bioAffinity Technologies, Inc.

Business Overview

We develop noninvasive diagnostic laboratory tests to detect early-stage lung cancer and other diseases of the lung using flow cytometry and automated analysis informed by machine learning, a form of artificial intelligence (AI). Our first commercial diagnostic test, CyPath® Lung, identifies and analyzes cell populations using flow cytometry, including cancer and cancer-related cells, that indicate a malignancy in the lung.

CyPath® Lung addresses the need for noninvasive detection of early-stage lung cancer with the proven ability to detect the leading cancer killer at its 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 or those patients who are likely without lung cancer and should continue screening in accordance with guidelines. For patients with small pulmonary nodules less than 20 millimeters (mm), CyPath® Lung has shown 92% sensitivity and 87% specificity with 88% accuracy in a clinical trial, offering the potential to increase the overall diagnostic accuracy of lung cancer testing, which could lead to increased survival, fewer unnecessary invasive procedures, reduced patient anxiety, and lower medical costs.

CyPath® Lung is performed and offered by our wholly owned subsidiary PPLS, a clinical anatomic and pathology laboratory which we acquired by purchasing the assets of Village Oaks Pathology Services, P.A., a Texas professional association. PPLS is a CAP-accredited and CLIA-certified commercial laboratory that has been in operation for more than 18 years.

In addition to CyPath® Lung, we are advancing development of our flow cytometry+AI platform for companion diagnostic tests targeted at asthma and chronic obstructive pulmonary disease (“COPD”). Diagnostics under development are designed to quantify the extent and type of inflammation in the lung associated with disease and further detect specific receptors in sputum that may determine the effectiveness of new and emerging therapies for asthma and COPD that have proved to effectively treat specific types of inflammation. Therapeutics for these lung diseases that are on the market or in development can help some but not all patients, and often it is unknown before use whether a drug will be effective. Our tests in development are designed to help determine the most effective use of new and emerging therapies for asthma and COPD and lessen the need for a trial-and-error approach to proscribing treatment.

Through 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 continue to advance research and development for use of this technology for topical treatment of squamous cell skin cancer. We expect to present our findings at conferences and publish our research in peer-reviewed journals 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.

Research 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 (UTSA). UTSA provided notice in January 2026 that our lease would not be renewed, and as a result we will relocate our research operations from UTSA to privately owned laboratory space.

Current Year Financial Highlights

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

Recent Developments

The Start of Our Longitudinal Clinical Study

In March 2026, we enrolled our first patient in our clinical trial entitled “Detection of Early-Stage Lung Cancer in Sputum using Flow Cytometry and an Automated Analysis Pipeline” (NCT07168993). The John P. Murtha Cancer Center Research Program (MCCRP), a research program within the Department of Surgery at the Uniformed Services University of the Health Sciences in Bethesda, Maryland, is providing support and funding associated with the trial at three collection sites – Brooke Army Medical Center in San Antonio, Texas, Walter Reed Medical Center in Bethesda, Maryland, and the South Texas Audie L. Murphy Memorial Veterans Medical Center.

The approved trial protocol calls for enrollment of up to 2,063 patients at 17 VA, military, academic and private medical centers who are at high risk for lung cancer with one or more indeterminate pulmonary nodules between 6 mm to less than 30 mm. Patients enrolled in the trial will be followed until the patient receives either a diagnosis of cancer or noncancer, with patients followed up to two years. The clinical trial will evaluate the clinical performance of the test as a sensitive and specific noninvasive diagnostic to identify the presence of lung cancer in high-risk individuals who have indeterminate pulmonary nodules as determined by CT imaging. To differentiate the investigational use of our CyPath® Lung test that is offered for commercial sale and use, we use the name “FlowPathtm Lung” in protocol documents and on collection kits provided to sites.

Continuation of Research Studies with the Military

Following the sale of tests to Brooke Army Medical Center (“BAMC”) beginning in the fourth quarter of 2023 and through 2024 as part of an observational study, we began a collaboration with BAMC in the fourth quarter 2025 to collect and validate the clinical utility of using CyPath® Lung to analyze sputum samples obtained by tracheal and bronchial suctioning for early detection of lung cancer. Bronchoscopy is used commonly in the United States, with approximately 500,000 procedures performed annually. The CyPath® Lung study with BAMC will explore an approach that could expand the utility of bronchoscopy-collected samples for earlier, noninvasive lung cancer detection.

In the first quarter of 2026, we began a research collaboration with BAMC to advance the development of companion diagnostic tests targeted at asthma and COPD. The initial research study is designed to quantify the extent and type of inflammation in the lung associated with disease and further determine the ability of our diagnostic platform to detect specific receptors in sputum that determine the effectiveness of new and emerging therapies for asthma and COPD that have been proved to effectively treat specific types of inflammation.

Positive Research Findings Advance Company’s Pipeline Tests for Asthma

In March 2026, the Company presented positive research findings for its platform technology’s ability to identify antibody drug receptors in sputum, including receptors for dupilumab, a leading therapy for asthma and chronic obstructive pulmonary disease (“COPD”), and benralizumab, another asthma therapy. The research, presented at the American Academy of Allergy, Asthma and Immunology’s annual conference, advances the Company’s pipeline tests aimed at guiding personalized treatment decisions and improving disease monitoring for asthma and COPD sufferers.

Appointment of Nationally Recognized Lung Cancer Authorities to its Medical and Scientific Advisory Board

In February 2026, we announced the appointment of David Ost, MD, MPH, Chief of Pulmonary, Critical Care and Sleep Medicine at the University of Texas MD Anderson Cancer Center, Daniel Sterman, MD, Chief of the Division of Pulmonary, Critical Care and Sleep Medicine at New York University Langone Medical Center, and J. Scott Ferguson, MD, Director of Interventional Pulmonology at the University of Wisconsin School of Medicine and Public Health, to our Medical and Science Advisory Board that includes recognized leaders in the field of lung cancer.

New Patient Case Studies Add to Real-World Evidence of CyPath® Lung Reducing Diagnostic Burden

In February 2026, we announced two additional patient case studies where a CyPath® Lung result of “Unlikely Malignancy” relieved patient anxiety and supported the physician’s decision to continue repeat imaging rather than subjecting patients to invasive, risky and costly biopsies. The case studies add to a growing number of reported cases where CyPath® Lung has made a decisive positive impact on patient care.

PPLS Continues to Meet Highest Standards for Laboratory Operations

In January 2026, we announced that PPLS maintained its accreditation across all laboratory service lines from the College of American Pathologists (CAP), considered the gold standard for excellence. CAP accreditation signifies that a laboratory meets high standards of quality, accuracy and patient safety through comprehensive peer-based inspections conducted every two years.

Public and Private Offerings

In October 2025, we entered into definitive agreements for the purchase and sale of 720,000 shares of common stock, par value $0.007 per share, 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.

