Q2 2026 10-Q

10-Q: Quarterly report [Sections 13 or 15(d)]

Published on August 7, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2026
	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from ______ to ______.

Commission File Number: 001-41463

bioAffinity Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware		46-5211056
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3300 Nacogdoches Road, Suite 216, San Antonio, Texas		78217
(Address of principal executive offices)		(Zip Code)

(210) 698-5334

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.007 per share		BIAF		The Nasdaq Stock Market LLC
Tradeable Warrants to purchase Common Stock		BIAFW		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

		Large accelerated filer ☐	Accelerated filer ☐
		Non-accelerated filer ☒	Smaller reporting company ☒
			Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer's Common Stock outstanding as of August 3, 2026, was 8,101,725.

Throughout this Quarterly Report on Form 10-Q (this "Quarterly Report"), the terms "bioAffinity," "bioAffinity Technologies," "we," "us," "our," or "the Company" refer to bioAffinity Technologies, Inc., a Delaware corporation, and its wholly owned subsidiaries, OncoSelect^® Therapeutics, LLC, a Delaware limited liability company, and Precision Pathology Laboratory Services, LLC, a Texas limited liability company.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are predictive in nature, depend on or refer to future events or conditions, and are sometimes identified by words such as "may," "could," "plan," "project," "predict," "pursue," "believe," "expect," "estimate," "anticipate," "intend," "target," "seek," "potentially," "will likely result," "outlook," "budget," "objective," "trend," or similar expressions of a forward-looking nature and the negative versions of such expressions. The forward-looking information contained in this report is generally located under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" but may be found in other locations as well. The forward-looking statements in this report generally relate to the plans and objectives for future operations of bioAffinity Technologies, Inc. and are based on our management's reasonable estimates of future results or trends. Although we believe these forward-looking statements are reasonable, all forward-looking statements are subject to various risks and uncertainties, and our projections and expectations may be incorrect. The factors that may affect our expectations regarding our operations include, among others, the following:

	·	our projected financial position and estimated cash burn rate;
	·	our estimates regarding expenses, future revenues, and capital requirements;
	·	the success, cost, and timing of our clinical trials;
	·	our ability to obtain funding for our operations necessary to complete further development and commercialization of our diagnostic tests or therapeutic product candidates;
	·	our dependence on third parties, including the conduct of our clinical trials;
	·	our ability to obtain the necessary regulatory approvals to market and commercialize our diagnostic tests or therapeutic product candidates;
	·	the potential that the results of our pre-clinical and clinical trials indicate our current diagnostic tests or any future diagnostic tests or therapeutic product candidates we may seek to develop are unsafe or ineffective;
	·	the results of market research conducted by us or others;
	·	our ability to obtain and maintain intellectual property ("IP") protection for our current diagnostic test or future diagnostic tests and therapeutic product candidates;
	·	our ability to protect our IP rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our IP rights;
	·	the possibility that a third party may claim we or our third-party licensors have infringed, misappropriated, or otherwise violated their IP rights and that we may incur substantial costs and be required to devote substantial time defending against such claims;
	·	the success of competing therapies, diagnostic tests, and therapeutic products that are or will become available;
	·	our ability to expand our organization to accommodate potential growth and to retain and attract key personnel;
	·	our potential to incur substantial costs resulting from product liability lawsuits against us and the potential for such lawsuits to cause us to limit the commercialization of our diagnostic tests and therapeutic product candidates;
	·	market acceptance of our diagnostic test and diagnostic tests in development and therapeutic product candidates, the size and growth of the potential markets for our current diagnostic test, diagnostic tests in development, and therapeutic product candidates, and any future diagnostic tests and therapeutic product candidates we may seek to develop, and our ability to serve those markets;
	·	the successful development of our commercialization capabilities, including sales and marketing capabilities;
	·	compliance with government regulations, including environmental, health, and safety regulations, and liabilities thereunder;
	·	the impact of a health epidemic on our business, our clinical trials, our research programs, healthcare systems, or the global economy as a whole;
	·	general instability of economic and political conditions in the United States, including inflationary pressures, increased interest rates, economic slowdown or recession, and escalating geopolitical tensions;

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	·	anticipated uses of net proceeds from our financings;
	·	the increased expenses associated with being a public company; and
	·	other factors discussed elsewhere in this Quarterly Report.

Many of the foregoing risks and uncertainties, as well as risks and uncertainties that are currently unknown to us, are, and may be, exacerbated by factors such as the ongoing conflict between Ukraine and Russia, the war in the Middle East, escalating tensions between China and Taiwan, increasing economic uncertainty and inflationary pressures, and any consequent worsening of the global business and economic environment. New factors emerge from time to time, and it is not possible for us to predict all such factors. Should one or more of the risks or uncertainties described in this Quarterly Report or any other filing with the Securities and Exchange Commission (the "SEC") occur or should the assumptions underlying the forward-looking statements we make herein and therein prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

You should read this Quarterly Report and the documents that we reference within it with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

Website and Social Media Disclosure

We use our websites (www.bioaffinitytech.com, ir.bioaffinitytech.com, www.cypathlung.com and www.precisionpath.us/) to share Company information. Information contained on or that can be accessed through our websites is not, however, incorporated by reference in this Quarterly Report. Investors should not consider any such information to be part of this Quarterly Report.

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bioAffinity Technologies, Inc.

FORM 10-Q

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
ITEM 1 -	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets at June 30, 2026 (unaudited) and December 31, 2025	5
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2026 and 2025	6
	Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months ended June 30, 2026 and 2025	7
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2026 and 2025	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
ITEM 2 -	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3 -	Quantitative and Qualitative Disclosures about Market Risk	32
ITEM 4 -	Controls and Procedures	32
PART II
OTHER INFORMATION
ITEM 1 -	Legal Proceedings	33
ITEM 1A -	Risk Factors	33
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3 -	Defaults Upon Senior Securities	35
ITEM 4 -	Mine Safety Disclosures	35
ITEM 5 -	Other Information	35
ITEM 6 -	Exhibits	36
	Signatures	37

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PART I

FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

bioAffinity Technologies, Inc.

Condensed Consolidated Balance Sheets

		June 30, 2026				December 31, 2025
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	2,429,719			$	6,449,782
Accounts and other receivables, net			894,823				541,962
Inventory			82,378				53,548
Prepaid expenses and other current assets			458,360				519,916
Total current assets			3,865,280				7,565,208
Non-current assets:
Property and equipment, net			313,708				265,593
Operating lease right-of-use asset, net			769,270				334,289
Finance lease right-of-use asset, net			562,187				661,575
Goodwill			1,404,486				1,404,486
Intangible assets, net			687,639				716,806
Other assets			16,709				12,815
Total assets		$	7,619,279			$	10,960,772
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	969,845			$	761,901
Accrued expenses			1,414,492				1,717,989
Unearned revenue			31,140				42,405
Operating lease liability, current portion			163,276				139,220
Finance lease liability, current portion			79,592				139,490
Notes payable, current portion			22,561				105,161
Total current liabilities			2,680,906				2,906,166
Non-current liabilities:
Operating lease liability, net of current portion			637,643				202,878
Finance lease liability, net of current portion			495,468				532,759
Notes payable, net of current portion			36,465				41,313
Total liabilities			3,850,482				3,683,116
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred Stock, par value $0.001 per share; 20,000,000 shares authorized; 450 shares and 700 shares issued and outstanding at June 30, 2026, and December 31, 2025, respectively			1				1
Common Stock, par value $0.007 per share; 350,000,000 shares authorized; 6,783,061 and 4,498,675 issued and outstanding at June 30, 2026, and December 31, 2025, respectively			47,454				31,461
Additional paid-in capital			79,272,098				75,800,258
Accumulated deficit			(75,550,756	)			(68,554,064	)
Total stockholders' equity			3,768,797				7,277,656
Total liabilities and stockholders' equity		$	7,619,279			$	10,960,772

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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bioAffinity Technologies, Inc.

