Item 1A. Risk Factors 22
Item 1B. Unresolved Staff Comments 51
Item 1C. Cybersecurity 52
Item 2. Properties 53
Item 3. Legal Proceedings 53
Item 4. Mine Safety Disclosures 53
PART II
Item 6. [Reserved] 54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61
Item 8. Financial Statements and Supplementary Data 61
Item 9A. Controls and Procedures 62
Item 9B. Other Information 62
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 62
PART III
Item 10. Directors, Executive Officers and Corporate Governance 63
Item 11. Executive Compensation 63
Item 14. Principal Accountant Fees and Services 63
PART IV
Item 15. Exhibit and Financial Statement Schedules 64
Signatures 70
Throughout
this Annual Report on Form 10-K (the “Annual Report”), the terms “bioAffinity,” “bioAffinity Technologies,”
“we,” “us,” “our” or “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
Annual 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 dependence on third parties in the conduct of our clinical trials;
● the results of market research conducted by us or others;
● our reliance on third parties;
● our anticipated uses of net proceeds from our financings;
● the increased expenses associated with being a public company; and
● other factors discussed elsewhere in this Annual Report.
Many
of the foregoing risks and uncertainties, as well as risks and uncertainties that are currently unknown to us, are or may be exacerbated
by factors such as the ongoing conflict between Ukraine and Russia, escalating tensions between China and Taiwan, the war in the Middle
East, 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 Annual 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 Annual 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 Annual Report.
Investors should not consider any such information to be part of this Annual Report.
Forward-Looking
Statements
This
Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial
risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I,
Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” but are also contained elsewhere in this Annual Report. In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,”
“anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions.
These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties,
many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those
expressed, projected, or implied in or by the forward-looking statements.
You
should refer to Item 1A. “Risk Factors” section of this Annual Report for a discussion of important factors that may cause
our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors,
we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking
statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking
statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our
objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements.
Unless the context requires otherwise, references to “we,” “us,” “our,” and “bioAffinity,”
refer to bioAffinity Technologies, Inc. and its subsidiaries.
Summary
of Risk Factors
Risks
Related to Our Financial Position
● We have limited experience operating a laboratory.
Risks
Related to our Diagnostic Product
● Clinical trials are expensive, time-consuming, and may not be successful.
Risks
Related to Our Diagnostic Tests
● We are currently dependent upon PPLS to offer and perform CyPath® Lung.
● We face substantial competition.
● Our lack of operating experience may make it difficult to manage our growth.
Risks
Related to the Operation of a CAP/CLIA Laboratory
Risks
Related to Intellectual Property Rights
● Our competitive position depends on protection of our intellectual property.
● Issued patents could be found invalid or unenforceable.
● If we do not obtain patent term extension, our business may be harmed.
● We enjoy only limited geographical protection with respect to certain patents.
Risks
Related to Government Regulations
Risks
Related to Ownership of Our Common Stock and Warrants
● Our Common Stock has often been thinly traded.
● An investment in our Company may involve tax implications.
● Our management collectively owns a substantial percentage of our Common Stock.
PART
I
Item
1. Business
Business
Overview
We develop proprietary noninvasive diagnostics to detect early-stage lung
cancer and other diseases of the lung using flow cytometry and automated analysis developed by machine learning, a form of artificial
intelligence (“AI”). Our diagnostic tests analyze cell populations, including cancer and cancer-related cells, that are indicative
of a specific diseased state.
We were formed as a Delaware corporation on March 26, 2014. On June 15,
2016, we formed OncoSelect® Therapeutics, LLC (“OncoSelect®”), a Delaware limited liability
company and our wholly owned subsidiary which is a preclinical-stage biopharmaceutical discovery company that has advanced our discoveries
of novel potential cancer therapies that specifically and selectively target a broad spectrum of cancer cells that have been grown in
petri dishes without harm to healthy cells. We expect to present our findings at conferences and publish the results of our research this
year and seek strategic partners that have the resources to advance our therapeutic discoveries.
On
August 14, 2023, we formed Precision Pathology Laboratory Services, LLC (“PPLS”), a Texas limited liability company and our
wholly owned subsidiary, which performs our clinical laboratory services, including CyPath® Lung operations. Research
and optimization of our platform technologies for in vitro diagnostics and therapeutic technologies are conducted in laboratories at
The University of Texas at San Antonio and PPLS in San Antonio, Texas.
In September 2023, through our wholly owned subsidiary PPLS, we acquired
the assets of Village Oaks Pathology Services, P.A. (“Village Oaks”), a Texas professional association d/b/a Precision Pathology
Services, including a clinical anatomic and clinical pathology laboratory and related services business in San Antonio, Texas. The laboratory
is accredited by the College of American Pathologists (“CAP”) and certified under the Clinical Laboratory Improvement Amendments
of 1988 (“CLIA”).
Our
first 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 and
care 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.
CyPath®
Lung uses flow cytometry technology to detect and analyze cell populations in a person’s sputum, or phlegm, to find characteristics
indicative of lung cancer, including cancer and/or cancer-related cells that have shed from a lung tumor. The flow cytometer is a well-established
instrument used in many commercial laboratories. Flow cytometry collects data pertaining to properties of single cells labeled with antibodies
and dyes specific to cell types and characteristics. Sputum is an excellent sample for analysis because it is in direct contact with
any malignancy in the lungs and can provide information about its area of field cancerization and the lung microenvironment. CyPath®
Lung uses automated data analysis developed by machine learning, a form of AI, that allows data collection and analysis of an entire
sample of sputum in less than 30 minutes, allowing for cost-effective, large-scale commercialization.