On 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 the Company 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, we completed a public offering of securities for gross proceeds of $3.25 million, before deducting agent fees and other estimated expenses payable by us. 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 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.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a more detailed discussion of the foregoing transactions.

Our First Diagnostic Test – CyPath® Lung

Lung cancer remains the most commonly diagnosed cancer and the leading cause of cancer-related deaths worldwide, claiming more than 1.8 million lives with almost 2.5 million new cases reported in 2022, according to a 2024 article inCA: A Cancer Journal for Clinicians. Lung cancer is the leading cause of cancer deaths in the European Union with an estimated 17 to 34 million people at high risk, according to Cancer Epidemiology. China reported 1,060,600 cases of lung cancer in 2022. The American Lung Association (“ALA”) estimated that screening for individuals at high risk for lung cancer has the potential to improve lung cancer survival rates by finding disease at an earlier stage when it is more likely to be curable. An estimated 19.3 million Americans should have annual screening for lung cancer, according to American Cancer Society recommendations. A study published in theNew England Journal of Medicine titled “Survival of patients with stage I lung cancer detected on CT screening” dated October 26, 2006, reported that the survival rate of individuals with Stage I lung cancer who underwent surgical resection within one month after diagnosis had a 10-year survival rate of 92%, as compared to the current overall five-year survival rate in the U.S. of 29.7% as reported by the ALA in its 2025 “State of Lung Cancer” report . Unfortunately, most lung cancer is detected in late stages. The results of a large national clinical trial that was reported in theNew England Journal of Medicine in an article dated August 4, 2011, titled “Reduced Lung-Cancer Mortality with Low-Dose Computed Tomographic Screening” showed that screening for lung cancer using low-dose computed tomography (“LDCT”) resulted in a reduction of the mortality rate by up to 20% as compared to screening by X-ray if LDCT screening is used by patients at high risk for lung cancer on an annual basis. If half of the individuals at high risk were screened, more than 12,000 lung cancer deaths could be prevented, according to the ALA. However, theNew England Journal of Medicine article also reported that LDCT was shown to have a low positive predictive value of less than 4%. This means that for every 100 people who receive a positive result from LDCT screening and are suspected of having lung cancer, only four actually have the disease. A reliable, noninvasive, and cost-effective diagnostic test can increase diagnosis of early-stage lung cancer while lowering the number of unnecessary and invasive procedures for patients with a false positive result from LDCT screening. (A false positive test result indicates that the patient has lung cancer when he or she does not have the disease.)

CyPath®Lung is a test for early-stage lung cancer proven to detect curative Stage 1A lung cancer that is designed to meet the need for greater diagnostic certainty. Based on our internal analysis, its use in conjunction with LDCT is predicted to improve the positive predictive value (the probability that patients with a positive LDCT scan truly have the disease) by a factor of five. Our analysis concludes that improving the positive predictive value of LDCT with the use of CyPath® Lung has the potential to subject fewer patients to the stresses of misdiagnosis or unnecessary diagnostic procedures, such as biopsies, while also reducing healthcare costs. Physicians receive a CyPath® Lung test result within three days of the sample arriving at the laboratory that identifies patients who should undergo more aggressive follow-up procedures to confirm a suspected lung cancer or guide and support a physician’s decision to monitor the patient using LDCT or CT imaging.

The results of a clinical trial using CyPath® Lung, “Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning,” published inRespiratory Research on January 21, 2023, reported overall 88% specificity, meaning the ability to correctly identify a person without cancer, and 82% sensitivity, meaning the ability to correctly identify cancer in a person with the disease. For the subset of patients in this trial who had lung nodules 20 millimeters or smaller or no nodules detected by imaging, this trial resulted in 92% sensitivity, 87% specificity, 99% negative predictive value, and 88% accuracy. This 150-patient test validation trial analyzed sputum from people at high risk for lung cancer including patients with the disease (N=28) and those who were cancer-free (N=122). In the subset of 132 individuals with small nodules, 119 patients were cancer-free and 13 had confirmed lung cancer. Eight out of 10 (80%) of Stage I tumors were correctly identified. Sensitivity is the percentage of persons with the disease – in this case, lung cancer – who are correctly identified by the test. Specificity is the percentage of persons without lung cancer who are correctly identified by the test. The cancer group included all lung cancer types, but mostly squamous cell carcinoma and adenocarcinoma lung cancer (in near equal numbers), showing that CyPath® Lung detects all types of lung cancer. Furthermore, clinical trial results reported an Area Under the Curve (AUC) value of 0.89 for CyPath® Lung. AUC value indicates the ability of a test to distinguish between positive and negative cases. An AUC value of 0.7 to 0.8 is considered acceptable; 0.8 to 0.9 is excellent; more than 0.9 is outstanding. In study participants with lung nodules less than 20 mm, the test performed with an AUC value of 0.94.

A study authored by two pulmonologists and published in 2024 in the peer-reviewedJournal of Health Economics and Outcomes Research reported that adding CyPath® Lung to the standard of care for Medicare patients with a positive lung cancer screening could have saved an average of $2,773 per patient for total cost savings of $379 million in 2022, while the screening could have saved an average of $6,460 per patient for privately insured patients with a positive lung cancer screening for total cost savings of $891 million. The peer-reviewed study, “Economic Evaluation of a Novel Lung Cancer Diagnostic in a Population of Patients with a Positive Low-Dose Computed Tomography Result,” attributes the savings to a reduction in follow-up diagnostic assessments, expensive follow-up procedures, and procedure-related complications. Michael J. Morris, M.D., BAMC pulmonology and critical care physician and Assistant Dean of Research at San Antonio Uniformed Services Health Education Consortium (“SAUSHEC”), and Sheila A. Habib, M.D., Director of the Pulmonary Lung Nodule Clinic and the Lung Cancer Screening Program at the South Texas Veterans Health Care Systems’ Audie L. Murphy Memorial Veterans Hospital and Assistant Professor at the University of Texas Health Science Center at San Antonio, were first and second authors on the study. Economists John E. Schneider, Ph.D., and Maggie L. Do Valle, Master of Public Health, of Avalon Health Economics also were authors on the study.

CyPath®Lung uses flow cytometry technology to detect and analyze cell populations in a person’s sputum, or phlegm, to find characteristics indicative of lung cancer, including cancer and/or cancer-related cells that have shed from a lung tumor. A patented algorithm developed using machine learning, a form of AI, automatically analyzes a patient’s flow cytometry data to generate a physician’s report within minutes after data acquisition that stratifies patients into one of two risk groups. A “Likely” result means cancer has been detected. An “Unlikely” result means cancer has not been detected. The physician’s report also provides a numerical probability score between 0.1 to 1.0, with 0.1 to less than 0.5 being a negative result and more than 0.5 to 1.0 considered positive for lung cancer. The proprietary automated analysis software was developed and is wholly owned and patent protected by bioAffinity Technologies.