Unaudited Condensed Consolidated Statements of Operations

		Three Months Ended June 30,								Six Months Ended June 30,
		2026				2025				2026				2025
Net revenue		$	1,510,579			$	1,269,483			$	2,862,106			$	3,123,080
Operating expenses:
Direct costs and expenses			1,087,837				1,016,602				2,016,473				2,384,462
Research and development			361,575				311,372				711,282				678,758
Clinical development			475,885				129,279				809,925				267,632
Selling, general and administrative			2,858,590				2,214,561				6,100,192				4,667,110
Depreciation and amortization			61,556				113,229				176,074				267,817
Total operating expenses			4,845,443				3,785,043				9,813,946				8,265,779
Loss from operations			(3,334,864	)			(2,515,560	)			(6,951,840	)			(5,142,699	)
Other income (expense):
Interest income			3,358				2,025				13,384				2,567
Interest expense			(11,688	)			(10,460	)			(26,410	)			(25,945	)
Other income			4,738				38,053				3,372				38,055
Other expense			(27,626	)			(483,043	)			(35,198	)			(492,685	)
Change in fair value of warrants issued			-				(1,062,818	)			-				(1,062,818	)
Total other income (expense), net			(31,218	)			(1,516,243	)			(44,852	)			(1,540,826	)
Net loss before provision for income tax expense			(3,366,082	)			(4,031,803	)			(6,996,692	)			(6,683,525	)
Income tax expense			-				28,984				-				37,679
Net loss		$	(3,366,082	)		$	(4,060,787	)		$	(6,996,692	)		$	(6,721,204	)
Net loss per common share, basic and diluted		$	(0.64	)		$	(5.07	)		$	(1.44	)		$	(10.01	)
Weighted average common shares outstanding			5,226,753				800,637				4,860,753				671,529

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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bioAffinity Technologies, Inc.

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

		For the Six Months Ended June 30, 2026
		Preferred Stock								Common Stock								Additional Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance at December 31, 2025			700			$	1				4,494,304			$	31,461			$	75,800,258			$	(68,554,064	)		$	7,277,656
Stock-based compensation expense			-				-				161,567				1,131				290,493				-				291,624
Sale of Common Stock, net			-				-				2,040,000				14,280				3,185,720				-				3,200,000
Conversion of Preferred			(250	)			-				83,331				582				(582	)			-				-
Issuance of Stock Options			-				-				-				-				507,657				-				507,657
Offering costs			-				-				-				-				(511,448	)			-				(511,448	)
Net loss			-				-				-				-				-				(6,996,692	)			(6,996,692	)
Balance at June 30, 2026 (unaudited)			450			$	1				6,779,202			$	47,454			$	79,272,098			$	(75,550,756	)		$	3,768,797

		For the Three Months Ended June 30, 2026
		Preferred Stock								Common Stock								Additional Paid-in				Accumulated				Stockholders' Equity
		Shares				Amount				Shares				Amount				Capital				Deficit				(Deficit)
Balance at March 31, 2026 (unaudited)			700			$	1				4,494,816			$	31,464			$	75,800,281			$	(72,184,674	)		$	3,647,072
Stock-based compensation expense			-				-				161,055				1,128				290,470				-				291,598
Sale of Common Stock, net			-				-				2,040,000				14,280				3,185,720				-				3,200,000
Conversion of Preferred			(250	)			-				83,331				582				(582	)			-				-
Issuance of Stock Options			-				-				-				-				507,657				-				507,657
Offering costs			-				-				-				-				(511,448	)			-				(511,448	)
Net loss			-				-				-				-				-				(3,366,082	)			(3,366,082	)
Balance at June 30, 2026 (unaudited)			450			$	1				6,779,202			$	47,454			$	79,272,098			$	(75,550,756	)		$	3,768,797

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		For the Six Months Ended June 30, 2025
		Preferred Stock								Common Stock								Additional Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance at December 31, 2024			-			$	-				507,520			$	3,553			$	56,242,793			$	(53,644,310	)		$	2,602,036
Stock-based compensation expense			-				-				9,798				68				538,155				-				538,224
Exercise of stock warrants			-				-				83,623				585				1,557,991				-				1,558,576
Sale of Common Stock			-				-				338,204				2,367				239,961				-				242,328
Offering costs			-				-				-				-				(356,067	)			-				(356,067	)
Net loss			-				-				-				-				-				(6,721,204	)			(6,721,204	)
Balance at June 30, 2025 (unaudited)			-			$	-				939,145			$	6,573			$	58,222,833			$	(60,365,514	)		$	(2,136,108	)

		For the Three Months Ended June 30, 2025
		Preferred Stock								Common Stock								Additional Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Equity
Balance at March 31, 2025			-			$	-				594,098			$	4,159			$	57,739,972			$	(56,304,727	)		$	1,439,404
Stock-based compensation expense			-				-				4,500				31				211,576				-				211,607
Sale of Common Stock			-				-				338,204				2,367				239,961				-				242,328
Exercise of stock warrants			-				-				2,343				16				40,093				-				40,109
Offering costs																			(8,769	)							(8,769	)
Net loss			-				-				-				-				-				(4,060,787	)			(4,060,787	)
Balance at June 30, 2025 (unaudited)			-			$	-				939,145			$	6,573			$	58,222,833			$	(60,365,514	)		$	(2,136,108	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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bioAffinity Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

		Six Months Ended June 30,
		2026				2025
Cash flows from operating activities
Net loss		$	(6,996,692	)		$	(6,721,204	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			176,074				267,817
Stock-based compensation expense			799,281				538,223
Fair value adjustment on warrants			-				1,062,818
Changes in operating assets and liabilities:
Accounts and other receivables			(352,861	)			717,335
Inventory			(28,830	)			(16,363	)
Prepaid expenses and other assets			57,662				29,706
Accounts payable			207,944				182,526
Accrued expenses			(303,497	)			(350,688	)
Unearned revenue			(11,265	)			-
Operating lease right-of-use asset			23,840				849
Net cash used in operating activities			(6,428,344	)			(4,288,981	)
Cash flows from investing activities
Purchase of property and equipment			(95,633	)			(64,213	)
Net cash used in investing activities			(95,633	)			(64,213	)
Cash flows from financing activities
Proceeds from issuance of Common Stock from direct offering, net of underwriting discounts, commissions, and offering expenses of $511,448 in 2026 and $112,922 in 2025			2,688,552				2,798,354
Proceeds from exercise of warrants, net of underwriting discounts, commissions, and offering expenses of $243,145 in 2025			-				1,558,576
Payment on loans payable			(87,448	)			(112,951	)
Principal repayments on finance leases			(97,190	)			(193,241	)
Net cash provided by financing activities			2,503,914				4,050,738
Net decrease in cash and cash equivalents			(4,020,063	)			(302,456	)
Cash and cash equivalents at beginning of period			6,449,782				1,105,291
Cash and cash equivalents at end of period		$	2,429,719			$	802,835
Supplemental disclosures of cash flow information:
Interest expense paid in cash		$	13,384			$	2,567
Income taxes paid in cash		$	-			$	37,679

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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bioAffinity Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

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 noninvasive tests using its flow cytometry platform to quantify lung inflammation with the aim of commercializing precision diagnostics that assist physicians when determining the most effective drug to prescribe patients with asthma and chronic obstructive pulmonary disease (COPD). The Company also is advancing its proprietary therapeutic discoveries and recently presented results from preliminary studies to advance treatments delivered topically for squamous cell skin cancer. The studies showed that self-delivering, stabilized siRNAs selectively kill squamous and basal carcinoma cells while leaving non-cancerous cutaneous cells unharmed. Commercial operations and product development are conducted in laboratories at PPLS and other leased laboratory space.

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 accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial reporting. The condensed consolidated financial statements are unaudited and in management's opinion include all adjustments, including normal recurring adjustments and accruals, necessary for a fair presentation of the results for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2025, was derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required in annual consolidated financial statements prepared in accordance with GAAP. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026, or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 16, 2026 (the "2025 Form 10-K").

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, which occurred on September 18, 2025.

Correction of Immaterial Error

In the first quarter ended March 31, 2026, the Company identified an error related to the recognition of a lease amendment executed in April 2024 for laboratory space. Management evaluated the error in accordance with SEC Staff Accounting Bulletin No. 108 under both the rollover and iron curtain methods and concluded the error was not material to any previously issued interim or annual financial statements, nor was it material to the period ended March 31, 2026. As a result, the Company recorded an out-of-period adjustment in the first quarter of 2026 of approximately $336,000 to both Operating lease right-of-use asset, net and Operating lease liability to correct the error, and expense of approximately $28,000 in the condensed consolidated statement of operations. The correction did not result in a material misstatement of the current period condensed consolidated financial statements, and therefore, the Company did not revise prior period amounts or amend any previously issued filings.

Liquidity and Capital Resources

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 condensed 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 approximately $75.6 million at June 30, 2026. The Company's cash and cash equivalents at June 30, 2026, were approximately $2.4 million. Based on the Company's current expected level of operating expenditures and the cash and cash equivalents on hand at June 30, 2026, 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 unaudited condensed consolidated financial statements. 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. Furthermore, an alternative source of funding to the sale of additional equity or debt securities is the exercise of outstanding warrants for which there can be no guarantee. No adjustments have been made to the presented condensed consolidated financial statements as a result of this uncertainty.

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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 statement 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 flow.

Advertising Expense

The Company expenses all advertising costs as incurred. Advertising expense was $192,859 and $171,822 for the six months ended June 30, 2026 and 2025, respectively, and $94,410 and $143,616 for the three months ended June 30, 2026 and 2025, 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 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 notes payable, unvested restricted stock, and warrants based on the average stock price for each period using the treasury stock method.

