bioAffinity Technologies, Inc.

For the Years Ended December 31, 2025 and 2024

Note 1. BASIS OF PRESENTATION, ORGANIZATION AND NATURE OF OPERATIONS

Description of Business

bioAffinity Technologies, Inc., a Delaware corporation (the “Company,” or “bioAffinity Technologies”), addresses the need for noninvasive diagnosis of lung cancer at early stage and other diseases of the lung. bioAffinity Technologies’ proprietary platform uses flow cytometry and automated data analysis built by machine learning, a form of artificial intelligence (“AI”), to preferentially target cancer cell populations and other cell populations indicative of a diseased state. The Company’s first diagnostic test, CyPath® Lung, is a noninvasive test for early detection of lung cancer, the leading cause of cancer-related deaths. CyPath® Lung is offered for sale to physicians by the Company’s subsidiary, Precision Pathology Laboratory Services, LLC (“PPLS”). The Company is developing its flow cytometry platform to address the need to identify patients who can benefit from new and emerging therapies for asthma and chronic obstructive pulmonary disease (“COPD”) with noninvasive precision diagnostic tests. Research also is advancing the Company’s therapeutic discoveries that could in the future result in broad-spectrum cancer treatments, beginning with treatment delivered topically for squamous cell skin cancer. Commercial operations and product development are conducted in laboratories at PPLS and laboratory space leased at The University of Texas at San Antonio.

Organization

The Company was formed on March 26, 2014, as a Delaware corporation with its corporate offices located in San Antonio, Texas. On June 15, 2016, the Company formed a wholly owned subsidiary, OncoSelect® Therapeutics, LLC, as a Delaware limited liability company. On August 14, 2023, the Company formed a wholly owned subsidiary, PPLS, as a Texas limited liability company, to acquire the assets of Village Oaks Pathology Services, P.A. (“Village Oaks”), a Texas professional association d/b/a Precision Pathology Services, including the clinical pathology laboratory it owned.

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

All share and per-share amounts in the accompanying footnotes have been retroactively adjusted to reflect the Company’s 1-for-30 reverse stock split.

Going Concern

In accordance with Accounting Standards Update (“ASU”) 2014-15,Presentation of Financial Statements – Going Concern(Subtopic 205-40), 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.

The Company has incurred significant losses and negative cash flows from operations since inception and expects to continue to incur losses and negative cash flows for the foreseeable future. As a result, the Company had an accumulated deficit of $68.6 million at December 31, 2025. The Company’s cash and cash equivalents at December 31, 2025, were approximately $6.4 million. Based on the Company’s current expected level of operating expenditures and the cash and cash equivalents on hand at December 31, 2025, 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. Without funding from the proceeds from the issuance of equity or debt securities, exercise of outstanding warrants, funding from a potential strategic relationship or grants, management anticipates that the Company’s cash resources are sufficient to continue operations through June 2026. The Company will need to raise further capital through the sale of additional equity or debt securities or other debt instruments, strategic relationships or grants, or other arrangements to support its future operations, if revenue from operations does not significantly increase. If such funding is not available or not available on terms acceptable to the Company, the Company’s current development plan may be curtailed. No adjustments have been made to the presented consolidated financial statements as a result of this uncertainty.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with GAAP in the U.S. requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available. Actual results could differ from those estimates under different assumptions, judgments, or conditions.

Principles of Consolidation

The Company’s consolidated financial statements reflect its financial statements, those of its wholly owned subsidiaries, and certain variable interest entities where the Company is the primary beneficiary. The accompanying consolidated financial statements include all the accounts of the Company, its wholly owned subsidiaries, OncoSelect® Therapeutics, LLC and PPLS, and the variable interest entity, Village Oaks. All significant intercompany balances and transactions have been eliminated.

In determining whether the Company is the primary beneficiary of a variable interest entity, it applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company continuously assesses whether it is the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in the Company consolidating or deconsolidating one or more of its collaborators or partners.

Cash and Cash Equivalents

For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash equivalents are stated at cost, which approximates market value because of the short maturity of these instruments.

Concentration of Risk

The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

Advertising Expense

The Company expenses all advertising costs as incurred. Advertising expenses were approximately $340,000 and $267,000 for the years ended December 31, 2025 and 2024, respectively.