The flow cytometer is a well-established instrument used in many commercial laboratories. Flow cytometry collects data pertaining to properties of single cells labeled with antibodies and dyes specific to cell types and characteristics. Sputum is an excellent sample for analysis because it is in direct contact with any malignancy in the lungs and can provide information about its area of field cancerization and the lung microenvironment.

In particular, CyPath® Lung uses a synthetic porphyrin called meso-tetra (4-carboxyphenyl) porphyrin (“TCPP”). Porphyrins are biological pigments that, when exposed to ultraviolet light at certain wavelengths, can result in the cell fluorescing a red or purplish color that can be detected under a microscope or by flow cytometry, according to an article titled “Laboratory Diagnosis of Porphyria,” published inDiagnostics (Basel) on July 26, 2021. Porphyrins can be man-made, like TCPP, or they can be naturally occurring, like heme that is responsible for the red color in red blood cells. Cancer cells are known to take up certain porphyrins in higher amounts than non-cancer cells, and the high affinity for cancer cells displayed by TCPP makes it an excellent bio-label for cancer, according to an article published inProgress in Clinical and Biological Research in 1984 titled “A comparative study of 28 porphyrins and their abilities to localize in mammary mouse carcinoma: uroporphyrin I superior to hematoporphyrin derivative.”

CyPath®Lung evaluates sputum for the presence of cancer without the opportunity to introduced operator bias. Our approach allows the entire sputum sample to be rapidly analyzed. The numerical analysis developed with machine learning captures complex interactions between lung cancer, the microenvironment, and areas of field cancerization that would be impossible for individuals to predict or detect reliably by eye. For example, during test development, we discovered that viability staining density suggests a link with apoptosis, or cell death, that is linked to many cancers, including lung cancer. Our model also suggests that specific markers of immune cell populations are informative as to the presence of cancer in the lung. These findings are the result of our machine learning approach to automated analysis.

CyPath®Lung uses sputum that is obtained noninvasively by patients in the privacy of their home. Physicians most often order the test for patients after CT imaging reveals one or more pulmonary nodules that have a higher risk but are not certain to be lung cancer. A patient collects his or her sample using a hand-held, noninvasive assist device, ICU Medical’s Acapella® Choice Blue, that acts to break up mucus in the lungs and help a person cough up sputum from the lung into a collection cup. The Acapella®Choice Blue has been 510(k)-cleared by the Food and Drug Administration (“FDA”) as a positive expiratory pressure device to help mobilize lung secretions in people with certain lung conditions

The sputum sample is shipped overnight by the patient to PPLS and processed into a single-cell suspension, then labeled with antibodies that distinguish different cell types and the synthetic porphyrin TCPP that identifies cancer cells and/or cancer-associated cells. Our test can collect sample data and analyze a sputum sample to produce a physician’s report in less than 20 minutes using integrated software for high-throughput, user-friendly standardized analysis.

The CyPath® Lung technology is based on scientific work originating at Los Alamos National Laboratory in collaboration with St. Mary’s Hospital in Colorado. In the Los Alamos research study, sputum samples from lung cancer patients were differentiated from non-cancer samples with 100% accuracy. This early research was conducted with sputum from 12 uranium miners. Microscope slides of sputum samples were labeled with the synthetic fluorescent porphyrin TCPP. The Los Alamos research study of 12 uranium miners included eight men with cancer and four healthy individuals. Researchers were blinded to the sample origin and looked for the presence of highly fluorescent cells indicating uptake of TCPP as an indicator of lung cancer. The length of the study and specific follow-up was not reported, but researchers did report that one patient in the study who had been incorrectly considered to be a healthy subject was correctly diagnosed with cancer by the test. Later, a blinded clinical trial was conducted and results published in September 2015 in an article titled “Early Detection of Lung Cancer with Meso-Tetra (4-Carboxyphenyl) Porphyrin-Labeled Sputum” in theJournal of Thoracic Oncology. This study reported on an earlier version of CyPath® Lung that used a fluorescent microscope to directly identify cells labeled with TCPP in one-third or less of the sputum sample. For each trial participant, researchers manually scanned 12 microscope slides labeled with TCPP for the presence of red fluorescent cells (“RFCs”) displaying a spectral signature that indicated uptake of TCPP in the cell. In addition to measuring the spectral signature, the fluorescent intensity and cell size of RFCs were measured. The test data, including fluorescent intensity over cell size, was analyzed. The trial was conducted over 24 months and resulted in 81% test accuracy, 77.9% sensitivity, and 65.7% specificity in the ability to correctly differentiate between samples from lung cancer patients and those at high risk who were cancer-free. The earlier trial required participants to provide a sputum sample and CT imaging of the lungs. Those in the cancer cohort underwent a biopsy to confirm lung cancer. High-risk patients displaying indeterminate nodules were followed for 18 months to confirm they were cancer-free. The study concluded that optimizing the test to provide for analysis of the entire sputum sample would improve results.

On January 1, 2024, the Medicare reimbursement code 0406U specific for CyPath® Lung became effective. The Current Procedural Terminology (“CPT”) Proprietary Laboratory Analysis (“PLA”) code specifically for use with CyPath® Lung, is 0406U with the descriptor “Oncology (lung), flow cytometry, sputum, 5 markers (meso-tetra [\4- carboxyphenyl porphyrin TCPP, CD206, onveniCD66b, CD3, CD19), algorithm reported as likelihood of lung cancer.”

We have an agreement with Cardinal Health for logistical services assisting in the delivery of collection kits and return of patient samples to PPLS. Laboratory reagents, supplies, and equipment are commercially available through multiple vendors. Sample processing, labeling, and data collection can be accomplished by a laboratory technician skilled in general laboratory techniques. Data analysis leading to a physician’s report is done by using automated analysis software fully integrated into the test.

To our knowledge, CyPath® Lung is the first cancer diagnostic that combines flow cytometry and automated analysis to predict the presence of lung cancer from sputum samples.

The Cancer Diagnostics Market and CyPath® Lung

The global lung cancer diagnostic market is projected to grow from an estimated $15.1 billion in 2023 to $34.8 billion by the end of 2034, with a compound annual growth rate (“CAGR”) of 7.9%, according to a market research report issued by Transparency Market Research in October 2024. Our Company has the potential to play a significant role in the global cancer diagnostic market because we hold a strong and expanding IP portfolio for CyPath® Lung, a noninvasive, cost-effective, and high performing test that has the potential to better patient outcomes.

In particular, we believe the market for CyPath® Lung is poised for significant growth. The test is most often ordered by physicians who need better clarity when patients present with small pulmonary nodules that are considered indeterminate, leaving both physician and patient without a clear diagnostic path forward. In Gould et al. (2015), researchers reported that imaging increasingly finds indeterminate pulmonary nodules with difficult choices: “watchful waiting” with serial CT scans or invasive procedures. According to the National Lung Screening Trial Research Team (2011), lung cancer screening using low dose CT can detect lung cancer at an early stage, but it has low specificity. Only about four out of 100 patients with a suspicious finding will have lung cancer. In addition, Gould et al. observed that indeterminate pulmonary nodules are increasingly found incidentally when imaging for other reasons.