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The following potentially dilutive securities have been excluded from the computations of weighted-average shares of Common Stock outstanding as of June 30, 2026 and 2025, as they would be anti-dilutive:

		As of June 30,
		2026				2025
Shares underlying options outstanding			352,835				9,531
Shares underlying convertible Preferred Stock			150,000				-
Shares underlying warrants outstanding			1,833,894				429,029
Shares underlying unvested restricted stock			3,859				14,348
			2,340,588				452,908

Revenue Recognition

To determine revenue recognition for the arrangements that the Company determines are within the scope of 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.

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.

		Six Months Ended June 30,								Three Months Ended June 30,
		2026				2025				2026				2025
Patient service fees1		$	2,326,352			$	2,512,449			$	1,244,142			$	942,067
Histology service fees			498,776				572,358				248,260				308,604
Medical director fees			35,005				33,897				17,544				17,309
Department of War observational studies			1,131				-				-				-
Other revenues			842				4,376				633				1,503
Total net revenue		$	2,862,106			$	3,123,080			$	1,510,579			$	1,269,483

1

Patient services fees include direct billing for CyPath® Lung diagnostic test of approximately $835,000 and $323,000 for the six months ended June 30, 2026 and 2025, respectively, and $474,000 and $153,000 for the three months ended June 30, 2026 and 2025, respectively.

Property and Equipment

In accordance with ASC 360-10, Accounting for the Impairment of Long-Lived Assets, 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 three and six months ended June 30, 2026, or for the fiscal year ended December 31, 2025.

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:

Asset Category		Useful Life
Computer equipment		3-5 years
Computer software		3 years
Equipment		3-5 years
Furniture and fixtures		5-7 years
Vehicles		5 years
Leasehold improvements		Lesser of lease term or useful life

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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 Company tests goodwill for impairment annually and, therefore, does not record amortization. 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 June 30, 2026, and December 31, 2025:

		June 30, 2026				December 31, 2025
Cost
Trade names and trademarks			150,000				150,000
Customer relationships			700,000				700,000
			850,000				850,000
Accumulated amortization
Trade names and trademarks			(23,194	)			(19,028	)
Customer relationships			(139,167	)			(114,166	)
			(162,361	)			(133,194	)
Total finite-lived intangible assets, net			687,639				716,806
Goodwill			1,404,486				1,404,486

The Company incurred amortization of intangible assets of $29,167 for each of the six months ended June 30, 2026, and 2025, and $14,583 for each of the three months ended June 30, 2026, and 2025.

The estimated amortization expense related to amortizable intangible assets for each of the five succeeding fiscal years and thereafter as of June 30, 2026 is as follows:

2026		$	29,167
2027			58,333
2028			58,333
2029			58,333
2030			58,333
Thereafter			425,140
Total		$	687,639

Recent Accounting Pronouncements

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

Segment Information

The Company is organized in two 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.

		Three months ended June 30,								Six months ended June 30,
		2026				2025				2026				2025
Net revenue:
Diagnostic R&D		$	-			$	-			$	1,131			$	-
Laboratory services 1			1,510,579				1,269,483				2,860,975				3,123,080
Total net revenue			1,510,579				1,269,483				2,862,106				3,123,080
Operating expenses:
Diagnostic R&D			(837,460	)			(440,651	)			(1,521,207	)			(946,390	)
Laboratory services			(1,787,865	)			(1,646,471	)			(3,620,457	)			(3,914,127	)
General corporate activities			(2,220,118	)			(1,697,921	)			(4,672,282	)			(3,405,262	)
Total operating loss			(3,334,864	)			(2,515,560	)			(6,951,840	)			(5,142,699	)
Non-operating (expense), net			(31,218	)			(1,516,243	)			(44,852	)			(1,540,826	)
Net loss before income tax expense			(3,366,082	)			(4,031,803	)			(6,996,692	)			(6,683,525	)
Income tax expense			-				(28,984	)			-				(37,679	)
Net loss		$	(3,366,082	)		$	(4,060,787	)		$	(6,996,692	)		$	(6,721,204	)

1	The majority of the decrease versus the prior year is primarily due to discontinuing certain unprofitable pathology services to focus on CyPath® Lung and other high-margin services.

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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 condensed consolidated balance sheets and within research and development expense in the accompanying condensed 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 ("FDCA"), which is administered by the Food and Drug Administration ("FDA") and the Centers for Medicare and Medicaid Services ("CMS"). CyPath^® Lung is commercially available as a laboratory developed test ("LDT") offered by PPLS, the Company's wholly owned clinical pathology laboratory, under the regulatory framework applicable to LDTs. PPLS is accredited by the College of American Pathologists ("CAP") and certified under the Clinical Laboratory Improvement Amendments ("CLIA").

Note 3. ACCOUNTS AND OTHER RECEIVABLES, NET

The following is a summary of accounts receivables and other receivables:

		June 30, 2026				December 31, 2025
Patient service fees		$	726,070			$	356,432
Histology service fees			133,422				142,889
Medical director fees			16,031				16,346
Other receivables			19,300				26,295
Total accounts and other receivables, net		$	894,823			$	541,962

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Note 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets are summarized below:

		June 30, 2026				December 31, 2025
Prepaid insurance		$	137,154			$	227,950
Legal and professional			32,146				21,530
Other			289,060				270,436
Total prepaid expenses and other current assets		$	458,360			$	519,916

Note 5. PROPERTY AND EQUIPMENT, NET

Property and equipment are summarized below:

		June 30, 2026				December 31, 2025
Lab equipment		$	735,569			$	679,995
Computers and software			46,441				81,433
Leasehold improvements			104,392				32,781
Vehicles			130,590				175,630
			1,016,992				969,839
Less: accumulated depreciation and amortization			(703,284	)			(704,246	)
Total property and equipment, net		$	313,708			$	265,593

Depreciation expense was $47,519 and $88,231 for the six months ended June 30, 2026 and 2025, respectively, and $23,108 and $44,468 for the three months ended June 30, 2026 and 2025, respectively.

Note 6. ACCRUED EXPENSES

Accrued expenses are summarized below:

						June 30, 2026			December 31, 2025

Compensation						$	869,289			$	1,309,738
Legal and professional							226,225				337,936
Clinical							295,613				46,177
Other							23,365				24,138
Total accrued expenses						$	1,414,492			$	1,717,989

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 43 units as of June 30, 2026. The performance obligation is deemed complete after samples have been collected and processed and results analyzed. The unearned revenue balance amounted to $22,696 and $23,827 as of June 30, 2026, and December 31, 2025, respectively.

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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 20 tests as of June 30, 2026. 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 $8,444 and $18,578 as of June 30, 2026 and December 31, 2025, respectively.

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:

Level		Inputs
1		Unadjusted quoted prices in active markets for identical assets and liabilities;
		Unadjusted quoted prices in active markets for similar assets and liabilities.
2		Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or
		inputs other than quoted prices that are observable for the asset or liability.
3		Unobservable inputs for the asset or liability.

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.

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. In April 2024, the Company amended the lab space lease agreement which included two options to extend the lease for an additional three years on the exercise of each option. Management has not included these options in calculating the operating lease right-of-use assets and operating lease liabilities. During the first quarter of 2026, operating lease assets and liabilities increased as a result of amending the lease due to an out-of-period adjustment described previously in Note 1. Additionally, the Company entered into an operating lease on September 1, 2024, for additional office space. The Company entered into a new operating lease agreement for additional lab space in June 2026. The Company's operating leases consist of office and lab space with remaining lease terms of 4.2 to 5 years as of June 30, 2026. The Company has finance leases consisting of office and lab equipment with remaining lease terms ranging from approximately 0.58 to 6.3 years as of June 30, 2026, 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 7.97% for the lease term lengths.

Leases with an initial term of 12 months or less are not recorded on the balance sheets. 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.