We
conducted a 150-patient test validation trial of people at high risk for lung cancer including patients with the disease (N=28) and those
who were cancer-free (N=122) that resulted in CyPath® Lung’s overall 88% specificity, meaning the ability to correctly
identify a person without cancer, and 82% sensitivity, meaning the ability to correctly identify cancer in a person with the disease.
CyPath® Lung correctly detected 80% of Stage I lung cancers. The test detected multiple lung cancer types including non-small
cell, small cell, adenocarcinoma, squamous, and large cell cancers. For the subset of patients in this trial who had lung nodules 20
millimeters (“mm”) or smaller, this trial resulted in 92% sensitivity, 87% specificity, 99% negative predictive value, and
88% accuracy. In this subset of 132 individuals with small nodules, 119 patients were cancer-free and 13 had confirmed lung cancer. The
detection of small lung nodules in people who have early-stage cancer can increase lung cancer survival.
Current
Year Financial Highlights
Key
financial results for the year ended December 31, 2024 include:
Recent
Developments
FDA
Pivotal Study
In
March 2025, we submitted our pivotal clinical trial protocol “Detection of Early-Stage Lung Cancer in Sputum using Flow
Cytometry and an Automated Analysis Pipeline” to the Sterling Institutional Review Board (“IRB”) for approval
after the Company meet met with the FDA on trial design. In third quarter 2024, the National Association of Veterans Research and
Education Foundation (“NAVREF”) extended a “Call for Interest” to Veterans Administration (“VA”) systems to solicit participation in the
pivotal trial, which resulted in a positive response from 22 VA medical centers. Academic, private, military, and VA centers currently are being qualified as collection sites for the
3,200-patient clinical trial expected to open in the second quarter of 2025.
Case
Studies
In
March 2025, we announced the release of physicians’ case studies showing the benefit to patients and their doctors of using CyPath®
Lung, including one case in which an “Unlikely Lung Cancer” directly prevented a robotic bronchoscopic biopsy or high-risk
percutaneous biopsy in a high-risk patient in response to imaging that showed several new, small non-calcified pulmonary nodules for
a high-risk patient. In a second case study, a positive CyPath® Lung test result led to diagnosis of a recurrence of breast
cancer, and a third case resulted in the diagnosis of a new primary lung cancer after a CyPath® Lung positive test that
prompted a biopsy that otherwise would not have been performed.
Targeted
Strategic Actions
In
March 2025, we announced targeted strategic actions to improve financial
performance and accelerate the commercial growth of CyPath® Lung, taking steps to deliver approximately $4 million in annual
cost savings at our subsidiary PPLS, while increasing resources to expand CyPath® Lung sales in high-potential national markets. Specifically,
cost savings are a result of labor cost reductions, operational efficiency enhancements, and discontinuing certain pathology services
with suboptimal profit margins to focus on high-margin services such as CyPath® Lung and by discontinuing certain pathology
services with suboptimal profit margins.
Continuation
of Department of Defense Research
Beginning
in the fourth quarter of 2023 and through 2024, we have been selling CyPath® Lung tests to the Department of Defense (DOD)
to conduct an observational study, “Detection of Abnormal Respiratory Cell Populations in Lung Cancer Screening Patients Using
the CyPath® Lung Assay,” and for research and development on using bronchoalveolar lavage fluid as a biological
sample to assess cardiopulmonary function and exercise performance in military personnel post COVID-19 infection.
Public
and Private Offerings
On
February 26, 2025, pursuant to the terms of a warrant inducement agreement (the “February Inducement Agreement”), dated
February 25, 2025 that we entered into with certain holders of existing warrants, such holders exercised for cash (i) warrants to
purchase an aggregate of up to 1,302,082 shares of Common Stock issued on October 21, 2024 (the “October Warrants”), at
the reduced exercise price of $0.58 per share, and (ii) warrants to purchase an aggregate of up to 1,136,391 shares of Common Stock
issued on August 5, 2024 (the “August Warrants”), at the reduced exercise price of $0.58 per share. We received
aggregate gross proceeds of approximately $1.4 million, before deducting advisory fees and other expenses payable by us. In
consideration of the immediate exercise of the October Warrants and August Warrants by the holders thereof in accordance with the
February Inducement Agreement, we issued unregistered common warrants to purchase an aggregate of up to 2,926,166 shares of Common
Stock (120% of the number of shares of Common Stock issuable upon exercise of the October Warrants and August Warrants) to such
holders.
On
October 21, 2024, we issued to certain institutional investors (i) in a registered direct offering, 2,048,294 shares of our Common Stock,
and (ii) in a concurrent private placement, common warrants to purchase an aggregate of 2,662,782 shares of Common Stock, with an exercise
price of $1.50, pursuant to a securities purchase agreement, dated October 18, 2024, that we entered into with such institutional investors,
and received aggregate gross proceeds from the offerings of approximately $2.7 million, before deducting placement agent fees and other
offering expenses payable by us.
See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a more detailed discussion
of the foregoing transactions.