Loss Per Share

Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of the Company’s Common Stock, par value $0.007 per share outstanding during the period. Diluted loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of shares of Common Stock outstanding during the period and the weighted-average number of dilutive Common Stock equivalents outstanding during the period, using the treasury stock method. Dilutive Common Stock equivalents are comprised of in-the-money stock options, convertible preferred stock, warrants, and unvested restricted stock based on the average stock price for each period using the treasury stock method.

The following potentially dilutive securities have been excluded from the computations of weighted average shares of Common Stock outstanding as of December 31, 2025 and 2024, as they would be anti-dilutive:

Revenue Recognition

To determine revenue recognition for the arrangements that the Company determines are within the scope of Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

Post-acquisition of PPLS, additional revenue streams have been consolidated since September 19, 2023. PPLS generates three sources of revenue: (1) patient service fees, (2) histology service fees, and (3) medical director fees. The Company recognizes as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods sold or services rendered primarily upon completion of the testing process (when results are reported) or when services have been rendered.

The Company follows a standard process, which considers historical denial and collection experience and other factors (including the period of time that the receivables have been outstanding), to estimate contractual allowances and implicit price concessions, recording adjustments in the current period as changes in estimates. The process for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation.

Reclassifications

Certain prior year balances have been reclassified to conform to current year presentation. Any reclassifications had an immaterial effect on the Company’s consolidated financial statements and had no effect on prior periods net loss or stockholders’ equity.

Accounts and other receivables, net

Substantially all accounts receivable are due from insurance companies, U.S. and state governmental agencies, and patients. The Company believes credit risks are mitigated as a result of the large number customers. The portion of the Company’s accounts receivable due from patients comprises the largest portion of credit risk, assumptions and judgments are used to assess collectability from patients.

Property and Equipment, Net

In accordance with ASC 360-10,Accounting for the Impairment of Long-Lived Assets (“ASC 360”), the Company periodically reviews the carrying value of its long-lived assets, such as property, equipment, and definite-lived intangible assets, to test whether current events or circumstances indicate that such carrying value may not be recoverable. When evaluating assets for potential impairment, the Company compares the carrying value of the asset to its estimated undiscounted future cash flows. If an asset’s carrying value exceeds such estimated cash flows (undiscounted and with interest charges), the Company records an impairment charge for the difference. The Company did not record any impairment for the years ended December 31, 2025 or 2024.

Property and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the asset. Amortization of leasehold improvements is computed using the shorter of the lease term or estimated useful life of the asset. Additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. Useful lives of each asset class are as follows:

Intangible Assets

The Company’s acquisition of PPLS on September 18, 2023, identified Goodwill and intangible assets. Goodwill represents the purchase price in excess of fair values assigned to the underlying identifiable net assets of the acquired business. The intangible assets and their respective useful lives are as follows: trade names and trademarks (18 years) and customer relationships (14 years). Intangible assets, net of accumulated amortization, are summarized as follows as of December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, amortization of intangible assets totaled $58,334.

Goodwill is reviewed annually for impairment in accordance with ASC 350,Intangibles – Goodwill and Other, and intangible assets are reviewed annually for impairment in accordance with ASC 360 unless circumstances dictate the need for more frequent assessment. The Company elected to perform a quantitative impairment analysis as of December 31, 2025. The annual quantitative assessment of the intangible assets was performed utilizing a discounted cash flow analysis (“income approach”). The income approach measures the fair value of an interest in a business by discounting expected future cash flows to present value. The results of the annual quantitative impairment analysis indicated that the fair value exceeded the carrying value of the reporting unit and therefore resulted in no impairment needed.

The estimated amortization expense related to amortizable intangible assets for each of the five succeeding fiscal years and thereafter as of December 31, 2025 is as follows:

Recent Accounting Pronouncements

The Company continues to monitor new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) and does not believe any accounting pronouncements issued through the date of this Annual Report will have a material impact on the Company’s consolidated financial statements.