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The components of lease expense, which are included in selling, general and administrative expense and depreciation and amortization for the three months and six months ended June 30, 2026 and 2025, are as follows:

		Three months ended June 30,								Six months ended June 30,
		2026				2025				2026				2025
Amortization of right-of-use asset - finance lease		$	24,638			$	54,177			$	100,165			$	150,420
Interest on lease liabilities - finance lease			8,688				7,410				20,957				20,491
Operating lease cost			46,255				39,764				89,539				79,529
Total lease cost		$	79,581			$	101,351			$	210,611			$	250,440
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash paid from finance leases		$	(29,941	)		$	(92,975	)		$	(119,251	)		$	(193,241	)
Operating cash paid from operating leases			(40,914	)			(31,443	)			(81,829	)			(56,238	)

Operating leases:		June 30, 2026				December 31, 2025
Operating lease right-of-use, assets		$	769,270			$	334,289
Operating lease liability, current		$	163,276			$	139,220
Operating lease liability, non-current		$	637,643			$	202,878
Total operating lease liabilities		$	800,919			$	342,098

Finance leases:		June 30, 2026				December 31, 2025
Finance lease right-of-use asset, gross		$	642,677			$	1,184,598
Accumulated amortization			(80,490	)			(523,023	)
Finance lease right-of-use asset, net		$	562,187			$	661,575
Finance lease liability, current portion		$	79,592			$	139,490
Finance lease liability, long-term			495,468				532,759
Total finance lease liabilities		$	575,060			$	672,249

Weighted-average remaining lease term:		June 30, 2026				December 31, 2025
Operating leases (in years)			4.33				3.04
Finance leases (in years)			6.29				6.18

Weighted-average discount rate:

June 30, 2026

December 31, 2025

Operating leases								6.84	%			7.28	%
Finance leases								6.76	%			6.86	%

Future minimum lease payments under non-cancellable lease as of June 30, 2026, are as follows:

		Operating Leases				Finance Leases
Remaining for 2026		$	100,693			$	59,881
2027			206,615				111,708
2028			214,859				111,708
2029			223,465				111,708
2030			166,039				111,708
2031 and thereafter			19,637				197,893
Total undiscounted cash flows			931,308				704,606
Less discounting			(130,389	)			(129,546	)
Present value of lease liabilities		$	800,919			$	575,060

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Note 10. NOTES PAYABLE

Vehicles Notes Payable

On January 10, 2025, the Company entered into a second 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 June 30, 2026, and December 31, 2025, was $27,546 and $29,774, respectively. The current portion of the balance of this loan as of June 30, 2026, and December 31, 2025, was $4,861 and $4,588, respectively.

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 June 30, 2026, and December 31, 2025, was $18,406 and $20,618, respectively. The current portion of the balance of this loan as of June 30, 2026, and December 31, 2025, was $4,627 and $4,491, respectively.

Directors and Officers Insurance Policy - 2025

In September 2025, the Company obtained short-term financing of approximately $260,000 with 11 monthly payments of approximately $24,000 and interest at a 6.7% fixed annual rate for director and officer insurance policies. The current portion of the balance of this loan as of June 30, 2026, and December 31, 2025, was $13,073 and $90,002, respectively.

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 450 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. As of June 30, 2026, the investors have converted 540 of the 990 Series B Convertible Preferred Stock in exchange for 125,359 shares of Common Stock. 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.

18

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 $6.90 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 $3.00 per share.

Common Stock

The Company has authorized a total of 350,000,000 shares of Common Stock, $0.007 par value per share. The Company has issued 6,783,061 shares of Common Stock, of which 3,859 are unvested restricted stock awards as of June 30, 2026, and 4,498,675 shares of Common Stock, of which 4,371 are unvested restricted stock awards as of December 31, 2025.

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 June 30, 2026, the Company sold 114,672 shares of Common Stock through the ATM Agreement which accumulated approximately $1.2 million in gross proceeds.

In June 2026, the Company consummated a best efforts public offering of an aggregate of (i) 1,040,000 shares of Common Stock, par value $0.007 per share and (ii) pre-funded warrants to purchase up to 2,960,000 shares of Common Stock in lieu of Shares. Each Share was sold at a public offering price of $0.80. Each Pre-Funded Warrant was sold at a public offering price of $0.793. The aggregate gross proceeds from the Offering were approximately $3.2 million, before deducting placement agent fees and other offering expenses. The Company intends to use the proceeds of the Offering for working capital and other general corporate purposes. The Company issued 4,000,000 shares of Common Stock at $0.80, of which 2,960,000 were issued as prefunded warrants. As of June 30, 2026, 1,000,000 prefunded warrants had been exercised.

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Note 13. STOCK-BASED COMPENSATION

Under the Company's 2024 Equity Incentive Plan (the "2024 Plan"), the Company is authorized to grant options or restricted stock for up to 1,000,000 shares of Common Stock. On April 30, 2026, at the Company's annual meeting of shareholders, the Company's shareholders approved an amendment to the 2024 Plan to increase the number of shares of Common Stock authorized for issuance under the 2024 Plan from 66,666 shares to 1,000,000 shares. 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. The Company's 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 condensed consolidated statements of operations:

		Three Months Ended June 30,								Six Months Ended June 30,
		2026				2025				2026				2025
Research and development		$	17,780			$	(8,334	)		$	18,854			$	12,916
General and administrative			767,161				219,941				780,427				525,307
		$	784,941			$	211,607			$	799,281			$	538,223

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

		Number of options				Weighted-average exercise price				Weighted-average remaining contractual term (in years)				Aggregate intrinsic value
Outstanding at December 31, 2025			9,055			$	211.56				3.67				-
Granted			343,780				1.59				9.94				-
Exercised			-				-				-				-
Forfeited			-				-				-				-
Outstanding at June 30, 2026			352,835			$	6.98				9.76				-
Vested and exercisable at June 30, 2026			352,835			$	6.98				9.76				-

As of June 30, 2026, there was no unrecognized compensation cost related to unvested stock options.

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

														As of June 30, 2026
		Number of restricted stock awards (RSA)				Weighted- average grant price				FMV on grant date				Vested number of RSA				Unvested number of RSA
Balance at December 31, 2025			51,810			$	51.87			$	2,709,982				47,951				3,859
Granted			161,055				1.56				251,246				161,055				-
Forfeited			-				-				-				-				-
Balance at June 30, 2026			212,865			$	13.91			$	2,961,228				209,006				3,859

During the six months ended June 30, 2026, the Company issued restricted stock awards ("RSAs") for 161,567 shares of Common Stock to employees, non-employees, and the board of directors. The shares vested immediately. During the six months ended June 30, 2026, 512 shares vested from RSAs granted prior to January 1, 2026, and 161,055 shares vested from RSAs granted during the six months ended June 30, 2026.

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Note 14. WARRANTS

The Company's outstanding Common Stock warrants are equity classified. As of June 30, 2026, and December 31, 2025, the Company had 1,833,894 warrants outstanding to purchase one share of the Company's Common Stock for each warrant at an average exercise price of $22.35 and 1,348,494 warrants outstanding at a weighted average exercise price of $28.44, respectively, and expire at various dates through June 2031. During the six months ended June 30, 2026, no warrants were exercised compared to the six months ended June 30, 2025, and a total number of 162,333 warrants were exercised into an equivalent number of shares of Common Stock.

As of June 30, 2026, 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 1,780,519 shares of Common Stock outstanding.

		Number of warrants issued				Weighted- average exercise price				Number of warrants exercised				Number of warrants outstanding
Pre-IPO convertible notes			96,616			$	159.35				-				96,616
IPO tradeable			77,561				91.95				(24,186	)			53,375
IPO non-tradeable			100,515				91.95				(10,366	)			90,149
Direct offering March 2024			53,330				37.50				(35,553	)			17,777
Placement agent direct offering March 2024			1,066				2.40				-				1,066
Inducement/direct offering August 2024			58,402				-				(58,402	)			-
Placement agent direct offering August 2024			1,659				2.40				-				1,659
Direct offering October 2024			88,757				23.92				(59,544	)			29,213
Warrant inducement February 2025			97,538				25.50				-				97,538
Public offering May 2025			1,470,673				4.50				(781,262	)			689,411
PIPE/Inducement offering August 2025			637,090				4.5				-				637,090
Placement agent direct offering June 2026			120,000				0.88				-				120,000
Balance at June 30, 2026			2,803,207			$	21.46				(969,313	)			1,833,894

Note 15. SUBSEQUENT EVENTS

In December 2025, the Company entered into a services agreement with IRTH Communication, LLC for investor relations, financial communications and strategic consulting. Per the agreement, the Company was to issue $125,000 worth of Common Stock calculated by the average closing price of the Company's common stock on its principal exchange for the ten (10) trading days immediately prior to execution of the Agreement. In July 2026, the Company issued 92,524 shares of Common Stock at $1.35 per the consulting agreement.

In July 2026, holders of the Company's Series B Convertible Preferred Stock elected to convert 150 shares of such Series B Convertible Preferred Stock into an aggregate of 49,999 shares of Common Stock in accordance with the Convertible Preferred Stock described in Note 12.

In July and August 2026, investors in the June direct offering, described in Note 12, exercised an additional 1,180,000 pre-funded warrants convertible into an equivalent number of Common Stock.

In July 2026, the Company announced a collaboration with Pictor®, Inc. ("Pictor"), a targeted proteomic platform company, to support development and commercialization of bioAffinity Technologies' next-generation diagnostic tests designed to provide a more complete picture of lung inflammation in patients with asthma and COPD. Pictor. is led by CEO and Managing Director Jamie Platt, PhD, a recognized diagnostics executive who joined bioAffinity Technologies' Board of Directors in 2023.