Projected Number of Indeterminate Pulmonary Nodules in the U.S.

As shown below, the total number of indeterminate pulmonary nodules detected by lung cancer screening and incidentally is projected to increase by 62% from 2.9 million in 2025 to 4.7 million in 2030, representing an estimated market of greater than $4.7 billion for CyPath® Lung. The forecast is based on a percentage of 2024 reported cases of suspicious pulmonary nodules and assumes a 10% compound annual growth for the 2024-2030 period based on 1) an increase in lung cancer screening from 18.1% in 2023 to close to 50% by 2030 due to growing adoption and awareness with improved access, and 2) improved ability to detect indeterminate nodules through greater adherence to guideline recommendations and use of AI.

In addition, CyPath® Lung’s ability to be used for surveillance of cancer survivors after they have completed treatment represents an estimated market of $870 million over the next ten years. The total number of people living with lung cancer is projected to increase by 28% from 680,450 survivors in 2025 to 871,580 in 2035.

Comparison of CyPath® Lung to Current Standards of Care

As seen in the above table, CyPath® Lung performs favorably compared to current Standards of Care, including more invasive and riskier diagnostic procedures. Our business model is to address the need for a noninvasive, cost-effective, high-performing lung cancer diagnostic that meets the need for more diagnostic certainty leading to quicker diagnosis at earlier stage for longer survival and reduced medical costs.

CyPath®Lung Business Development Plan

We believe in the viability of our business plan based on the circumstances surrounding our business that are known to us as of the date of this Annual Report. However, the timing, strategies, and stages of our business plan may evolve in light of new circumstances that cannot be predicted with certainty at this time. Our business plan envisions three phases of strategic expansion in the U.S. and the European Union (“EU”) and Asia that are timed to maximize our resources and minimize market risk.

In January 2025, we reported successful results from the Company’s CyPath®Lung pilot marketing program using Texas for our beta launch with sales growth quarter-over-quarter and more than 600 tests delivered in 2024. Our test marketing approach allowed us to refine future positioning and develop strategic insight for our CyPath® Lung test before expanding to a larger market. In 2025, we more than doubled the number of tests sold and tripled our revenues. We expanded our sales team in the second half of 2025 to enter the Mid-Atlantic market.

In 2026, we will enter Phase 2 of our business plan with expansion into broader strategic markets aimed at providing national coverage, including increasing our sales force and strategic partners in the Mid-Atlantic and entering the South Atlantic, Southeast, Northeast, Midwest, West and federal markets. Phase 2 includes launching our longitudinal clinical trial that will provide additional validation and further evidence of CyPath® Lung’s ability to detect early-stage lung cancer.

In Phase 3 of our business plan, we expect to have achieved a national sales footprint upon which we can build and secure strategic partners in the EU and Asia who can support entry into those markets. We also foresee establishing CyPath® Lung as a Standard of Care for the federal and VA healthcare systems which can propel CyPath® Lung for adoption as a Standard of Care for the entire U.S. healthcare system.

We will continue to execute on strategic marketing and promotional collaborations that can accelerate growth, including collaboration with strategic partners that provide greater market access, marketing resources, and opportunities to leverage existing relationships with physicians and their patients.

We have developed messaging and marketing programs that will continue to grow both in size and scope as we penetrate the U.S. market, including executing strategies that take advantage of practicing physicians who find significant benefits from using CyPath® Lung. To date, we have published more than a dozen patient case studies. Peer-to-peer communication has been a driver for sales which is supported by attending major conferences and presentations by key opinion leaders (“KOLs”) of case studies, digital marketing, social media presence, and advertising to create an “inbound” lead generation mechanism that delivers our message to our target audience.

The Competition for CyPath® Lung

CyPath®Lung has not been tested directly against its competitors’ products, but a comparison of the published performance numbers provides evidence that CyPath® Lung is among the highest performing tests on the market. Furthermore, CyPath® Lung is noninvasive – not even requiring a needle stick – and cost effective. Processing and analysis procedures are easy to perform. Our competitive analysis reviewed published research that was sufficient to provide a scientific basis for evaluation.

Low dose computer tomography (LDCT) is recommended as a screening test with eligibility driven by age and smoking history, but its low positive predictive value (PPV) can lead to unnecessary invasive procedures on benign nodules. CyPath® Lung is recommended for adults at high risk of lung cancer, particularly those with small or indeterminate pulmonary nodules discovered by LDCT, to assist doctors in deciding whether to recommend invasive procedures such as biopsy or continue monitoring by LDCT. CyPath®Lung and competing tests that assist in making such decisions may be categorized as (1) rule-out tests (2) rule-in tests, and (3) balanced tests. Rule-out tests are designed to have high sensitivity and negative predictive value (NPV) to determine that the patient is unlikely to have lung cancer and exclude the patient from unnecessary follow-up procedures. However, these tests also have lower specificity and produce a greater number of false positives results. Rule-in tests by contrast have high specificity but lower sensitivity, providing higher positive predictive value (PPV) so that a positive result predicts the patient does have lung cancer. The positive result may lead to more aggressive follow-up procedures but with higher false-negative rates that can result in more invasive procedures on benign nodules. Balanced tests are designed to achieve high sensitivity and specificity to both exclude patients without cancer from unnecessary follow-up diagnostic procedures and accurately detect patients with early-stage cancer who can proceed to more aggressive procedures to confirm diagnosis.

CyPath®Lung is a balanced test, having demonstrated a sensitivity of 92% and a specificity of 87% and a NPV of 99% for patients with nodules under 20 mm in a population with lung cancer prevalence of 18% (Lemieux 2023, Morris 2024). The high sensitivity and specificity of CyPath®Lung make it a balanced test. In our analysis we will classify competitors as balanced tests, rule-out tests and rule-in tests.

We believe there are many reasons why CyPath® Lung is a superior test when compared to its competitors. First, lung sputum is an excellent medium for early lung cancer detection because (1) sputum is in close contact with the tumor and pre-cancerous areas that shed cancer and pre-cancerous cells directly into the sputum, (2) can be obtained noninvasively, and (3) can be transported easily. Moreover, sputum contains immune cell populations associated with the presence of a tumor. Second, our proprietary technology is straightforward. CyPath® Lung uses well-established flow cytometry techniques to investigate cells contained in the sputum for characteristics that indicate the likelihood of lung cancer, unlike molecular tests which can use labile genetic materials. Sample processing is well established, and laboratory technicians can be easily trained. Reagents used by the test are widely available. Data acquisition and analysis is fully automated, allowing for non-biased, efficient test results. Third, CyPath® Lung has demonstrated high specificity and sensitivity that is similar to far more invasive and more expensive procedures currently used to detect lung cancer. Fourth, CyPath® Lung is cost effective, with a Medicare reimbursement code billable to both government and private insurance carriers. A 2024 study authored by Michael Morris, M.D., and Sheila Habib, M.D., reported on CyPath® Lung’s economic impact when used as companion test to the current standard of care predicting savings of more than $2,700 per Medicare patient and more than $6,400 per patient with private payer insurance who have pulmonary nodules sized less than 30 mm. Fifth and as important as any of our test’s benefits, CyPath® Lung is patient friendly, providing at-home, noninvasive sample collection.