The Company adopted FASB issued ASU No. ASU 2023-09,*Income Taxes (Topic 740): Improvement to Income Tax Disclosures.*The standard requires enhanced annual disclosures, including: (i) disaggregated information in the rate reconciliation, (ii) disaggregation of income (loss) from continuing operations before income tax expense (benefit) between domestic and foreign, (iii) disaggregation of income tax expense (benefit) from continuing operations by federal, state, and foreign, and (iv) disaggregated disclosure of income taxes paid by jurisdiction. The Company adopted ASU 2023-09 on January 1, 2025 prospectively. The adoption of ASU 2023-09 resulted in expanded income tax disclosures in Note 15. Income Taxes.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which the related temporary difference becomes deductible. The Company includes interest and penalties related to uncertain tax positions as part of income tax expense, if any. No such interest or penalties were recognized during the years ended December 31, 2025 and 2024, and the Company hadno accruals for interest and penalties at December 31, 2025 or 2024.

Segment Information

The Company is organized intwo operating segments, Diagnostic Research and Development (“R&D”) and Laboratory Services, whereby its chief operating decision maker (“CODM”) uses operating income as the primary measure of segment profit or loss to assess performance and make resource allocation decisions, in addition to monitoring revenue growth and research and development progress. The CODM is the Chief Executive Officer.

Diagnostic R&D includes research and development and clinical development of diagnostic tests. Any revenues assigned to Diagnostic R&D are proceeds received from observational studies. Laboratory services include all the operations from Village Oaks and PPLS in addition to sales and marketing costs of CyPath® Lung from bioAffinity.

Research and Development

Research and development costs are charged to expense as incurred. The Company’s research and development expenses consist primarily of expenditures for laboratory operations, preclinical studies, compensation, and consulting costs.

Accrued Research and Development Costs

The Company records accrued liabilities for estimated costs of research and development activities conducted by service providers, which include preclinical studies. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses in the accompanying consolidated balance sheets and within research and development expense in the accompanying consolidated statements of operations.

The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with service providers. The Company makes significant judgments and estimates in determining the accrued expenses balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred since its inception.

Regulatory Matters

Regulations imposed by federal, state, and local authorities in the U.S. are a significant factor in providing medical care. In the U.S., drugs, biological products, and medical devices are regulated by the federal Food, Drug and Cosmetic Act, which is administered by the FDA and CMS. The Company has not yet obtained marketing authorization from the FDA but is able to market its CyPath® Lung test as a laboratory developed test sold by Precision Pathology Laboratory Services, a CAP-accredited, CLIA-certified clinical pathology laboratory and wholly owned subsidiary.

Note 3. ACCOUNTS AND OTHER RECEIVABLES, NET

Accounts and other receivables at December 31, 2025 and 2024, are summarized below:

Note 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets at December 31, 2025 and 2024, are summarized below:

Note 5. PROPERTY AND EQUIPMENT, NET

Property and equipment at December 31, 2025 and 2024, are summarized below:

Total property and equipment depreciation and amortization expense was $170,359 and $162,332 for the years ended December 31, 2025 and 2024, respectively.

Note 6. ACCRUED EXPENSES

Accrued expenses at December 31, 2025 and 2024, are summarized below:

Note 7. UNEARNED REVENUE

The Company engaged in an observational study of CyPath® Lung with the Department of War. A total of 70 CyPath® Lung units were ordered and shipped. However, in compliance with FASB ASC 606, the performance obligation was complete for only 41 units as of December 31, 2025. The performance obligation is deemed complete after samples have been collected and processed and results analyzed. The unearned revenue balance amounted to $23,827 and $24,404 as of December 31, 2025 and 2024, respectively.

During August 2025, the Company engaged with Veterans Administration (“VA”) medical centers to purchase CyPath®Lung tests. A total of 30 tests were ordered and shipped. However, in compliance with FASB ASC 606, the performance obligation was complete for only eight tests as of December 31, 2025. The performance obligation is deemed complete after samples have been collected, processed, and analyzed and results communicated to patients. The unearned revenue balance amounted to $18,578 as of December 31, 2025.