In July 2026, the Company received notice from Nasdaq noting the Company's bid price for its Common Stock closed at less than $1 per share over the previous 30 consecutive business days as of July 29, 2026, and has not regained compliance according to Listing Rule 5550(a)(2). As of August 6, 2026 the Company requested a hearing appeal on the determination. Such request will stay any further action by Nasdaq and will allow the Company's ordinary shares to continue to trade on Nasdaq under the symbol "BIAF" at least pending the issuance of the Panel's decision and the expiration of any extension the Panel may grant to the Company following the appeal.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section presents management's perspective on our financial condition and results of operations. The following discussion and analysis (the "MD&A") is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report and should be read in conjunction with our interim unaudited condensed consolidated financial statements and notes elsewhere in this Quarterly Report and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2025, included in the 2025 Form 10-K. The MD&A is also intended to provide you with information that will assist you in understanding our consolidated financial statements, the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted for those changes. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause the Company's financial results to differ materially from management's expectations. Factors that could cause such differences are discussed in the "Cautionary Note Regarding Forward-Looking Statements" section of this Quarterly Report and in the "Risk Factors" section of the 2025 Form 10-K.

Data as of and for the three and six months ended June 30, 2026 and 2025, has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.

Our MD&A is organized as follows:

	·	Company Overview - Discussion of our business plan and strategy to provide context for the remainder of the MD&A.
	·	Results of Operations - Analysis of our financial results comparing three months and six months ended June 30, 2026, to the comparable period in 2025.
	·	Liquidity and Capital Resources - Analysis of changes in our cash flows and discussion of our financial condition and potential sources of liquidity.
	·	Critical Accounting Estimates - Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Company Overview

Business

We develop noninvasive diagnostics to detect early-stage lung cancer and other diseases of the lung using flow cytometry and automated analysis developed by machine learning, a form of AI. Our commercial test, CyPath^® Lung, is a noninvasive diagnostic that analyzes sputum using flow cytometry and automated analysis built with machine learning. Building on this proprietary platform, the Company is developing noninvasive tests to quantify lung inflammation with the aim of commercializing precision diagnostics to assist physicians when determining the most effective drug to prescribe patients with asthma and COPD. bioAffinity Technologies also is advancing its proprietary therapeutic discoveries, focusing on developing the dermal delivery of drugs developed by the Company containing self-delivering, stabilized siRNAs that selectively kill squamous and basal carcinoma cells while leaving non-cancerous cutaneous cells unharmed.

Our diagnostic test, CyPath^® Lung, addresses the need for noninvasive detection of early-stage lung cancer. Lung cancer is the leading cause of cancer-related deaths worldwide. Physicians order CyPath^® Lung to assist in their assessment of patients who are at high risk for lung cancer. The CyPath^® Lung test enables physicians to more confidently identify patients who will likely benefit from timely intervention and more invasive follow-up procedures and those who are likely without lung cancer and should continue routine screening. CyPath^® Lung has the potential to increase overall diagnostic accuracy of lung cancer, which could lead to increased survival, fewer unnecessary invasive procedures, reduced patient anxiety, and lower medical costs.

Commercial laboratory services, including CyPath^® Lung, are performed at our wholly owned subsidiary PPLS which we acquired by purchasing the assets of Village Oaks Pathology Services, P.A., a Texas professional association d/b/a Precision Pathology Services, that included the CAP-accredited and CLIA-certified commercial laboratory it owned. We now own and operate the clinical anatomic and clinical pathology laboratory. CyPath^® Lung is offered for sale to physicians by PPLS.

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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 will continue to present our findings at academic and industry conferences and expect to publish our research findings in peer-reviewed journals. We intend to seek strategic partners as we progress into in vivo studies to develop our therapeutics targeted at squamous and basal cell skin cancers.

Research and optimization of our platform technologies are now conducted in laboratories at our wholly owned subsidiary PPLS and leased laboratory space.

Current Year Financial Highlights

Key financial results for the six months ended June 30, 2026, include:

	·	Unit sales for CyPath® Lung diagnostic in the second quarter of 2026 achieved 216% growth compared to the second quarter of 2025, reflecting accelerating physician adoption and expanding clinical use of the Company's noninvasive lung cancer diagnostic test.
	·	CyPath® Lung testing revenue increased approximately 156% to $835,000 for the six months ended June 30, 2026, as compared to $323,000 for the six months ended June 30, 2025.
	·	The Company raised approximately $3.2 million in gross proceeds from an equity transaction in the second quarter to fund operating activities.

Recent Developments

	·	In July 2026, the Company surpassed the total number of tests completed in all of 2025, delivering more than 1,200 CyPath® Lung test reports to physicians.
	·	The number of physician offices and clinics ordering CyPath® Lung for their patients increased 122% during the second quarter of 2026 compared to the same period in 2025.
	·	In July 2026, the Company received notice from Nasdaq noting the Company's bid price for its Common Stock closed at less than $1 per share over the previous 30 consecutive business days as of July 29, 2026, and has not regained compliance according to Listing Rule 5550(a)(2). As of August 6, 2026 the Company requested a hearing appeal on the determination. Such request will stay any further action by Nasdaq and will allow the Company's ordinary shares to continue to trade on Nasdaq under the symbol "BIAF" at least pending the issuance of the Panel's decision and the expiration of any extension the Panel may grant to the Company following the appeal.
	·	On July 27, 2026, the Company published a comprehensive clinical review and white paper authored by Chief Medical Officer Gordon H. Downie, MD, PhD, that presents a practical clinical framework for incorporating CyPath® Lung into pulmonary nodule evaluation and cancer surveillance. The review is titled "Lung Nodules, Lung Microenvironment, Predictive Models and Clinician Risk Stratification Using CyPath® Lung Testing for Early Diagnosis of Lung Cancer."
	·	On July 22, 2026, the Company announced a collaboration with Pictor®, Inc., a targeted proteomic platform company, to support development and commercialization of bioAffinity Technologies' next-generation diagnostic tests designed to provide a more complete picture of lung inflammation in patients with asthma and COPD.
	·	As of June 30, 2026, 11 clinical sites have been activated for the CyPath ® Lung longitudinal clinical trial that opened in March 2026, including nine Department of Veterans Affairs (VA) and military medical centers that have begun patient enrollment. Financial support for the trial has been provided by 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.
	·	On June 22, 2026, the Company presented positive results from preliminary therapeutic studies to advance treatments delivered topically for squamous and basal cell skin cancers showing that their self-delivering, stabilized siRNAs selectively kill squamous and basal carcinoma cells while leaving non-cancerous cutaneous cells unharmed.
	·	On June 16, 2025, The Society for Advanced Bronchoscopy ("SAB") and on July 21, 2026, the National Association of Veterans' Research Education Foundations ("NAVREF") hosted webinars featuring multi-disciplinary panels of physicians who discussed CyPath Lung's expanding role in the lung nodule care continuum.
	·	On May 27, 2026, bioAffinity announced it received notification of allowance from the Mexican Institute of Industrial Property for a patent application protecting the use of defined antibodies and the porphyrin TCPP to label cell populations in sputum and the use of flow cytometry to determine the presence of lung cancer cells in sputum.

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Recent Financings

On June 16, 2026, the Company consummated a best-efforts public offering of an aggregate of (i) 1,040,000 shares of Common Stock, par value $0.007 per share and (ii) pre-funded warrants to purchase up to 2,960,000 shares of Common Stock in lieu of shares. Each share was sold at a public offering price of $0.80. Each pre-funded warrant was sold at a public offering price of $0.793. The aggregate gross proceeds from the offering were approximately $3.2 million, before deducting placement agent fees and other offering expenses. The Company intends to use the proceeds of the Offering for working capital and other general corporate purposes. As of June 30, 2026, 1,000,000 of the prefunded warrants had been exercised.

Financial

To date, we have devoted a substantial portion of our efforts and financial resources to the development of our diagnostic test, CyPath^® Lung. As a result, since our inception in 2014, we have funded our operations principally through private and public sales of our equity, issuance of debt, and the exercise of outstanding warrants and stock options. As of June 30, 2026, we had cash and cash equivalents of $2.4 million. As of August 3, 2026, we had cash and cash equivalents of $1.0 million, which we expect will support our operations through August 2026. We have incurred significant losses and negative cash flows from operations since inception and expect to continue to incur losses and negative cash flows for the foreseeable future. Based on the Company's current expected level of operating expenditures and the cash and cash equivalents on hand at June 30, 2026, 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 condensed consolidated financial statements.

Prior to acquisition of the clinical pathology laboratory by PPLS, Village Oaks, under the trade name Precision Pathology Services, had licensed and developed CyPath^® Lung as a laboratory developed test ("LDT") for sale to physicians. The license agreement provided that revenues from the sale would be split evenly between the Company and Village Oaks. In the second quarter of 2022, prior to the acquisition, we started to recognize revenue as part of a limited beta market testing program of the CyPath^® Lung test. We have never been profitable, and as of June 30, 2026, we had working capital of approximately $1.2 million and an accumulated deficit of approximately $75.6 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our diagnostic tests and advance our diagnostic tests through clinical trials.