The recent economic journal article evaluating the significant healthcare cost benefits of using CyPath® Lung as a standard of care (Morris, et al., 2024) shows that balanced tests, like CyPath® Lung, can be the most cost effective. Tests that perform well are most useful to a physician and their patient because they provide the most information, allowing a quicker decision on what follow-up path to choose: whether to move forward with more aggressive follow-up procedures after a CyPath® Lung results in a “likely malignancy” or to follow a more conservative approach when the CyPath® Lung test result is “unlikely malignancy”.

Building on our Flow Cytometry Platform to Develop Asthma and COPD Companion Diagnostics

We are conducting research studies that expand our platform technology to detect the type and severity of inflammation in the lung and design precision diagnostics that identify patients who will benefit from effective but often expensive commercial therapies treating asthma and chronic obstruction pulmonary disease (“COPD”). Major pharmaceutical companies offer very effective treatments for asthma and COPD that work well for some sufferers but not all. Many patients must try a series of different types of treatments before finding an effective therapy. Our tests under development leverage our expertise in using our proprietary flow cytometry platform equipped with automated AI analysis to develop tests that match asthma and COPD patients with the most appropriate biologic therapies and monitor their ongoing conditions.

An estimated 23 million adults in the U.S. and 27 million people in the EU have been diagnosed with asthma, and 4.2% of Chinese adults presented with asthma in a representative sample of adults recruited for a national cross-sectional China Pulmonary Health study between 2012 and 2015, representing 45.7 million adults in China. Furthermore, an estimated 14.2 million U.S. adults had COPD in 2021, and approximately 36.6 million people in Europe had COPD in 2020, with the expectation that almost 50 million people in Europe will have COPD in 2050. The diagnostics market for COPD alone was valued at $5.6 billion in 2023 and is expected to reach $8.2 billion by 2029, according to a market research study published byResearch and Markets in November 2023. We are building on our expertise in using sputum as a sample for flow cytometric analysis to develop tests to detect COPD and asthma, including research to detect the presence of specific therapeutic targets to identify patients who can benefit from specific treatments. We expect to begin patient studies in 2026.

OncoSelect®Therapeutics Research

We have completed and expect to report at one or more scientific conferences our findings describing the results of our research to advance our own scientific discoveries demonstrating that inhibition of the expression of two specific cell membrane proteins results in the selective killing of various cancer cell types grown in the laboratory with little or no effect on normal (non-cancerous) cells. We continue to advance research for use of this technology as a topical treatment of squamous cell skin cancer. We expect to present our findings at conferences and publish our research in peer-reviewed journals 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.

Our therapeutic discoveries originated from our research on how TCPP, the synthetic porphyrin used in CyPath® Lung, enters cancer cells. We conducted research to better understand the mechanism of TCPP’s selective uptake in cancer cells. Our research identified receptors, cell-membrane proteins which capture small molecules outside of the cell and bring them inside the cell, that are associated with TCPP. Experiments that we conducted confirmed that at least two of these receptors, CD320 and LRP2, contributed to TCPP uptake by cancer cells. When these receptors were individually “knocked down” in cancer cells and therefore could not be made by the cell, TCPP uptake was significantly decreased. Knock-down of CD320 and LRP2 receptors was achieved by introducing siRNA molecules into the cells that cause the destruction of CD320 and LRP2 gene products. These gene products were the messenger (m)RNAs that are the precursors of the receptor protein. An siRNA is a small, chemically synthesized piece of RNA that specifically binds to mRNA, prohibiting the further production of the corresponding proteins. Thus, the reduction of CD320 or LRP2 mRNAs reduced the CD320 or LRP2 protein, respectively, and resulted in decreased TCPP uptake in a variety of cancer cells, with a larger decrease observed when CD320 was knocked down. We subsequently discovered that the simultaneous knockdown of these two cell-surface receptors, CD320 and LRP2, was deadly to cancer cells or inhibited their growth significantly but left normal cells virtually unharmed.

We designed siRNAs to effectively eliminate CD320 and LRP2 protein production. With these CD320 and LRP2 siRNAs, we achieved a reduction of CD320 and LRP2 protein levels of up to 90%. Simultaneous siRNA knock-down of CD320 and LRP2 in normal cells, including skin fibroblasts and breast epithelial cells, did not affect cell growth. However, knock-down of CD320 and LRP2 in cancer cell lines derived from diverse tissues (lung, breast, prostate, brain, and skin cancers) inhibited cell growth or killed the cells, in some cases up to 80%.

Corporate Information

We were incorporated in the State of Delaware on March 26, 2014. Our principal executive office is located at 3300 Nacogdoches, Suite 216, San Antonio, Texas 78217, and our telephone number at that address is (210) 698-5334. Our website address is https://www.bioaffinitytech.com/. Information contained on or that can be accessed through our website is not incorporated by reference into this Annual Report. Investors should not consider any such information to be part of this Annual Report.

Intellectual Property Portfolio

We strive to protect the proprietary technologies that we believe are important to our business, including pursuing and maintaining patent protection intended to cover our commercialized diagnostic test, pipeline product candidates and their use, as well as other inventions that are important to our business. In addition to patent protection, we also protect valuable company assets with copyright, trademark, trade secret, and know-how through confidentiality agreements, invention assignment agreements, and a trade secret program to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. The confidentiality agreements are designed to protect our proprietary information, and the invention assignment agreements are designed to gain company control and ownership of technologies that are developed for us by our employees, consultants, or other third parties. We seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises, physical and electronic security of our information technology systems, and non-disclosure agreements with those that produce or receive company confidential information. While we have confidence in our agreements and security measures, either may be breached, and we may not have adequate remedies. In addition, our trade secrets may otherwise become known or independently discovered by competitors.

Our commercial success depends in part upon our ability to obtain and maintain patent and other proprietary protection for commercially important technologies, inventions, and trade secrets related to our business, defend and enforce our intellectual property rights, particularly our patent rights, preserve the confidentiality of our trade secrets, and operate without infringing valid and enforceable intellectual property rights of others.

The patent positions for biotechnology companies like ours are generally uncertain and can involve complex legal, scientific, and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented, or invalidated by third parties.