Note 8. FAIR VALUE MEASUREMENTS

The Company analyzes all financial instruments with features of both liabilities and equity under the FASB accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The three levels of the hierarchy and the related inputs are as follows:

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts and other receivables, prepaid and other current assets, accounts payable, accrued expenses, and note payable, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Warrants

The Company issued liability classified warrants in connection with the issuance of the May 2025 warrants. The warrants were liability classified as a result of certain terms in the May 2025 warrant agreement, and the terms were amended during September 2025 to trigger an equity classification on the date of the reverse stock split. The Company uses a Black-Scholes model to estimate the fair value of the warrants. Changes in the fair value of the warrants are recognized in “Change in fair value of warrants issued” for each reporting period in the consolidated statements of operations.

There were no warrant liabilities as of December 31, 2025 and 2024. The Company initially recorded a warrant liability of $2.9 million as a result of the May 2025 public offering. The Company revalued and recognized an aggregate of $3.8 million for the change in fair value of warrants issued before adjusting the warrant liability to equity classified warrants.

Note 9. LEASES

The Company has one operating lease for its real estate and office space for the CAP/CLIA laboratory, as well as multiple finance leases for lab equipment in Texas that were acquired through the September 18, 2023, acquisition. On April 1, 2025, the Company terminated one of the finance leases and entered into a new finance lease agreement for equipment on October 20, 2025. Additionally, the Company entered into another operating lease on September 1, 2024, with regard to office space. The Company has operating leases consisting of office space with remaining lease terms ranging from 1.6 to 4.7 years as of December 31, 2025. The Company has finance leases consisting of lab equipment with remaining lease terms ranging from approximately 0.3 to 6.8 years as of December 31, 2025, for which the Company has determined that it will use the equipment for a major part of its remaining economic life.

The lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach as of the date of inception of the leases to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed interest rates ranging from 6.41% to 8.07% for the lease term lengths.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements. Certain leases include variable payments related to common area maintenance and property taxes, which are billed by the landlord, as is customary with these types of charges for office space. The Company has not entered into any lease arrangements with related parties, and the Company is not the sublessor in any arrangement.

The Company’s existing leases contain escalation clauses and renewal options. The Company has evaluated several factors in assessing whether there is reasonable certainty that the Company will exercise a contractual renewal option. For leases with renewal options that are reasonably certain to be exercised, the Company included the renewal term in the total lease term used in calculating the right-of-use asset and lease liability.

The components of lease expense, which are included in selling, general and administrative expense and depreciation and amortization for the years ended December 31, 2025 and 2024 are as follows:

Note 10. NOTES PAYABLE

Vehicles Notes Payable

On January 10, 2025, the Company entered into a finance agreement to purchase a 2024 Toyota Corolla for $33,517 with a maturity date of January 18, 2031. The loan bears fixed interest at a rate of 11.65% per annum, with monthly payments of $651, which is comprised of principal and interest. This loan is collateralized by the underlying vehicle. The balance of this loan as of December 31, 2025, was $29,774. The current portion of the balance of this loan as of December 31, 2025 was $4,588.

On March 18, 2024, the Company entered into a finance agreement to purchase a 2024 Toyota Corolla for $33,620 with a maturity date of February 18, 2030. The loan bears fixed interest at a rate of 5.99% per annum, with monthly payments of $467, which is comprised of principal and interest. This loan is collateralized by the underlying vehicle. The balance of this loan as of December 31, 2025 and 2024, was $20,618 and $24,849, respectively. The current portion of the balance of this loan as of December 31, 2025 and 2024, was $4,491 and $5,603, respectively.

Directors and Officers Insurance Policy – 2025

In September 2025, the Company obtained short-term financing of approximately $127,500 with 10 monthly payments of approximately $13,000 and interest at a 6.70% fixed annual rate for director and officer insurance policies. The current portion of the balance of the Company’s Directors and Insurance short-term financing as of December 31, 2025, was $90,002 and $167,000 as of December 31, 2024, for the 2024 Directors and Officers Insurance Policy. In 2024, the Company financed the director and officer insurance policy.

Note 11. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. To date, the Company has no material pending legal proceedings.