Our
First Diagnostic Test – CyPath® Lung
Lung
cancer remains the most commonly diagnosed cancer and the leading cause of cancer-related deaths worldwide, claiming more than 1.8 million
lives with almost 2.5 million new cases reported in 2022 according to a 2024 article in CA: A Cancer Journal for Clinicians. Cancer
Epidemiology reports that lung cancer is the leading cause of cancer deaths in the European Union with an estimated 17 to 34 million
people at high risk. China reported 1,060,600 new cases of lung cancer in 2022. According to the American Lung Association (“ALA”),
screening for individuals at high risk for lung cancer has the potential to improve lung cancer survival rates by finding disease at
an earlier stage when it is more likely to be curable. An estimated 19.3 million Americans should have annual screening for lung
cancer, according to American Cancer Society recommendations. A study published in the New England Journal of Medicine titled
“Survival of patients with stage I lung cancer detected on CT screening” dated October 26, 2006, reported that the survival
rate of individuals with Stage I lung cancer who underwent surgical resection within one month after diagnosis had a ten-year survival
rate of 92%, as compared to the overall five-year survival rate in the U.S. of 28.4% as reported by the ALA in its 2024 “State
of Lung Cancer” report. Unfortunately, most lung cancer is detected in late stages. The results of a large national clinical trial
that was reported in the New England Journal of Medicine in an article dated August 4, 2011, titled “Reduced Lung-Cancer
Mortality with Low-Dose Computed Tomographic Screening” showed that screening for lung cancer using low-dose computed tomography
(“LDCT”) resulted in a reduction of the mortality rate by up to 20% as compared to screening by X-ray if LDCT screening is
used by patients at high risk for lung cancer on an annual basis. Therefore, LDCT scans are recommended for screening of an estimated
14 million Americans who are at high risk for lung cancer. If half of these high-risk individuals were screened, more than 12,000 lung
cancer deaths could be prevented, according to the ALA. However, the New England Journal of Medicine article also reported that
LDCT was shown to have a low positive predictive value of less than 4%. This means that for every 100 people who receive a positive result
from LDCT screening and are suspected of having lung cancer, only four actually have the disease. A reliable, noninvasive, and cost-effective
diagnostic test can increase diagnosis of early-stage lung cancer while lowering the number of unnecessary and invasive procedures for
patients with a false positive result from LDCT screening. (A false positive test result indicates that the patient has lung cancer when
he or she does not have the disease.)
CyPath®
Lung is a test for early-stage lung cancer that is designed to meet the need for greater diagnostic certainty. Based on our internal
analysis, its use in conjunction with LDCT is predicted to improve the positive predictive value (the probability that patients with
a positive LDCT scan truly have the disease) by a factor of five. Our analysis concludes that improving the positive predictive value
of LDCT with the use of CyPath® Lung has the potential to subject fewer patients to the stresses of misdiagnosis or unnecessary
diagnostic procedures, such as biopsies, while also reducing healthcare costs.
A
study authored by two pulmonologists and published in 2024 in the peer-reviewed Journal of Health Economics and Outcomes Research
reported that adding CyPath® Lung to the standard of care for Medicare patients with a positive lung cancer screening
could have saved an average of $2,773 per patient for total cost savings of $379 million in 2022, while the screening could have
saved an average of $6,460 per patient for all patients with a positive lung cancer screening for a total costs savings of $891
million. The peer-reviewed study, “Economic Evaluation of a Novel Lung Cancer Diagnostic in a Population of Patients with a
Positive Low-Dose Computed Tomography Result,” attributes the savings to a reduction in follow-up diagnostic assessments,
expensive follow-up procedures and procedure-related complications. Michael J. Morris, M.D., Brooke Army Medical Center (“BAMC”) pulmonology and critical care physician and
Assistant Dean of Research at San Antonio Uniformed Services Health Education Consortium (“SAUSHEC”), and Sheila A. Habib,
M.D., Director of the Pulmonary Lung Nodule Clinic and the Lung Cancer Screening Program at the South Texas Veterans Health Care Systems’
Audie L. Murphy Memorial Veterans Hospital and Assistant Professor at the University of Texas Health Science Center at San Antonio, were
first and second authors on the study published in the Journal of Health Economics and Outcomes Research. Economists John E. Schneider,
Ph.D., and Maggie L. Do Valle, Master of Public Health, of Avalon Health Economics also contributed to the study.
CyPath®
Lung uses flow cytometry technology to detect and analyze cell populations in a person’s sputum, or phlegm, to find characteristics
indicative of lung cancer, including cancer and/or cancer-related cells that have shed from a lung tumor. The flow cytometer is a well-established
instrument used in many commercial laboratories. Flow cytometry collects data pertaining to properties of single cells labeled with antibodies
and dyes specific to cell types and characteristics. Sputum is an excellent sample for analysis because it is in direct contact with
any malignancy in the lungs and can provide information about its area of field cancerization and the lung microenvironment.
In
particular, CyPath® Lung uses a synthetic porphyrin called meso-tetra (4-carboxyphenyl) porphyrin (“TCPP”).
Porphyrins are biological pigments that, when exposed to ultraviolet light at certain wavelengths, can result in the cell fluorescing
a red or purplish color that can be detected under a microscope or by flow cytometry, according to an article titled “Laboratory
Diagnosis of Porphyria,” published in Diagnostics (Basel) on July 26, 2021. Porphyrins can be man-made, like TCPP, or they
can be naturally occurring, like heme that is responsible for the red color in red blood cells. Cancer cells are known to take up certain
porphyrins in higher amounts than non-cancer cells, and the high affinity for cancer cells displayed by TCPP makes it an excellent bio-label
for cancer, according to an article published in Progress in Clinical and Biological Research in 1984 titled “A comparative
study of 28 porphyrins and their abilities to localize in mammary mouse carcinoma: uroporphyrin I superior to hematoporphyrin derivative.”