As of December 31, 2025, we and our OncoSelect® subsidiary have a patent estate that includes 19 issued U.S. and non-U.S. counterpart patents including three U.S. patents and 16 counterpart patents in Australia, Canada, China, France, Germany, Hong Kong, Italy, Mexico, Japan, Spain, Sweden, and the United Kingdom. We and OncoSelect® own all patents and trademarks in our intellectual property portfolio. One U.S. patent and nine counterpart non-U.S. patents directed at diagnostic applications expire in 2030, three non-U.S. patents directed at a diagnostic application for lung cancer prediction expires in 2039, and one non-U.S. patent directed to an automated diagnostic lung cancer prediction assay expires in 2042. One U.S. patent directed to siRNA therapeutic compounds and method of use for treating cancer expires in 2042, one counterpart non-U.S. patent expires in 2039, and one U.S. patent and two counterpart non-U.S. patents directed to therapeutic porphyrin conjugate compounds and method of use for treating cancer expire in 2037.

With regard to our diagnostic patent portfolio, we have one issued U.S. patent and nine counterpart patents in Canada, China, France, Germany, Hong Kong, Italy, Spain, Sweden, and the United Kingdom. Diagnostic lung health patents have issued in Australia, China and Japan. Our diagnostic lung health patent applications, fall into one of two families: one directed at diagnosing lung health using flow cytometry and the other directed at proprietary compensation beads used in analysis by flow cytometry. The diagnostic lung health family of pending patent applications includes three pending non-provisional U.S. patent applications and 21 counterpart patent applications in Australia, Canada, China, European Patent Office, Hong Kong, Japan, Mexico, and Singapore filed in 2019 and 2024, and one non-provisional U.S. patent application directed to compensation beads for flow cytometry.

With regard to our therapeutic product candidates, we have two issued U.S. patents, three issued patents in China, Hong Kong, and Mexico, one pending U.S. application, and 7 counterpart applications pending in Canada, China, European Patent Office, and Hong Kong. The therapeutic intellectual property patent portfolio is made up of two families, one family directed at our siRNA product candidates for the treatment of cancer, and another family directed at our porphyrin conjugates for treating cancer.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the U.S., the term of a patent covering an FDA-approved drug may be eligible for a patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The period of extension may be up to five years beyond the expiration of the patent but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible for an extension may be extended, and a given patent may only be extended once. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering each of our therapeutic product candidates may be entitled to patent term extensions. If our product candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available; however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted and, if granted, the length of such extensions.

In addition to patent protection, we also rely on know-how and trade secret protection for our proprietary information that is not amenable to, or that we do not consider appropriate for, patent protection, to develop and maintain our proprietary position. However, trade secrets can be difficult to protect. Although we take steps to protect our proprietary information, including restricting access to our premises and our confidential information, as well as entering into agreements with our employees, consultants, advisors, and potential collaborators, third parties may independently develop the same or similar proprietary information or may otherwise gain access to our proprietary information. As a result, we may be unable to meaningfully protect our know-how, trade secrets, and other proprietary information.

In addition, we plan to rely on regulatory protection based on orphan drug exclusivities, data exclusivities, and market exclusivities.

Government Regulation

United States

Clinical Laboratories

In the U.S., clinical laboratories are subject to regulation under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which is administered by the Center for Medicare and Medicaid Services (CMS) in partnership with the states. A clinical laboratory is defined as a facility that performs testing on materials derived from the human body for the purpose of diagnosing, preventing, or treating disease, or for assessing health. CLIA establishes quality standards for all clinical laboratory testing to ensure the accuracy, reliability, and timeliness of patient test results regardless of where the test was performed. In particular, these regulations mandate that clinical laboratories must be certified, which requires inspection by either CMS or a deemed accreditation organization. The College of American Pathologists (CAP), a member-based physician organization comprising approximately 18,000 board-certified pathologists. has been granted deeming authority from the federal government, meaning that laboratories accredited by CAP’s Laboratory Accreditation Program qualify for a CLIA Certificate of Accreditation and undergo periodic CAP inspection to maintain their accreditation.

CLIA also requires that laboratories meet quality assurance, quality control and personnel standards, perform proficiency testing, and undergo inspections. The CLIA standards applicable to clinical laboratories are based on the complexity of the testing performed by the laboratory, which ranges from “waived” to “moderate complexity” to “high complexity.”

A state can be exempted from CLIA requirements if it has laws in effect that provide for requirements equal to or more stringent than CLIA requirements. New York State has been exempted from CLIA; to operate a laboratory in or testing specimens from New York State a laboratory must hold a permit issued by the New York State Clinical Laboratory Evaluation Program. Certain states that administer the CLIA program also require laboratories to hold a state license in order to operate in or test specimens from the state.

Laboratory Developed Tests

Laboratories can perform tests using in vitro diagnostic (IVD) products manufactured by third parties or using their own proprietary methods. Tests developed, manufactured, and used within a single CLIA-certified laboratory are known as laboratory developed tests or LDTs.

Third party manufactured IVDs are regulated as medical devices by FDA. FDA historically asserted that LDTs were also subject to regulation as IVD medical devices, but historically exercised enforcement discretion with respect to (i.e., did not regulate) most LDTs. On May 6, 2024, FDA published a final rule amending the definition of an in vitro diagnostic (“IVD”) device to include tests manufactured by a clinical laboratory. The final rule also announced FDA’s intention to apply its medical device requirements, including in some cases the requirement to obtain premarket authorization, to LDTs. On March 31, 2025, a federal district court vacated the FDA final rule, thereby cancelling the rulemaking’s associated requirements. The court held that laboratory developed tests do not meet the definition of a medical device under the Federal Food, Drug, and Cosmetic (“FD&C”) Act and the FDA therefore lacks jurisdiction to regulate them. The court directed FDA to rescind the final rule, which occurred on September 19, 2025.

Medical Devices

Medical devices are subject to regulation by the FDA, under the federal Food, Drug and Cosmetic Act (“FDCA”) and its implementing regulations. The laws and regulations govern, among other things, the design, manufacture, storage, recordkeeping, approval, labeling, promotion, post-approval monitoring and reporting, distribution, and import and export of medical devices.

FDA classifies medical devices into one of three categories—Class I, Class II, and Class III— based on the risks associated with the device and the level of control necessary to provide reasonable assurance of safety and effectiveness. Class I (low risk) devices are subject only to general regulatory controls. Class II (moderate risk) devices are subject to general controls and may also be subject to special controls. Class III (high risk) require premarket approval and are subject to postmarket conditions of approval in addition to general regulatory controls.

Most Class I devices can be marketed without prior FDA review and authorization. Some Class I and most Class II devices require FDA review and authorization before they can be marketed through 510(k) notification or de novo classification pathways. To obtain clearance of a 510(k) notification, a device must be shown to be substantially equivalent to a legally marketed predicate device. Novel low and moderate risk devices, for which substantial equivalence to a legally marketed predicate cannot be demonstrated, can be marketed pursuant to FDA grant of a request for de novo classification. Class III medical devices can be legally sold within the U.S. only if the FDA has approved an application for premarket approval (PMA). PMA applications, 510(k) premarket notifications, andde novo requests require payment of user fees.