Note 12. CONVERTIBLE PREFERRED AND COMMON STOCK

Convertible Preferred Stock

The Company has authorized a total of 20,000,000 shares of $0.001 per share par value preferred stock. The Company has issued 700 shares of preferred stock, designated as Series B. In August 2025, the Company 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 the Company’s newly designated Series B Convertible Preferred Stock, with a par value $0.001 per share and stated value of $1,000 per share initially convertible into 143,476 shares of the Company’s Common Stock, par value $0.007 per share at an initial conversion price of $6.90 per share and (ii) warrants to purchase up to 223,824 shares of the Company’s Common Stock at an exercise price of $10.56 per share of Common Stock. The investors have converted 290 of the 990 Series B Convertible Preferred Stock in exchange for 42,028 shares of Common Stock as of December 31, 2025. The holders of the Series B preferred stock have various rights as follows:

Voting Rights. Except as otherwise required by law, holders of Series B Preferred Stock shall not be entitled to any voting rights.

Dividends. The holders of Series B Preferred Stock shall be entitled to receive dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock.

Conversion. The Series B Preferred Stock will be convertible into shares of Common Stock at an initial conversion price of $0.23 per share (the “Conversion Price”). Each share of Series B Preferred Stock shall be convertible into such number of shares of Common Stock that results from dividing the Stated Value by the Conversion Price. Holders of Series B Preferred Stock are prohibited from converting shares of Series B Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own in excess of 4.99% of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion. If and whenever on or after the date on which the Company obtains the Preferred Stockholder Approval, the Company is deemed to have issued or sold any shares of Common Stock for a consideration per share less than the Conversion Price, the Conversion Price will be reduced to such new issuance price subject to a floor price of $0.10 per share.

Common Stock

The Company has authorized a total of 350,000,000 shares of Common Stock, $0.007 par value per share. On July 22, 2025, the Company received stockholder approval to increase the number of authorized shares of Common Stock from 100,000,000 shares to 350,000,000 shares, and on August 13, 2025, the Company filed an amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the increase. The Company has issued 4,498,675 shares of Common Stock, of which 4,371 are unvested restricted stock awards as of December 31, 2025, and 519,158 shares of Common Stock, of which 11,638 are unvested restricted stock awards as of December 31, 2024, adjusted for the 30-1 reverse stock split.

On September 29, 2025, the Company 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.

In October 2025, we entered into definitive agreements for the purchase and sale of 720,000 shares of Common Stock, at a purchase price of $2.50 per share in a registered direct offering priced at-the-market under Nasdaq rules. The gross proceeds from the offering were approximately $1.8 million before deducting placement agent fees and other offering expenses payable by us.

On May 22, 2025, the Company entered into an at-the-market issuance sales agreement (the “ATM Agreement”) with WallachBeth Capital LLC (“WallachBeth”), as sales agent providing for the sale of common stock from time to time in an “at the market offering” program. The aggregate market value of the shares of Common Stock eligible for sale is currently $5,801,000. The ATM Agreement provides that WallachBeth will receive 3.0% of the gross sales price sold under the ATM Agreement. From May 22, 2025, through December 31, 2025, the Company sold 114,672 shares of Common Stock through the ATM Agreement which accumulated approximately $1.2 million in gross proceeds.

Note 13. STOCK-BASED COMPENSATION

Under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), the Company is authorized to grant options or restricted stock for up to 66,666 shares of Common Stock. On June 6, 2023, the Company received stockholder approval to increase the number of authorized shares from 38,095 to 66,666, adjusted for the 30-1 reverse split. Options or restricted stock awards may be granted to employees, the Company’s board of directors, and external consultants who provide services to the Company. Options and restricted stock awards granted under the 2014 Plan have vesting schedules with terms of one to three years and become fully exercisable based on specific terms imposed at the date of grant. The 2014 Plan expired at the end of its 10-year term in March 2024. A new 2024 Incentive Compensation Plan (the “2024 Plan”) was approved at the Annual Meeting of Shareholders on June 4, 2024.

The Company has recorded stock-based compensation expense related to the issuance of restricted stock awards in the following line items in the accompanying consolidated statements of operations:

The following table summarizes stock option activity under the 2014 and 2024 Plans:

As of December 31, 2025, there wasno unrecognized compensation cost related to non-vested stock options.

Restricted Stock Awards

The following table summarizes restricted stock award activity under the 2014 and 2024 Plan:

During the year ended December 31, 2025, the Company issued restricted stock awards (“RSAs”) for 8,598 shares of Common Stock to employees, non-employees, and the board of directors. The shares vest in equal monthly installments over terms of immediately and up tothree years, subject to the employees and non-employees providing continuous service through the vesting date. During the year ended December 31, 2025,7,195 shares vested from RSAs granted in 2025, and 7,621 shares vested from RSA’s granted prior to 2025.