We anticipate raising additional cash needed through the private or public sales of equity or debt securities, collaborative arrangements, or a combination thereof to continue to fund our operations and develop our products. There is no assurance that any such collaborative arrangement will be entered into or that financing will be available to us when needed in order to allow us to continue our operations or, if available, on terms acceptable to us. If we do not raise sufficient funds in a timely manner, we may be forced to curtail operations, delay our clinical trials, cease operations altogether, or file for bankruptcy.

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Results of Operations

Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025

Net loss for the three months ended June 30, 2026, was approximately $3.4 million, compared to a net loss of approximately $4.1 million for the three months ended June 30, 2025.

Revenue

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.

		For the Three Months Ended June 30,
		2026				2025
Patient service fees1		$	1,244,142			$	942,067
Histology service fees			248,260				308,604
Medical director fees			17,544				17,309
Department of War observational studies			-				-
Other revenues			633				1,503
Total net revenue		$	1,510,579			$	1,269,483

¹ Patient services fees include direct billing for CyPath ^® Lung diagnostic tests and anatomical testing and pathology services wholly unrelated to CyPath^® Lung including those services discontinued due to unprofitability.

Net revenue totaled approximately $1.5 million and $1.3 million for the three months ended June 30, 2026 and 2025, respectively. Consolidated revenue increased approximately $0.2 million, or 19%, to $1.5 million for the three months ended June 30, 2026, as compared to $1.3 million for the three months ended June 30, 2025, primarily as a result of growth in CyPath^® Lung testing revenue, partially offset by the Company's targeted strategic actions taken in March 2025 to discontinue certain unprofitable pathology services. CyPath^® Lung testing revenue increased approximately $321,000, or 210%, to $474,000 for the three months ended June 30, 2026, compared to $153,000 for the three months ended June 30, 2025, as a result of a total of 622 test results delivered for the three months ended June 30, 2026, compared to 197 tests for the three months ended June 30, 2025

Operating Expenses

		Three Months Ended								Change in 2026
		June 30,								Versus 2025
		2026				2025				$				%
Operating expenses:
Direct costs and expenses		$	1,087,837			$	1,016,602			$	71,235				7	%
Research and development			361,575				311,372				50,203				16	%
Clinical development			475,885				129,279				346,606				268	%
Selling, general and administrative			2,858,590				2,214,561				644,029				29	%
Depreciation and amortization			61,556				113,229				(51,673	)			(46	)%
Total operating expenses		$	4,845,443			$	3,785,043			$	1,060,400				28	%

Operating expenses totaled approximately $4.8 million and $3.8 million during the three months ended June 30, 2026 and 2025, respectively. The increase in operating expenses is the result of the following factors:

Direct costs and expenses

Our direct costs and expenses consist primarily of direct labor for pathology services, laboratory supplies and reagents, laboratory equipment, and allocated shared facilities. Direct costs and expenses totaled $1.1 million and $1.0 million during the three months ended June 30, 2026 and 2025, respectively. The costs were consistent compared to the same period in prior year, with an increase of $70,000 attributable to the addition of personnel to process tests related to the sale of CyPath^® Lung, as well as to process tests related to our clinical study.

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Research and Development Expenses

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

Research and development expenses totaled approximately $362,000 and $311,000 for the three months ended June 30, 2026 and 2025, respectively. The increase of $50,000, or 16%, for the three months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to an increase in lab supplies and moving costs related to relocating our laboratory facilities in June 2026.

Clinical Development

Clinical development expenses totaled approximately $476,000 and $129,000 for the three months ended June 30, 2026 and 2025, respectively. The increase of $347,000, or 268%, for the three months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to opening clinical trial sites and enrolling patients in our longitudinal clinical trial opened in March 2026. As of June 30, 2026, 11 clinical sites have been activated for enrollment, including nine Department of Veterans Affairs (VA) and military medical centers that have begun patient enrollment. Financial support for the trial has been provided by t he 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.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of expenditures related to employee compensation, selling and marketing costs, legal, accounting, tax and other professional services, and general operating expenses.

Selling, general and administrative expenses totaled approximately $2.9 million and $2.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase of approximately $644,000, or 29%, for the three months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to an increase in stock compensation expense, sales and marketing costs due to additional personnel and support services to expand sales of our diagnostic test, CyPath^® Lung.

Depreciation and Amortization

Depreciation and amortization expenses totaled $62,000 and $113,000 for the three months ended June 30, 2026 and 2025, respectively. The decrease of approximately $51,000, or 46%, for the three months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to the termination of a financing lease in April 2025 due to the Company's targeted strategic actions announced in March 2025.

Other Income (Expense)

		Three Months Ended								Change in 2026
		June 30,								Versus 2025
		2026				2025				$				%
Interest (expense) income, net		$	(8,330	)		$	(8,435	)		$	105				(1	)%
Other income (expense), net			(22,888	)			(444,990	)			422,102				(95	)%
Gain (loss) on remeasurement of warrant liabilities			-				(1,062,818	)			1,062,818				-	%
Total other (expense) income		$	(31,218	)		$	(1,516,243	)		$	1,485,025				(98	)%

Total other income (expense), net totaled approximately ($30,000) and ($1.5 million) for the three months ended June 30, 2026 and 2025, respectively. The decrease in the total other expenses of approximately $1.5 million is mostly attributable to the remeasurement of warrant liability and offering costs related to the May 2025 public offering.

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Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025

Net loss for the six months ended June 30, 2026, was approximately $7.0 million, compared to a net loss of approximately $6.7 million for the six months ended June 30, 2025.

Revenue

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.

		For the Six Months Ended June 30,
		2026				2025
Patient service fees1		$	2,326,352			$	2,512,449
Histology service fees			498,776				572,358
Medical director fees			35,005				33,897
Department of War observational studies			1,131				-
Other revenues			843				4,376
Total net revenue		$	2,862,106			$	3,123,080

¹ Patient services fees include direct billing for CyPath ^® Lung diagnostic tests and anatomical testing and pathology services wholly unrelated to CyPath^® Lung. Revenues for 2025 include PPLS anatomical services discontinued in March 2025 due to unprofitability.

Consolidated revenue decreased approximately $0.3 million, or 8%, to approximately $2.9 million for the six months ended June 30, 2026, as compared to $3.1 million for the six months ended June 30, 2025, primarily as a result of the Company's targeted strategic actions to discontinue certain unprofitable pathology services, offset by continuing to drive sales growth for CyPath^® Lung. CyPath^® Lung testing revenue increased approximately $512,000, or 159%, to $835,000 for the six months ended June 30, 2026, compared to $323,000 for the six months ended June 30, 2025, as a result of a total of approximately 1,100 test results delivered for the six months ended June 30, 2026, compared to approximately 400 tests for the six months ended June 30, 2025.

Operating Expenses

		Six Months Ended								Change in 2026
		June 30,								Versus 2025
		2026				2025				$				%
Operating expenses:
Direct costs and expenses		$	2,016,473			$	2,384,462			$	(367,989	)			(15	)%
Research and development			711,282				678,758				32,524				5	%
Clinical development			809,925				267,632				542,293				203	%
Selling, general and administrative			6,100,192				4,667,110				1,433,082				31	%
Depreciation and amortization			176,074				267,817				(91,743	)			(34	)%
Total operating expenses		$	9,813,946			$	8,265,779			$	(571,292	)			19	%

Operating expenses totaled approximately $9.8 million and $8.3 million during the six months ended June 30, 2026 and 2025, respectively. The increase in operating expenses is the result of the following factors:

Direct costs and expenses

Our direct costs and expenses consist primarily of direct labor for pathology services, laboratory supplies and reagents, laboratory equipment, and allocated shared facilities. Direct costs and expenses totaled approximately $2.0 million and $2.4 million during the six months ended June 30, 2026 and 2025, respectively. The decrease of approximately $0.4 million, or 15%, for 2026 compared to 2025 was primarily attributable to the targeted strategic actions which occurred in March 2025, aimed at streamlining operations and reducing costs related to our lab operations, partially offset by increases attributable to the addition of personnel to process tests related to the sale of CyPath^® Lung and to our clinical study.

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Research and Development Expenses

Our research and development expenses consist primarily of expenditures for laboratory operations, preclinical and clinical studies, compensation, and consulting costs.