As used in CyPath® Lung, the proportion of cells with high TCPP fluorescence intensity in a patient’s sputum sample
is a significant predictor of lung cancer. We hold multiple patents protecting our use of TCPP for the diagnosis, monitoring, and treatment
of cancer. In addition, we have multiple domestic and foreign patent applications to protect the use of flow cytometry and our AI-developed
automated analysis platform in the detection of lung cancer and other lung diseases using sputum as a sample.
We
developed an algorithm as part of a test validation trial that used machine learning to distinguish samples from high-risk patients who
had lung cancer from those who are cancer-free. Results of the trial were published January 21, 2023, in the peer-reviewed journal Respiratory
Research. Village Oaks developed CyPath® Lung for sale as an LDT in accordance with the standards of the CAP and the
regulations and guidance of the CLIA program, which is administered by the Centers for Medicare and Medicaid Services (“CMS”).
CyPath®
Lung has been put into routine lab use without requiring expert evaluation of samples or being subject to operator bias. Our approach
allows the entire sputum sample to be rapidly analyzed. The numerical analysis developed with machine learning captures complex interactions
between lung cancer, the microenvironment, and areas of field cancerization that would be impossible for individuals to predict or detect
reliably by eye. For example, during test development, we discovered that viability staining density suggests a link with apoptosis,
or cell death, that is linked to many cancers, including lung cancer. Our model also suggests that specific markers of immune cell populations
are informative as to the presence of cancer in the lung. These findings are the result of our machine learning approach to automated
analysis.
CyPath®
Lung uses sputum that is obtained noninvasively by patients in the privacy of their home. Physicians most often order the test
for patients after CT imaging reveals one or more pulmonary nodules that have a higher risk but are not certain to be lung cancer. A
patient collects his or her sample using a hand-held, noninvasive assist device, ICU Medical’s Acapella® Choice
Blue, that acts to break up mucus in the lungs and help a person cough up sputum from the lung into a collection cup. The Acapella®
Choice Blue has been 510(k)-cleared by the FDA as a positive expiratory pressure device to help mobilize lung secretions in people
with certain lung conditions
The
sputum sample is shipped overnight by the patient to PPLS and processed into a single-cell suspension, then labeled with antibodies that
distinguish different cell types and the synthetic porphyrin TCPP that identifies cancer cells and/or cancer-associated cells. Our test
can collect sample data and analyze a sputum sample in less than 30 minutes using integrated software for high-throughput, user-friendly
standardized analysis. A physician’s report is generated within minutes after data acquisition. The report stratifies the patient
into one of two risk groups. Those patients deemed “likely or very likely” to have cancer may benefit from aggressive intervention.
Those “unlikely or very unlikely” to have a malignancy may continue imaging surveillance in accordance with local standard
of care. The physician’s report also shows a numerical score between 0.1 to 1.0,
with 0.1 to less than 0.5 being a negative result and 0.5 to 1.0 considered positive for lung cancer. The proprietary automated analysis
software was developed and is wholly owned and patent protected by bioAffinity Technologies.
Physicians
receive test results within three days after the laboratory receives the patient’s sputum sample. CyPath® Lung testing
helps identify patients who should undergo more aggressive follow-up procedures to confirm a suspected lung cancer. When CyPath®
Lung sample analysis determines a patient is unlikely or very unlikely to have lung cancer, the result can serve to guide and support
a physician’s decision to monitor the patient using LDCT or CT imaging.
As
reported in an article titled “Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning,”
published in Respiratory Research on January 21, 2023, we conducted a 150-patient test validation trial of people at high risk
for lung cancer including patients with the disease (N=28) and those who were cancer-free (N=122) that resulted in CyPath®
Lung’s overall 88% specificity, meaning the ability to correctly identify a person without cancer, and 82% sensitivity, meaning
the ability to correctly identify cancer in a person with the disease. For the subset of patients in this trial who had lung nodules
20 mm or smaller or no nodules detected by imaging, this trial resulted in 92% sensitivity, 87% specificity, 99% negative predictive
value, and 88% accuracy. In this subset of 132 individuals with small nodules, 119 patients were cancer-free and 13 had confirmed lung
cancer. Eight out of 10 (80%) of Stage I tumors were correctly identified. Sensitivity is the percentage of persons with the disease
– in this case, lung cancer – who are correctly identified by the test. Specificity is the percentage of persons without
lung cancer who are correctly identified by the test. The cancer group included all lung cancer types, but mostly squamous cell carcinoma
and adenocarcinoma lung cancer (in near equal numbers), showing that CyPath® Lung detects all types of lung cancer. Furthermore,
clinical trial results reported an Area Under the Curve (AUC) value of 0.89 for CyPath® Lung. AUC value indicates the
ability of a test to distinguish between positive and negative cases. An AUC value of 0.7 to 0.8 is considered acceptable; 0.8 to 0.9
is excellent; more than 0.9 is outstanding. In study participants with lung nodules less than 20 mm, the test performed with an AUC value
of 0.94.
In
this 19-month trial, participants provided a sputum sample and were released from the study after a physician either confirmed the individual
was cancer-free by examination of CT imaging or confirmed the presence of lung cancer by biopsy. Flow cytometry and patient data used
in the analysis produced results that included (1) the proportion of cells with a high ratio of high TCPP fluorescence intensity over
cell size; (2) the proportion of cells with an intermediate ratio of fluorescence intensity caused by the viability dye (FVS510) over
cell size; (3) the proportion of cells that were CD206 negative but positive for one or more of the following markers: CD66b (granulocytes),
CD3 (T cells), and CD19 (B cells); and (4) patient age.