Note 14. WARRANTS

The Company’s outstanding Common Stock warrants are equity classified. As of December 31, 2025 and 2024, the Company had 1,348,494 and 409,937 warrants outstanding to purchase one share of the Company’s Common Stock for each warrant at a weighted average price of $28.44. These warrants expire at various dates through August 2030. During the year ended December 31, 2025, a total number of 1,204,854 warrants were exercised into 1,140,947 shares of Common Stock as compared to 35,558 being exercised during the year ended December 31, 2024. During the year ended December 31, 2025, a total of 63,907 warrants were forfeited as a result of cashless exercises. The proceeds from the exercise of warrants for the year ended December 31, 2025, was approximately $4.8 million, compared to proceeds of $1.3 million for the year ended December 31, 2024.

On February 25, 2025, the Company entered into a warrant inducement agreement (the “February Inducement Agreement”) with certain holders (the “Holders”) of the Company’s warrants to purchase shares of the Company’s Common Stock, issued in a private placement offering that closed on October 21, 2024 (the “October Warrants”), and a private placement offering that closed on August 5, 2024 (the “August Warrants” and, together with the October Warrants, collectively, the “Existing Warrants”). In consideration of the Holders’ immediate exercise of the Existing Warrants in accordance with the February Inducement Agreement, the Company issued unregistered Common Stock purchase warrants (the “New Warrants”) to purchase an aggregate of up to 97,538 shares of Common Stock (the “New Warrant Shares”) to the Holders of the Existing Warrants, with an exercise price of $25.50.

On May 7, 2025, the Company completed a public offering with warrants (“May 2025 Warrants”) to purchase of 507,812 shares of Common Stock. The May 2025 were initially recorded as liability classified until certain requirements were met, at which time the May 2025 warrants were reclassified as equity. The May 2025 Warrants have an initial exercise price of $10.56 per share and are exercisable for a term of five years on a date that is five years after receiving shareholder approval. The number of shares of Common Stock issuable upon exercise of the May 2025 Warrant Shares is subject to the following adjustments: (i) a 30% increase in the number of shares of Common Stock that would be issuable upon exercise of the May 2025 Warrants if a reverse stock split is effected prior to the expiration of the May 2025 Warrants (the “Reverse Stock Split Adjustment”), and (ii) subject to Warrant Stockholder Approval (as defined below), a decrease of the exercise price of the May 2025 Warrants, if in a subsequent offering of the Company’s securities the price paid for Common Stock, the exercise price of any options or warrants or the conversion price of any convertible securities issued in such subsequent offering is less than the exercise price immediately prior to such subsequent offering, to an exercise price that is equal to the lowest of the price paid for Common Stock, the exercise price of any options or warrants, or the conversion price of any convertible securities issued in such subsequent offering (subject to a floor of $4.50 per share) and an increase in the number of shares of Common Stock underlying the May 2025 Warrants upon such exercise price reset so that the reset exercise price multiplied by the increased number of shares equals the aggregate proceeds that would have resulted from the full exercise of the May 2025 Warrants immediately prior to the reset (the “Anti-Dilution Adjustment”). After the adjustments, the Company issued a total of 962,862 additional warrants related to the May 2025 Warrants at an exercise price of $4.50.

On August 13, 2025, the Company entered into a warrant inducement agreement with the holder of a warrant to purchase 15,000 shares of Common Stock originally issued on August 5, 2024, with a current exercise price of $37.50 per share (the “August 2024 Warrant”) and a warrant to purchase 21,667 shares of Common Stock originally issued on October 21, 2024, with a current exercise price of $45.00 per share, pursuant to which the Holder agreed to exercise in cash the Existing Warrants at a reduced exercise price of $6.90 per share, for gross proceeds to the Company of $253,000. As an inducement to such exercise, the Company agreed to issue to the holder unregistered warrants to purchase up to 47,666 shares of the Company’s Common Stock. The new warrants, which have an exercise price of $10.56 per share and will not become exercisable until the Company’s stockholders approve the issuance of shares of Common Stock. Following stockholder approval, the warrants have a term of five years.