Research and development expenses totaled $0.7 million for the six months ended June 30, 2026 and 2025, respectively. While there was no significant change, we expect that research and development expenses will increase as we develop our flow cytometry platform to address the need to identify patients who may benefit from existing and emerging therapies for asthma and COPD with noninvasive precision diagnostic tests and research pertaining to the dermal delivery of drugs developed by the Company containing self-delivering, stabilized siRNAs that selectively kill squamous and basal carcinoma cells while leaving non-cancerous cutaneous cells unharmed..

Clinical Development

Clinical development expenses totaled approximately $0.8 million and $0.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of approximately $0.5 million, or 203%, for the six months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to an increase in professional fees in 2026 related to managing our clinical strategy for our clinical trial that began in March 2026, as well as costs to open 11 clinical trial sites that have begun patient enrollment as of June 30, 2026.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of expenditures related to employee compensation, selling and marketing costs, legal, accounting and tax, and other professional services, and general operating expenses.

Selling, general and administrative expenses totaled approximately $6.1 million and $4.7 million for the six months ended June 30, 2026 and 2025, respectively. Our selling, general and administrative cost increase was primarily attributable to an increase in employee compensation related to stock compensation, administrative and sales due to additional personnel and support services to support the growth of sales of our diagnostic test, CyPath^® Lung.

Depreciation and Amortization

Depreciation and amortization expenses totaled approximately $176,000 and $268,000 for the six months ended June 30, 2026 and 2025, respectively. The decrease of approximately $92,000, or 34%, for the six months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to the termination of a financing lease in April 2025 due to the Company's targeted strategic actions announced in March 2025.

		Six Months Ended								Change in 2026
		June 30,								Versus 2025
		2026				2025				$				%
Interest (expense) income, net		$	(13,026	)		$	(23,378	)		$	10,352				(44	)%
Other income (expense), net			(31,826	)			(454,630	)			422,804				(93	)%
Gain (loss) on remeasurement of warrant liabilities			-				(1,062,818	)			1,062,818				(91	)%
Total other (expense) income		$	(44,852	)		$	(1,540,826	)		$	1,495,974				(313	)%

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Other Income (Expense)

Total other income (expense), net totaled approximately ($45,000) and ($1.5 million) for the six months ended June 30, 2026 and 2025, respectively. The decrease in the total other expenses of approximately $1.5 million is mostly attributable to the remeasurement of warrant liability and offering costs related to the May 2025 public offering.

Liquidity, Capital Resources, and Going Concern

To date, we have funded our operations primarily through our IPO, exercise of stock options and warrants, and the sale of our securities, resulting in gross proceeds of approximately $61.4 million. We have evaluated whether there are conditions and events that raise substantial doubt about our ability to continue as a going concern for at least one year after the date the condensed consolidated financial statements are issued.

We have incurred losses since our inception in 2014 as a result of significant expenditures for operations and research and development and, prior to April 2022, the lack of any approved diagnostic test or therapeutic products to generate revenue. For the six months ended June 30, 2026 and 2025, we had net losses of $7.0 million and $6.7 million, respectively, and we expect to incur substantial additional losses in future periods. We have an accumulated deficit of approximately $75.6 million as of June 30, 2026. Despite our recent financing in June 2026 in which we raised gross proceeds of $3.2 million, we believe our current cash and anticipated revenue from operations will not be sufficient to support our operations through August 2026. Based on our current expected level of operating expenditures, current expected levels of revenue, and the cash and cash equivalents on hand at June 30, 2026, of $2.4 million, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least twelve (12) months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report. We need to raise further capital through the sale of additional equity or debt securities or other debt instruments, strategic relationships or grants, or through exercised outstanding warrants to support our future operations unless our revenue increases significantly. Our business plan includes expansion for our commercialization efforts which will require additional funding. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate revenue and raise capital from financing transactions. There can be no assurance that we will be successful in accomplishing these objectives.

We continue to seek sources of financing to fund our continued operations and research and development programs. To raise additional capital, we may sell additional equity or debt securities, or enter into collaborative, strategic, and/or licensing transactions. There can be no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise enter into a collaborative or strategic transaction. If we are not able to raise additional cash, we may be forced to delay, curtail, or cease development of our diagnostic tests or therapeutic products, or cease operations altogether.

Summary Statements of Cash Flows

The following information reflects cash flows for the periods presented:

		Six Months Ended
		June 30,
		2026				2025
Cash and cash equivalents at beginning of period		$	6,449,782			$	1,105,291
Net cash used in operating activities			(6,428,344	)			(4,288,981	)
Net cash used in investing activities			(95,633	)			(64,213	)
Net cash provided by financing activities			2,503,914				4,050,738
Cash and cash equivalents at end of period		$	2,429,719			$	802,835

Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $6.4 million and $4.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of approximately $2.4 million in cash used by operations during the six months ended June 30, 2026, compared to the same period in 2025 was primarily attributable to an increase of $0.3 million in our loss from operations offset by a decrease in accounts receivable by $1.1 million compared to the prior year, an increase of stock based compensation of $0.3 million compared to the prior year, and a fair value adjustment to the warrant liability by $1.1 million related to the May 2025 warrant agreement.

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Net Cash Used in Investing Activities

We used approximately $96,000 for the six months ended June 30, 2026, in investing activities related primarily to purchase of computer and lab equipment, compared to approximately $64,000 used in investing activities for the six months ended June 30, 2025.

Net Cash Provided by Financing Activities

Cash provided in financing activities was approximately $2.5 million compared to cash provided by financing activities of approximately $4.1 million for the six months ended June 30, 2026 and 2025, respectively. The change in proceeds from prior year was primarily related to net proceeds from the equity transactions of $2.7 million offset by payments for loans and finance leases of $0.1 million, compared to the prior year net proceeds of $4.4 million offset by payments for loans and finance leases of $0.2 million.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with third-party contract organizations for clinical trials and other services and products used for research and development and operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that any non-cancellable obligations under these agreements are not material.

Critical Accounting Estimates

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

Patient Fee Revenues

We follow ASC 606, Revenue from Contracts with Customers, which requires revenue recognition in the period in which the service was performed. To be able to report timely net revenues for the period, estimates are used for a portion of uncollected balances. The Company follows a standard process, which considers historical denial and collection experience and other factors (including the period of time that the receivables have been outstanding), to estimate contractual allowances and implicit price concessions, recording adjustments in the current period as changes in estimates. The process for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation.

Patient Fee Receivables and Considerations for Credit Losses

We follow accounting considerations of CECL - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. With the acquisition of PPLS and control of Village Oaks, the Company's board-certified pathologists provide anatomic and clinical pathology services for patients and other customers. The Company's other customer types include contract research organizations ("CROs"), hospitals, and independent laboratories. The majority of the Company's revenues stem from fees for services provided to patients, and thus, in those arrangements, the patient is the customer, although the services may be requested by a physician on the patient's behalf. Furthermore, in addition to its contracts with patients, the Company separately contracts with third-party payors (insurance companies and governmental payors), who are typically responsible for all or the majority of the fees agreed upon for such services provided to patients. Historically, material amounts of gross charges are not collected due to various agreements with insurance companies, capped pricing levels for government payors, and uncollectible balances from individual payers. To estimate these allowances of credit losses, the Company assesses the portfolio risk segments and historical data on collection rates. These estimated allowances offset patient revenues and accounts receivables.

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Discount Rate for Finance Leased Equipment

We follow ASC 842, Leases. In February 2016, the FASB issued Topic ASC 842, under which a lessee is required to recognize most leases on its balance sheet. The Company has elected to apply a third-party valuation incremental borrowing rate ("IBR") as the discount rate by class of underlying assets when the rate is not implicit in the lease.

Share-Based Compensation

We follow ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors, and non-employees based on estimated fair values. We have used the Black-Scholes option pricing model to estimate grant date fair value for all option grants. The assumptions we use in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As such, as we use different assumptions based on a change in factors, our stock-based compensation expense could be materially different in the future.

Accounting for Income Taxes

We are governed by U.S. income tax laws, which are administered by the Internal Revenue Service ("IRS"). We follow ASC 740, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. 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. 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.

Assessment of Goodwill and Intangible Assets

Our indefinite-lived assets include goodwill and intangible assets resulting from the acquisition of PPLS. Goodwill represents the purchase price in excess of fair values assigned to the underlying identifiable net assets of the acquired business. Goodwill and intangible assets are reviewed annually for impairment unless circumstances dictate the need for more frequent assessment.

In performing impairment tests for our goodwill in 2025, in accordance with ASC 350 - Intangibles - Goodwill and Other, we opted to complete a quantitative assessment at the PPLS level as opposed to relying on a qualitative assessment as permitted in the guidance. This quantitative assessment required that the estimated fair value of PPLS' net assets, including goodwill, be calculated and compared to the carrying amount. If that estimated fair value is in excess of the carrying amount, no impairment is recognized. We performed this assessment as of December 31, 2025. We estimated the fair value of the net assets tested using a discounted cash flow model. The income-based approach required significant judgment to estimate future cash flows, including revenue growth inclusive of long-term growth rate assumptions and the discount rate. Significant changes in our estimates and assumptions could affect our fair value calculations. Our estimate of fair value exceeded the carrying amount and therefore resulted in no impairment.