The
CyPath® Lung technology is based on scientific work originating at Los Alamos National Laboratory in collaboration with
St. Mary’s Hospital in Colorado. In the Los Alamos research study, sputum samples from lung cancer patients were differentiated
from non-cancer samples with 100% accuracy. This early research was conducted with sputum from 12 uranium miners. Microscope slides of
sputum samples were labeled with the synthetic fluorescent porphyrin TCPP. The Los Alamos research study of 12 uranium miners included
eight men with cancer and four healthy individuals. Researchers were blinded to the sample origin and looked for the presence of highly
fluorescent cells indicating uptake of TCPP as an indicator of lung cancer. The length of the study and specific follow-up was not reported,
but researchers did report that one patient in the study who had been incorrectly considered to be a healthy subject was correctly
diagnosed with cancer by the test. Later, a blinded clinical trial was conducted and results published September 2015 in an article titled
“Early Detection of Lung Cancer with Meso-Tetra (4-Carboxyphenyl) Porphyrin-Labeled Sputum” in the Journal of Thoracic
Oncology. This study reported on an earlier version of CyPath® Lung that used a fluorescent microscope to directly
identify cells labeled with TCPP in one-third or less of the sputum sample. For each trial participant, researchers manually scanned
12 microscope slides labeled with TCPP for the presence of red fluorescent cells (“RFCs”) displaying a spectral signature
that indicated uptake of TCPP in the cell. In addition to measuring the spectral signature, the fluorescent intensity and cell size of
RFCs were measured. The test data, including fluorescent intensity over cell size, was analyzed. The trial was conducted over 24 months
and resulted in 81% test accuracy, 77.9% sensitivity, and 65.7% specificity in the ability to correctly differentiate between samples
from lung cancer patients and those at high risk who were cancer-free. The earlier trial required participants to provide a sputum sample
and CT imaging of the lungs. Those in the cancer cohort underwent a biopsy to confirm lung cancer. High-risk patients displaying indeterminate
nodules were followed for 18 months to confirm they were cancer-free. The study concluded that optimizing the test to provide for analysis
of the entire sputum sample would improve results.
On
January 1, 2024, the Medicare reimbursement code 0406U specific for CyPath® Lung became effective after multiple regulatory
decisions in 2023 leading to approval. On June 6, 2023, the American Medical Association (“AMA”) approved a Current Procedural
Terminology (“CPT”) Proprietary Laboratory Analysis (“PLA”) code specifically for use with CyPath®
Lung, which was publicly released on June 30, 2023. CyPath® Lung is on CMS’ clinical laboratory fee schedule. The
CPT PLA code assigned to CyPath® Lung is 0406U with the descriptor “Oncology (lung), flow cytometry, sputum, 5 markers
(meso-tetra [4- carboxyphenyl] porphyrin [TCPP], CD206, CD66b, CD3, CD19), algorithm reported as likelihood of lung cancer.”
We
have an agreement with GO2 Partners to produce patient collection kits and to provide warehousing and distribution services for sending
out the kits. Laboratory reagents, supplies, and equipment are commercially available through multiple vendors. Sample processing, labeling,
and data collection can be accomplished by a laboratory technician skilled in general laboratory techniques. Data analysis leading to
a physician’s report is done by automated analysis software fully integrated into the test.
To
our knowledge, CyPath® Lung is the first cancer diagnostic that combines flow cytometry and automated analysis to predict
the presence of lung cancer from sputum samples.
The
Cancer Diagnostics Market and CyPath® Lung
The
global lung cancer diagnostic market is projected to grow from an estimated $15.1 billion in 2023 to $34.8 billion by the end of 2034,
with a compound annual growth rate (“CAGR”) of 7.9%, according to a market research report issued by Transparency Market
Research in October 2024. Our Company has the potential to play a significant role in the global cancer diagnostic market because we
hold a strong and expanding IP portfolio for CyPath® Lung, a noninvasive, cost-effective, and high performing test that
has the potential to better patient outcomes.
Comparison
of CyPath® Lung to Current Standards of Care
As
seen in the above table, CyPath® Lung performs similar to current Standard of Care, including more invasive and riskier
diagnostic procedures. Moreover, lung nodules are commonly found on CT scans. Studies suggest up to 50% of lung nodules may be considered
“indeterminate” without clear indication of being benign or malignant, posing difficult choices for physicians and their
patients on steps. Our business model is to address the need for a noninvasive, cost-effective, high-performing lung cancer diagnostic
that meets the need for more diagnostic certainty leading to quicker diagnosis at earlier stage for longer survival and reduced medical
costs. The U.S. Preventive Services Task Force recommended new guidelines for screening in March 2021, nearly doubling the number of
Americans at high risk for lung cancer who are recommended for annual screening to 14 million people, according to the ALA. In November
2023, the American Cancer Society updated its guidelines for lung cancer screening to include all former smokers over the age of 50 regardless
of when they quit, increasing the estimated number of American adults eligible for screening to 19 million. China has an estimated 300
million smokers, according to the World Health Organization. In Europe, it is estimated that there is one new case of lung cancer diagnosed
every minute, with incidence rates for males the highest in Eastern European countries and a five-year survival rate of only 13%, as
reported by a May 2021 article, “Lung cancer screening in Europe: where are we in 2021?” published in Translational Lung
Cancer Research. We expect to pursue CE marking of CyPath® Lung for sale in the European Union (“EU”).