On August 13, 2025, the Company 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 the Company’s newly designated Series B Convertible Preferred Stock, with a par value $0.001 per share and stated value of $1,000 per share initially convertible into 143,476 shares of the Company’s Common Stock, par value $0.007 per share at an initial conversion price of $6.90 per share and (ii) warrants to purchase up to 223,824 shares of the Company’s Common Stock at an exercise price of $10.56 per share of Common Stock.

As of December 31, 2025, there were tradeable warrants to purchase up to an aggregate of 53,375 shares of Common Stock outstanding and non-tradeable warrants to purchase an aggregate of up to 90,149 shares of Common Stock outstanding.

Note 15. INCOME TAXES

The Company’s net loss before income taxes of $14.9 million and $9.0 million consisted entirely from U.S. operations for the years ended December 31, 2025 and 2024, respectively. The components of income tax expense and taxes paid by jurisdiction for the years ended December 31, 2025 and 2024 were as follows:

Deferred tax assets and valuation allowance

The tax effect of significant items comprising deferred tax assets are as follows:

The Company is required to reduce its deferred tax assets by a valuation allowance if it is more likely than not that some or all of its deferred tax assets will not be realized. Management must use judgment in assessing the potential need for a valuation allowance, which requires an evaluation of both negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. In determining the need for and amount of the valuation allowance, if any, the Company assesses the likelihood that it will be able to recover its deferred tax assets using historical levels of income, estimates of future income and tax planning strategies. As a result of historical cumulative losses, the Company determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net deferred taxes in future periods. Accordingly, the Company recorded a valuation allowance against all of its net deferred tax assets as of December 31, 2025 and 2024. The net change in total valuation allowance was an increase of approximately $1.9 million and $2.0 million for the years ended December 31, 2025 and 2024, respectively.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2025 and 2024, was as follows:

Unrecognized tax benefits

As of December 31, 2025 and 2024, the Company has unrecognized tax benefits related to tax credits of $0.3 million and $0.3 million, respectively. None of the unrecognized tax benefits as of December 31, 2025, if recognized, would impact the effective tax rate due to the valuation allowance, and no interest or penalties have been recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2025 and 2024, the Company recognized no interest and penalties associated with unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

Under the tax statute of limitations applicable to the Internal Revenue Code, the Company and its U.S. subsidiary, either standalone or as part of the consolidated group, is no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for tax years before tax year 2021. However, because the Company is carrying forward income tax attributes, such as net operating losses and tax credits from 2020 and earlier tax years, these attributes can still be audited when utilized on returns filed in the future.

As of December 31, 2025 and 2024, the Company had net operating loss (“NOL”) carryforwards of $47.2 million and $38.0 million for federal purposes, respectively. If not utilized, federal net operating losses of $6.0 million will begin to expire in 2034 and $41.2 million will be carried forward indefinitely.

As of December 31, 2025 and 2024, the Company had research and development tax credit carryforwards for federal purposes of $0.5 million and $0.7 million, respectively. The federal research and development tax credit carryforwards will expire at various dates between 2037 and 2045.

Sections 382 and 383 of the Internal Revenue Code provide for a limitation on the annual use of NOL and tax credit carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards. The Company continues to disclose the NOL and tax credit carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for all deferred tax assets, including the NOL and tax credit carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets. Due to the existence of a full valuation allowance, limitations under Section 382 and 383 will not impact the Company’s effective tax rate. Further analyses will be performed prior to recognizing the benefits of any losses or credits in the consolidated financial statements.

Beginning on January 1, 2022, the Tax Cuts and Jobs Act (“the Act”), enacted in December 2017, eliminated the option to deduct research and experimentation expenditures in the current period and requires taxpayers to capitalize and amortize U.S.-based and non-U.S. based research and experimentation expenditures over five and fifteen years, respectively. However, the enactment of the bipartisan OBBB Act, signed into law in July 2025, repeals the mandatory capitalization requirement for domestic R&D expenditures for tax years beginning after December 31, 2024. The Company has elected to continue to capitalize research and experimentation expenditures. This legislation does not impact the Company's current tax obligations.