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Going Concern

Our evaluation of our ability to continue as a going concern requires us to evaluate our future sources and uses of cash sufficient to fund our currently expected operations in conducting research and development activities one year from the date our consolidated financial statements are issued. We evaluate the probability associated with each source and use of cash resources in making our going concern determination. The research and development of our diagnostic tests and therapeutic products are inherently subject to uncertainty.

Off-Balance Sheet Arrangements

We do not engage in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, as a part of our ongoing business. Accordingly, we did not have any off-balance sheet arrangements during any of the periods presented.

Emerging Growth Company Status

We are both an "emerging growth company" and a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are therefore subject to reduced public company reporting requirements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, pursuant to Item 305(e) of Regulation S-K promulgated under the Securities Act, we are not required to provide the information required by this Item 3.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report, is collected, recorded, processed, summarized, and reported within the time periods specified under the rules of the SEC. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. We have adopted and maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized, and reported within the time periods specified in the rules of the SEC. The Company's disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As of June 30, 2026, the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our "disclosure controls and procedures," as defined in Rule 13a-15(e) under the Exchange Act. The Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our disclosure controls and procedures as of June 30, 2026. Based on their assessment, they have concluded that as of June 30, 2026, our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) over financial reporting during the three months ended June 30, 2026, the period covered by this Quarterly Report, that could materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we are involved in various disputes and litigation matters that arise in the ordinary course of business. To date, we have had no material pending legal proceedings, and we are not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse impact on our financial position or results of operations.

ITEM 1A. RISK FACTORS.

In addition to other information set forth in this Quarterly Report, you should carefully consider the "Risk Factors" discussed in the 2025 Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Quarterly Report. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition, and operating results. The following information updates and should be read in conjunction with the information disclosed in Part I, Item 1A, "Risk Factors," contained in our 2025 Form 10-K. Except as disclosed below, there have been no material changes from the risk factors disclosed in our 2025 Form 10-K.

Risks Related to Our Financial Position

Our business plan relies upon our ability to obtain additional sources of capital and financing. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may be required to cease operations.

Prior to 2022, we had not generated any revenue. During the six months ended June 30, 2026, we generated revenue of approximately $2.9 million, and $6.2 million during the year ended December 31, 2025.

To become and remain profitable, we must succeed in generating additional laboratory revenue and developing and commercializing our diagnostic tests and therapeutic products that we expect will generate significant income in the planned timeframe. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our diagnostic and therapeutic technologies, obtaining regulatory approval for our diagnostic and therapeutic technologies, manufacturing, marketing, and selling any diagnostic tests and therapeutic products for which we may obtain regulatory approval, and establishing and managing our collaborations at various phases of each diagnostic test and therapeutic product candidate's development. We are in the preliminary phases of these activities. We may never succeed in these activities and, even if we do, may never generate sufficient income to achieve profitability.

To become profitable, we must develop our diagnostic tests and therapeutic products, which will depend in large part on our ability to:

	·	Develop, enhance, and protect our diagnostic tests and therapeutic products;
	·	Raise sufficient funding to support our diagnostic tests and therapeutic product development program(s);
	·	Complete pre-clinical testing of new diagnostic and therapeutic products;

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	·	Expand commercialization of CyPath® Lung as an LDT under the CAP/CLIA guidelines and regulations administered by CMS and CAP and, if we opt to obtain FDA clearance for our CyPath® Lung test, to expand sales in accordance with applicable requirements.
	·	Develop and commercialize CyPath® Lung as a CE-marked test in accordance with the In Vitro Diagnostic Regulation ("IVDR") of the European Union ("EU");
	·	Conduct research studies resulting in scientific results required to successfully develop therapeutic products based on our discoveries that the knockdown of certain cell receptors results in cancer death without harm to healthy tissue;
	·	Develop and conduct human clinical studies to support the regulatory approval and marketing of our diagnostic test(s) and therapeutic product(s);
	·	Develop and manufacture the test(s) and product(s) to FDA standards, appropriate EU standards, and appropriate standards required for the commercialization of our tests and products in countries in which we seek to sell our diagnostic test(s) and therapeutic product(s);
	·	Obtain the necessary regulatory approvals to market our diagnostic test(s) and therapeutic product(s);
	·	Secure the necessary personnel and infrastructure to support the development, commercialization, and marketing of our diagnostic test(s) and therapeutic product(s); and
	·	Develop strategic relationships to support development, manufacturing, and marketing of our diagnostic test(s) and therapeutic product(s).

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain the research and development efforts, diversify our diagnostic tests and therapeutic product offerings, or even continue operations. A decline in our value could also cause you to lose all or part of your investment.

We must raise additional capital to fund our operations in order to continue as a going concern.

As of June 30, 2026, we had an accumulated deficit of $75.6 million and $2.4 million cash on hand. As of August 3, 2026, our cash and cash equivalents were $1.0 million. Despite our recent financings, we 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 our future operations. Our business plan includes expansion for our commercialization efforts which will require additional funding. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate revenue and raise capital from financing transactions. Without funding from the proceeds of a capital raise or strategic relationship or grant, management anticipates that our cash resources are sufficient to continue operations through August 2026. Based on our current expected level of operating expenditures, current expected levels of revenue, and the cash and cash equivalents on hand at June 30, 2026, of $2.4 million, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least twelve (12) months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of new business opportunities. There can be no assurance that we will be successful in accomplishing these objectives. Without such additional capital, we may be required to curtail or cease operations and be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment. WithumSmith+Brown, PC, our independent registered public accounting firm for the fiscal year ended December 31, 2025, has included an explanatory paragraph in its opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2025, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern.

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We are unable to precisely estimate when we will begin to generate significant profit from revenue, if ever, from PPLS' services, the amount of profit or revenue that will be generated, or the expenses that will be incurred.

We do not expect to immediately derive profit from revenue from PPLS' services. Since its acquisition in September 2023, we have generated $2.5 million in 2023, $9.4 million in 2024, $6.2 million in 2025, and $2.9 million in 2026 in revenue from PPLS. Once we begin to generate such profit, there is no guarantee that it will be sufficient to realize the expected financial benefits of the acquisition. In addition, since we have limited experience operating a clinical laboratory, we may not accurately estimate the expenses we will incur.

Risks Related to Ownership of Our Common Stock and Warrants

We have received a notice of delisting from Nasdaq due to our failure to maintain the minimum bid price requirement, and there can be no assurance that we will be able to regain compliance or maintain our listing on The Nasdaq Capital Market.

On July 30, 2026, we received written notice from the Listing Qualifications Department of Nasdaq indicating that the bid price of our listed securities had closed at less than $1.00 per share over the previous thirty consecutive business days, and that, as a result, we are not in compliance with the Minimum Bid Price Requirement for continued listing on The Nasdaq Capital Market set forth in Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), we are not eligible for the standard 180-calendar day compliance period because we effected a 1-for-30 reverse stock split on September 19, 2025, which occurred within the prior one-year period.

We have submitted an appeal to Nasdaq and intend to present our plans to regain compliance with the Minimum Bid Price Requirement at a hearing before a Nasdaq Hearings Panel (the "Panel"). However, there can be no assurance that the Panel will grant us any extension period within which to regain compliance, or that, if any such extension period is granted, we will be able to regain compliance within such period.

If we are unable to regain compliance with the Minimum Bid Price Requirement or otherwise satisfy Nasdaq's continued listing requirements, our securities could be delisted from The Nasdaq Capital Market. A delisting of our securities could have material adverse consequences, including, but not limited to: a limited availability of market quotations for our securities; reduced liquidity for our securities, making it more difficult for stockholders to buy or sell our securities; a determination that our common stock is a "penny stock," which would require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; a limited amount of news and analyst coverage; a decreased ability to issue additional securities or obtain additional financing in the future; potential loss of confidence by investors, employees, and business partners; and potential negative reputational effects that could impair our business, financial condition, and results of operations.

In addition, we may be required to take actions to regain compliance with the Minimum Bid Price Requirement, such as effecting an additional reverse stock split, which could result in further dilution to our stockholders and may not result in a sustained increase in the per-share price of our common stock. We previously effected a 1-for-30 reverse stock split on September 19, 2025, and there can be no assurance that any future reverse stock split, if undertaken, would result in a lasting increase in the market price of our common stock sufficient to regain or maintain compliance with the Minimum Bid Price Requirement.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Rule 10b5-1 Trading Plans

During the fiscal quarter ended June 30, 2026, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

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ITEM 6. EXHIBITS.

Exhibit No.		Title of Document
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File - the cover page from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 is formatted in Inline XBRL