After a device is placed on the market, numerous general regulatory controls apply. Manufacturers must register their establishment with FDA and list the devices they manufacture. Other postmarket requirements may include those relating to labeling, corrections, removals, and recalls, medical device reporting, and establishing a quality system.

Manufacturers of medical devices are permitted to promote products solely for the uses and indications set forth in the approved or cleared product labeling. A number of enforcement actions have been taken against manufacturers that promote products for “off-label” uses (i.e., uses that are not described in the approved or cleared labeling).

Violations of the FDCA relating to inappropriate promotion of medical devices may also lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection laws.

The FDA enforces its requirements by market surveillance and periodic inspections, both announced and unannounced, to review records, equipment, facilities, laboratories, and processes to confirm regulatory compliance. These inspections may include the manufacturing facilities of subcontractors. Following an inspection, the FDA may issue a report, known as a Form 483 notice of observations, listing instances where the manufacturer has failed to comply with applicable regulations and/or procedures. The FDA may also issue a public warning letter. If the manufacturer does not adequately respond to a Form 483 or warning letter, the FDA may take enforcement action against the manufacturer or impose other sanctions or consequences, which may include:

Software

Software that is intended for use in diagnosis, cure, treatment, mitigation or prevention of disease meets the definition of a medical device and is subject to FDA regulation. Software that is included in a hardware device (Software in a Medical Device or SiMD) is regulated as part of the hardware device. Freestanding software (Software as a Medical Device or SaMD) may be subject to regulation by FDA but may be exempt if it meets certain criteria. In 2016, the 21st Century Cures Act, (the “Cures Act”), among other things, amended the medical device definition in the FDC Act to exclude certain software from FDA regulation. Exempt categories include ertain types of clinical decision support (CDS) software. CDS software is exempt from the medical device definition if it: (a) displays, analyzes or prints medical information about a patient or other medical information; (b) is intended for the purpose of supporting or providing recommendations about a patient’s care to a health care professional, (“HCP”), user; and (c) provides sufficient information about the basis for the recommendations to the HCP user, so that the HCP user does not rely primarily on any of the recommendations to make a clinical decision about an individual patient; unless (d) the software function acquires, processes, or analyzes a medical image, a signal from an in vitro diagnostic device, or a pattern or signal from a signal acquisition system. In January 2026 FDA issued an updated final guidance document interpreting the Cures Act as it pertains to CDS software and provides examples of CDS that that meet the exemption criteria and those that do not.

Clinical Trials

Clinical trials conducted with investigational devices or to support FDA marketing authorization or with a device that requires but does not have marketing authorization are subject to regulations to protect human subjects and ensure data integrity. For significant risk investigational device studies, the FDA regulations require that human clinical investigations conducted in the U.S. be subject to an approved investigational device exemption (“IDE”). An IDE application is considered approved 30 days after it has been received by the FDA, unless the FDA otherwise informs the sponsor prior to that time that the IDE is approved, approved with conditions, or disapproved. A nonsignificant risk investigational device study does not require FDA approval of an IDE. Some types of device studies are exempt from IDE requirements altogether. Clinical studies with investigational drugs must be subject to an approved investigational new drug (IND) exemption.

Separate from FDA oversight, clinical trials that are conducted or supported by the Department of Health and Human Services and many other federal agencies are subject to the requirements of the Common Rule. Many institutions that conduct both federally funded and privately funded research hold a federal-wide assurance from the government stating that all research conducted by the institution will comply with the Common Rule.

Clinical trials must be conducted in accordance with good clinical practice (“GCP”) requirements contained in federal regulations and in international guidelines. Clinical trials, for both significant and nonsignificant risk devices, as well as exempt studies, must be approved by an IRB, an appropriately constituted group that has been formally designated to review and monitor biomedical research involving human subjects and which has the authority to approve, require modifications in, or disapprove research to protect the rights, safety, and welfare of the human research subject.

Clinical trials that are not conducted in accordance with applicable federal requirements or present an unacceptable risk to participants may be subject to temporary or permanent discontinuation as well as other sanctions. An IRB may also require the clinical trial it has approved to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or may impose other conditions or sanctions.

Although the QSR does not fully apply to investigational devices, the requirement for controls on design and development does apply. The sponsor also must manufacture the investigational device in conformity with the quality controls described in the IDE application and any conditions of IDE approval that the FDA may impose with respect to manufacturing. Investigational drugs must be manufactured in accordance with good manufacturing practice (GMP) requirements.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including diagnostic and drugs products, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites, and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.

Therapeutic Products

FDA Approval Process

In the U.S., therapeutic products are subject to extensive regulation by the FDA. The FDCA and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending new drug applications (“NDAs”), warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Development for a new therapeutic product in the U.S. typically involves preclinical laboratory and animal tests, the submission to the FDA of an investigational new drug application (“IND”), which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA premarket approval requirements typically takes many years, and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including Good Laboratory Practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, a general investigational plan, and a proposed clinical trial protocol. Long-term preclinical tests, such as tests of reproductive toxicity and carcinogenicity in animals, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. If the IND is placed on clinical hold, the sponsor must resolve any issues to the satisfaction of the FDA before the clinical hold is lifted and the clinical trial may proceed.

Clinical trials involve the administration of the investigational drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted (1) in compliance with federal regulations; (2) in compliance with GCP requirements; and (3) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. Imposition of a clinical hold may be full or partial. The study protocol and informed consent information for patients in clinical trials must also be submitted to an IRB for approval. The IRB will also monitor the clinical trial until completed. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or may impose other conditions. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.

Clinical trials to support NDAs for marketing authorization are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the initial introduction of the drug into patients, the product is tested to assess safety, dosage tolerance, metabolism, pharmacokinetics, pharmacological actions, side effects associated with drug exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the drug. In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. Approval on the basis of a single trial may be subject to a requirement for additional post-approval studies.

These phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose escalation stage and a dose expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s). Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing and distribution of the product may begin in the U.S. The NDA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee. Under an approved NDA, the applicant is also subject to an annual program fee. These fees typically increase annually. The FDA has 60 days from its receipt of an NDA to determine whether the application will be filed based on the FDA’s determination that it is adequately organized and sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of NDAs. Most applications are classified as Standard Review products that are reviewed within 10 months of the date the FDA files the NDA. Applications classified as Priority Review are reviewed within six months of the date the FDA files the NDA. An NDA can be classified for Priority Review when the FDA determines the drug has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information, or information intended to clarify information already provided in the NDA submission.

The FDA may also refer applications for novel products, as well as products that present difficult questions of safety or efficacy, to be reviewed by an advisory committee – typically a panel that includes clinicians, statisticians and other experts – for review, evaluation, and a recommendation as to whether the NDA should be approved. The FDA is not bound by the recommendation of an advisory committee but generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug product is manufactured. The FDA will not approve the product unless compliance with current good manufacturing practices (“cGMP”) is satisfactory. After the FDA evaluates the NDA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the NDA submission and may require substantial additional testing or information in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”) to help ensure that the benefits of the drug outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product’s safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.

Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved NDA, including changes in indications, product labeling, manufacturing processes, or facilities, require submission and FDA approval of a new NDA, or a supplement to an approved NDA, before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing original NDAs.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the internet. A drug may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.

Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of an NDA. The FDA also may require postmarket testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, product manufacture, packaging, and labeling procedures must continue to conform to cGMP after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies.

Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a drug product’s manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with cGMP. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

European Union

A medical device or diagnostic test must be CE marked to be sold in the EU. The In Vitro Diagnostic Device Regulation (“IVDR”) of the EU defines the necessary pre-conditions that must be fulfilled to CE mark an IVD test or in vitro medical device in the EU. The manufacture of the test and/or device must fulfill all applicable regulatory requirements in the IVDR. Objective evidence of fulfilment of these requirements must be provided by the manufacturer prior to placing a test on the EU market. The manufacturer is required to establish a Quality Management System (“QMS”) as well as processes for manufacturing, importing, distribution, post-market surveillance, and vigilance. Regulations also require that the product is fully documented. In addition, it is likely that our CyPath®Lung test is classified in a risk class that requires a review by an external party, a Notified Body, prior to placing the test on the EU market. This process is expected to require an additional six to 12 months after required documents and systems are in place. There currently is a general shortage in the EU of available Notified Bodies designated for IVDR devices. Further, we will need to contract a European Authorized Representative (“EAR”) that acts as the Company’s legal representative in the EU. Medical devices also must be registered with the competent authority in the country in which they are based. In addition to the CE mark and the registration done by the EAR, there is a need for an administrative national notification with certain member states of the EU.

European Data Collection

The collection and use of personal data (including health data) in the European Economic Area (“EEA”) are governed by the EU General Data Protection Regulations (“EU GDPR”) and national implementing legislation in EEA member states. The EU GDPR applies to any company established in the EEA and to companies established outside the EEA that process personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA. The EU GDPR establishes stringent requirements applicable to the processing of personal data, including strict requirements relating to the validity of consent of data subjects, expanded disclosures about how personal data is used, requirements to conduct data protection impact assessments for “high risk” processing, limitations on retention of personal data, special provisions for “special categories of personal data” including health and genetic information of data subjects, mandatory data breach notification (in certain circumstances), “privacy by design” requirements, and direct obligations on service providers acting as processors. The EU GDPR also prohibits the international transfer of personal data from the EEA to countries outside of the EEA unless made to a country deemed to have adequate data privacy laws by the European Commission or a data transfer mechanism has been put in place. Failure to comply with the requirements of the EU GDPR and the related national data protection laws of the EEA states may result in fines up to 20 million euros or 4% of a company’s global annual revenues for the preceding financial year, whichever is higher. Moreover, the EU GDPR affords various data protection rights to individuals (i.e., the right to erasure of personal data) in certain circumstances, and the ability for data subjects to claim material and non-material damages resulting from infringements of the EU GDPR. Given the breadth and depth of changes in data protection obligations, maintaining compliance with the EU GDPR will require significant time, resources, and expense, and we may be required to put in place additional mechanisms ensuring compliance with the evolving data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations, and prospects.

Rest of the World Regulation

For other countries outside of the EU (or in some cases, EEA) and the U.S., such as China, Southeast Asia, and Australia, the requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary from country to country. Additionally, the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements, and the ethical principles that have their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution.

Human Capital

We employ 57 employees at the time of this filing, 21 employed by bioAffinity and 36 employed by PPLS. We place significant emphasis on the recruitment, development, and retention of our employees who include award-winning scientists dedicated to advancing scientific discovery from bench to bedside. Of our seven employees engaged in research and development, all of whom are employed full-time, two hold Ph.Ds in biology or medicinal chemistry. Of the 36 employees at PPLS, nearly 40% have worked at our clinical laboratory for more than five years.

Our Chief Medical Officer, Gordon Downie, MD, Ph.D, brings more than three decades of experience in pulmonary medicine, clinical research, medical innovation, and interventional pulmonology to the role. He has authored more than 30 peer-reviewed publications, many centered on innovation in bronchoscopy, early lung cancer diagnosis and medical device development, and worked extensively in both academic medicine and private practice, led FDA-approved research programs, and served in national leadership roles with the American College of Chest Physicians in the areas of interventional pulmonology, lung cancer, and medical ethics. Our Chief Science Officer, William Bauta, Ph.D., was the Associate Director of Science at Genzyme Corporation and held a similar position at Ilex Products, Inc., where he was responsible for the discovery, development and FDA approval of therapeutics in the companies’ pipelines, and Manager of Medicinal and Process Chemistry at Southwest Research Institute. Clinical operations are led by our Chief Operating Officer, Xavier Reveles, who has 25 years of experience as a clinical geneticist skilled in the creation and management of CLIA clinical laboratories, coding, and CPT reimbursement valuations. Mr. Reveles is board certified by the American Society of Clinical Pathology as a clinical specialist in cytogenetics who has successfully launched multiple diagnostics and commercial laboratories. We have attracted experienced salespeople with a proven record in the pulmonary field. Dallas Coleman, Vice President of Sales, brings more than 15 years of experience in medical sales and marketing, including as Executive Account Manager for the respiratory portfolio of Olympus America’s therapeutic solutions division. Our innovative and collaborative culture is in part responsible for our ability to attract and retain highly skilled professionals seeking professional advancement. Outside partnerships and collaborations that advance business and scientific research are encouraged, allowing us to multiply workforce efforts without expending significant capital.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we remain an emerging growth company, we may take advantage of specified reduced reporting requirements and other burdens that are otherwise applicable generally to other public companies. These provisions include, but are not limited to:

We may take advantage of some or all of these provisions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (2) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (3) the date on which we have, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these reduced burdens. For example, we have taken advantage of the reduced reporting requirements with respect to disclosure regarding our executive compensation arrangements, have presented only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Annual Report, and have taken advantage of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. To the extent that we take advantage of these reduced burdens, the information that we provide stockholders may be different than you might obtain from other public companies in which you hold equity interests.

In addition, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period. As a result of this election, our timeline to comply with new or revised accounting standards will in many cases be delayed compared to other public companies that are not eligible to take advantage of this election or have not made this election. Therefore, our financial statements may not be comparable to those of companies that comply with the public company effective dates for these accounting standards.

We are also a “smaller reporting company” as defined in the Exchange Act and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller reporting company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an “emerging growth company” may continue to be available to us as a “smaller reporting company,” including exemption from compliance with the auditor attestation requirements pursuant to SOX and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller reporting company” until we have $250 million or more in public float (based on our Common Stock) measured as of the last business day of our most recently completed second fiscal quarter or in the event we have no public float (based on our Common Stock) or a public float (based on our Common Stock) that is less than $700 million, annual revenues of $100 million or more during the most recently completed fiscal year.