CyPath®
Lung Business Development Plan
We
believe in the viability of our business plan based on the circumstances surrounding our business that are known to us as of the date
of this Annual Report. However, the timing, strategies, and stages of our business plan may evolve in light of new circumstances that
cannot be predicted with certainty at this time. Our business plan envisions four phases of expanding market entry into the U.S., the
EU, and worldwide that are timed to maximize our resources and minimize market risk. Phase 1 of our business plan was completed in 2024
with a limited market launch of our LDT CyPath® Lung in Texas. This limited test market launch was designed to evaluate
our marketing program and help us ensure each step in the care pathway – from the initial order by physicians to sputum collection
and processing, to generating and delivering the patient report – is efficient and effective. This limited test market approach
allowed us to refine future positioning and develop strategic insight for our CyPath® Lung test before expanding to a
larger market.
We
believe that our strategy related to a limited market launch proved successful. In January 2025, we reported the results of the
Company’s CyPath® Lung pilot marketing program using Texas for our beta launch with sales growth
Quarter-over-Quarter and more than 600 tests delivered in 2024. We attribute the growth in sales to three 2023 initiatives that came
to fruition in 2024: (1) CMS’ inclusion of reimbursement for CyPath® Lung on its 2024 clinical laboratory fee
schedule and subsequent reimbursement by Medicare and private insurance carriers; (2) the hiring of our new National Director of
Sales in late 2023 and subsequent sales persons in 2024 who are experienced and well respected in the pulmonary
field; and (3) marketing materials for the newly branded CyPath® Lung that emphasize our test’s ability to
assist physicians with next steps in patient care.
In
October 2024, CyPath® Lung was awarded listing on the U.S. Federal Supply Schedule (FSS), making the test available to
U.S. Veterans and active military personnel across government health systems. We view this market opportunity as the next step in
expanding sales nationally in the U.S., including strategic expansion into regional markets in 2025. Phase 2 of our business plan anticipates
entering the EU market with CyPath® Lung as a CE-marked IVD test beginning with sales in the Netherlands, followed by
a staged EU expansion. Phase 3 of our business plan focuses on the marketing of an FDA-cleared CyPath® Lung test, beginning
with conducting a pivotal clinical trial in the U.S. Toward that end, we have voluntarily sought FDA guidance with the intention of obtaining
clearance after completion of the pivotal trial of a Class II IVD medical device for use in the diagnosis of lung cancer in individuals
with indeterminate pulmonary nodules between 6 mm to less than 20 mm.
To differentiate our LDT test from the future FDA cleared diagnostic test,
we have named the test for which we are seeking FDA clearance “FlowPath Lung.” In December 2024, we met with FDA to discuss
our pre-submission and subsequently incorporated the requested protocol changes to improve the trial design. Our revised trial protocol
is now under review by an IRB. In third quarter 2024, the National Association of Veterans
Research and Education Foundation (“NAVREF”) extended a “Call for Interest” to VA systems to solicit participation
in the pivotal trial, which resulted in a positive response from 22 VA medical centers. We are in the process of qualifying VA, academic
and private medical centers that have asked to participate. Our Clinical Research Organization (“CRO”) is Courante Oncology.
Retired Army Col. Michael Morris, MD., of Brooke Army Medical Center has accepted the position as national Principal Investigator for
the clinical trials. We anticipate a three-to-four-year clinical trial including an 18-month patient enrollment of approximately 3,400
patients, with the first clinical site expected to open and patient enrollment expected to begin in in the second quarter of 2025.
The
pivotal trial will analyze sputum using flow cytometry data and patient data using the algorithm used for our LDT
CyPath® Lung, including (1) the proportion of cells with a high ratio of high TCPP fluorescence intensity over cell
size; (2) the proportion of cells with an intermediate ratio of fluorescence intensity caused by the viability dye (FVS510) over
cell size; (3) the proportion of cells that were CD206 negative but positive for one or more of the following markers: CD66b
(granulocytes), CD3 (T cells), and CD19 (B cells); and (4) patient age. Patient enrollment is scheduled to begin in the second
quarter of 2025 at up to 20 collection sites. Assuming the study is successful, we intend to submit a de novo classification request
to the FDA within six months of study completion. Phase 4 of our business plan accelerates the market presence of CyPath® Lung
in the U.S. as well as countries in Asia, Eastern Europe, and Australia after obtaining FDA marketing authorization.
We
have developed messaging and marketing programs that will continue to grow both in size and scope with each phase of development, including
key convention attendance, digital marketing, social media presence, and advertising, to create an “inbound” lead generation
mechanism that delivers our message to our target audience. In addition, we will continue to expand our collaboration with regional and
national key opinion leaders (“KOLs”) and support efforts with collateral materials, including posters, presentations, videos,
and peer-reviewed papers, to our KOLs who will present data and case studies of their use of CyPath® Lung. This content
can be shared across platforms, including websites and sales tools, and will be used as references to support our product claims as well
as sales and marketing efforts to physicians, reference laboratories, and patients. We are also working with lung cancer advocacy groups
throughout all phases to support the message that routine lung cancer screening can save lives by diagnosing cancer at an early stage.
The
Competition for CyPath® Lung
CyPath®
Lung has not been tested directly against its competitors’ products, but a comparison of the published performance numbers
suggests CyPath® Lung is among the highest performing tests on the market. Furthermore, CyPath® Lung is
noninvasive – not even requiring a needle stick – and cost effective, and processing and analysis procedures are easy to
perform.
Published
data and the results of clinical trials allow us to group lung cancer diagnostic tests into three categories: (1) balanced tests;( 2)
rule-out tests, and (3) rule-in tests. Balanced tests aim at excluding patients without cancer from unnecessary follow-up diagnostic
procedures and detecting patients with early-stage cancer who can proceed to more aggressive procedures to confirm diagnosis. Rule-out
tests aim to exclude patients without cancer from unnecessary follow-up procedures with high accuracy (if the test provides a “negative”
result), but among the remainder of patients who do not receive an unambiguous negative result, there is still uncertainty about who
has cancer and who does not. Cancer patients for whom time is of the essence are included in this group of patients still in uncertainty.
The patient can lose precious time with a rule-out test. Rule-in tests aim to identify patients with cancer but in doing so may identify
many people without cancer as positive. Therefore, rule-in tests have a low positive predictive value.
The recent economic journal article evaluating the significant healthcare
cost benefits of using CyPath® Lung as a standard of care (Morris, et al., 2024) shows that balanced tests, like CyPath®
Lung, can be the most cost effective. Those that perform well are most useful to a physician and his or her patient because they provide
the most information, allowing a quicker decision on what follow-up path to choose: whether to move forward with more aggressive follow-up
procedures (i.e., in the case of CyPath® Lung, if the test reveals a “likely” or “highly likely”
cancer result) or to follow a more conservative approach (i.e., when the CyPath® Lung test reveals an “unlikely”
or “very unlikely” cancer result).
Our
competitive analysis reviewed published research that was sufficient to provide a scientific basis for evaluation. We found only seven
tests, including CyPath® Lung, that represent a balanced test for early lung cancer detection and have advanced to the
point that there is sufficient data for evaluation. One test is sold by two companies: one from the U.S. and one from China. In the U.S.,
the test is called Lung LB (sold by LungLife AI) and is now on the market. LungLB is a FISH-based test that requires a significant amount
of experience to conduct. Four companies, each selling unique tests for early lung cancer detection, conducted their studies on a population
that does not match the high-risk population for which the test is intended. Their clinical data, therefore, is not necessarily representative
of the results that would be achieved in the population of patients who actually will use the test. The remaining balanced test, ProLung,
is from IONIQ Sciences. The test requires an expensive machine to measure transcutaneous bioconductance. The test is not on the market
at this time.
Delphi’s
First Look was recently launched to assist in determining whether a person
should be screened by LDCT. While CyPath® Lung is positioned to help diagnose lung nodules in patients who have already
undergone screening by LDCT, First Look is intended to be used prior to LDCT. As such, this test may increase lung cancer screening
uptake and potentially increase the need for CyPath® Lung.
We
found two rule-out tests on the market. Both REVEAL, offered by MagArray, and Nodify-XL2, offered by Biodesix, are rule-out tests, meaning
the tests aim to exclude patients without cancer. The REVEAL test is a blood test intended for patients with indeterminant nodules. In
their 97-patient clinical validation trial, only patients with an intermediate risk of cancer, based either on a physician’s judgement
or a clinical model, took part. This requirement led to 30% of high -risk patients being excluded at the onset of their analysis. In
addition, the positive predictive value of the REVEAL test was 13.5% as compared to CyPath® Lung’s positive predictive
value of 43.2%. Importantly, CyPath® Lung trial participants included those at high risk for lung cancer as defined by
CMS, and none were excluded based on physician’s judgement which can be highly subjective. The tests had negative predictive values
of 98% and 97.8%, respectively. The second rule-out test, Nodify-XL2, is used only by people with a pre-test probability of cancer less
than 50%. As with the REVEAL test, a large number of patients were excluded from analysis. In the case of Nodify-XL2, about 55% of patients
with lung nodules that physicians considered indeterminate, namely lung nodules sized between 8-30 mm, were excluded from the study.
In addition, Nodify XL-2 reported an AUC of 0.62 (unacceptable) and 0.76 (acceptable) for their two clinical trials, as compared to CyPath®
Lung with an AUC of 0.89 and 0.90 in two independent study groups (excellent).
Finally,
the Percepta nasal swab test offered by Veracyte is not widely available and reportedly is seeking a reimbursement code. The test classifies
patients in low- and high-risk categories, or for those whose results are unclear, an intermediate category. Test performance is different
in each risk category. In a 2023 published paper of the test validation trial, the sensitivity and specificity for low-risk classification
was 97% and 40%, respectively, with those at low risk having an 8% calculated risk of having a malignancy. The sensitivity and specificity
for the high-risk classification was 57% and 92%, respectively, and those patients who were put into the high-risk category had a 90%
risk of a malignancy. One of the limitations of this study is that the participants in the validation trial had a cancer prevalence of
54% as compared to the overall high-risk population that has an estimated lung cancer prevalence of 1.1%, according to the National Lung
Cancer Screening Trial. Therefore, we believe the nasal swab test’s performance may suffer when the classifier is tested on more
realistic cohorts with a cancer prevalence lower than 10%. In addition, nearly half of all patients who took part in the validation trial
could not be classified as either low- or high-risk; instead, they are considered “intermediate risk” with a 50:50 chance
of having cancer. Thus, in nearly half of the patients who received the Percepta nasal swab test, the results would not help advance
the diagnostic process. In fact, for those patients in this indeterminate category who do have cancer, valuable time in
diagnosis may be lost.
We
believe there are many reasons why CyPath® Lung is a superior test when compared to its competitors. First, lung sputum
is an excellent medium for early lung cancer detection because sputum is in close contact with the tumor and pre-cancerous areas that
shed cancer and pre-cancerous cells directly into the sputum, can be obtained noninvasively, and can be transported easily. Moreover,
sputum contains immune cell populations in reaction to the presence of a tumor. Second, our proprietary technology is straightforward.
Our CyPath® Lung platform technology is not a molecular test and does not collect genetic material that requires immediate
processing. CyPath® Lung uses well-established flow cytometry techniques to investigate cells contained in the sputum
for characteristics that indicate the likelihood of lung cancer. Sample processing is straightforward, and laboratory technicians can
be easily trained. Reagents used by the test are widely available. Data acquisition and analysis is fully automated, allowing for non-biased,
efficient test results. Third, CyPath® Lung has shown high specificity and sensitivity that is similar to far more invasive
and more expensive procedures currently used to detect lung cancer. Fourth, CyPath® Lung is cost effective, with a Medicare
reimbursement code billable to both government and private insurance carriers. A 2024 study authored by Michael Morris, M.D., and Sheila Habib, M.D., reported on CyPath®
Lung’s economic impact when used as companion test to the current Standard of Care predicting savings of more than $2,700 per Medicare
patient and more than $6,400 per patient with private payer insurance who have pulmonary nodules sized less than 30 mm. Fifth and as important
as any of our test’s benefits, CyPath® Lung is patient friendly, providing at-home, noninvasive sample collection.
Building
on our Flow Cytometry Platform to Develop COPD and asthma precision diagnostics
We
are conducting research to expand our platform technology to detect other lung diseases, including development of precision diagnostics
to identify patients who can best use commercial therapies and treatments in late-stage clinical phases that treat asthma and Chronic
Obstruction Pulmonary Disease (COPD).
An
estimated 23 million adults in the U.S. and 27 million people in the EU have been diagnosed with asthma; and 4.2% of Chinese
adults presented with asthma in a representative sample of adults recruited for a national cross-sectional China Pulmonary Health study
between 2012 and 2015, representing 45.7 million adults in China. Furthermore, an estimated 14.2 million U.S. adults had COPD in 2021
and approximately 36.6 million people in Europe had COPD in 2020, with the expectation that almost 50 million people in Europe will have
COPD in 2050. The diagnostics market for COPD alone was valued at $5.6 billion in 2023 and is expected to reach $8.2 billion by 2029,
according to a market research study published by Research and Markets in November 2023. We are building on our expertise in using
sputum as a sample for flow cytometric analysis to develop tests to detect COPD and asthma, including research to detect the presence
of specific therapeutic targets to identify patients who can benefit from specific treatments. We expect to continue research through
2025 with patient studies expected in 2026.
OncoSelect®
Therapeutics Research
We
have completed and expect to report at one or more scientific conferences our findings describing the results of our research to
advance our own scientific discoveries demonstrating that inhibition of the expression of two specific cell membrane proteins
results in the selective killing of various cancer cell types grown in the laboratory with little or no effect on normal
(non-cancerous) cells. We expect to pursue additional research and clinical development in this area with strategic partners that have the
resources to advance our discoveries.
Our
therapeutic platforms originated from our research on how TCPP, the synthetic porphyrin used in CyPath® Lung, enters cancer
cells. We conducted research to better understand the mechanism of TCPP’s selective uptake in cancer cells. Our research identified
receptors, cell-membrane proteins which capture small molecules outside of the cell and bring them inside the cell, that are associated
with TCPP. Experiments that we conducted confirmed that at least two of these receptors, CD320 and LRP2, contributed to TCPP uptake by
cancer cells. When these receptors were individually “knocked down” in cancer cells and therefore could not be made by the
cell, TCPP uptake was significantly decreased. Knock-down of CD320 and LRP2 receptors was achieved by introducing siRNA molecules into
the cells that cause the destruction of CD320 and LRP2 gene products. These gene products were the messenger (m)RNAs that are the precursors
of the receptor protein. An siRNA is a small, chemically synthesized piece of RNA that specifically binds to mRNA, prohibiting the further
production of the corresponding proteins. Thus, the reduction of CD320 or LRP2 mRNAs reduced the CD320 or LRP2 protein, respectively,
and resulted in decreased TCPP uptake in a variety of cancer cells, with a larger decrease observed when CD320 was knocked down. We subsequently
discovered that the simultaneous knockdown of these two cell-surface receptors, CD320 and LRP2, was deadly to cancer cells or inhibited
their growth significantly but left normal cells virtually unharmed.
We
designed siRNAs to effectively eliminate CD320 and LRP2 protein production to study their role in TCPP uptake into the cell. With these
CD320 and LRP2 siRNAs, we achieved a reduction of CD320 and LRP2 protein levels of up to 90%. Simultaneous siRNA knock-down of CD320
and LRP2 in normal cells, including skin fibroblasts and breast epithelial cells, did not affect cell growth. However, knock-down of
CD320 and LRP2 in cancer cell lines derived from diverse tissues (lung, breast, prostate, brain, and skin cancers) inhibited cell growth
or killed the cells, in some cases up to 80%. Interestingly, in some cell lines, when either CD320 or LRP2 were silenced individually,
a concurrent increase in protein expression of the other receptor was observed, suggesting that CD320 and LRP2 compensate for each other’s
function; hence, silencing both receptors is required for optimal cell killing.
Corporate
Information
We
were incorporated in the State of Delaware on March 26, 2014. Our principal executive office is located at 3300 Nacogdoches, Suite 216,
San Antonio, Texas 78217, and our telephone number at that address is (210) 698-5334. Our website address is https://www.bioaffinitytech.com/.
Information contained on or that can be accessed through our website is not incorporated by reference into this Annual Report. Investors
should not consider any such information to be part of this Annual Report.