Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 nine months ended September 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 nine months ended September 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 address the need for noninvasive diagnosis of lung cancer at early stage and precision diagnostics for other diseases of the lung with our proprietary platform that detects changes to the lung microenvironment using flow cytometry and automated data analysis built by machine learning, a form of AI, to preferentially target cancer cell populations and other cell populations in sputum that are indicative of a diseased state. Our first commercial 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 our subsidiary PPLS. We are developing noninvasive tests to measure both the type and severity of lung inflammation in patients with asthma and COPD using our flow cytometry platform and enzyme-linked immunosorbent assay technology (ELISA) to quantify the cellular and proteomic characteristics of the lung microenvironment with the aim of commercializing precision diagnostics that assist physicians when determining the most effective drug to prescribe patients with lung disease. We are also advancing our proprietary therapeutic discoveries that may lead to treatments delivered topically for squamous cell skin cancer. Our published research findings show that self-delivering, stabilized siRNAs developed by the Company selectively kill squamous and basal carcinoma cells while leaving non-cancerous cutaneous cells unharmed. Commercial operations and product development are conducted in our laboratories at PPLS and the Steven and Sondra Girgenti Research Laboratory in San Antonio.

CyPath^® Lung addresses the need for noninvasive detection of early-stage lung cancer that can lead to better patient outcomes including curative therapy. Lung cancer is the leading cause of cancer-related deaths worldwide. Physicians order CyPath^® Lung to assist in their assessment of patients who have small pulmonary nodules requiring follow-up. Patients collect their sputum sample at home. The CyPath^® Lung test enables physicians to more confidently identify patients who will likely benefit from more invasive and immediate biopsy and those whose nodules are benign and should continue screening in accordance with guidelines. 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.

We are developing precision diagnostic tests for asthma and COPD, having recently reported on our ability to measure inflammatory cell populations and specific immune signaling cytokines and cell-surface receptors involved in lung inflammation. Cytokines are small signaling proteins released by immune and non-immune cells to control inflammation, direct immune defenses, and regulate cell growth. Our data showed we can detect multiple targets in sputum using a combination of cellular and proteomic analysis. Data are specifically provided for soluble and cellular biologic drug targets that play different roles in driving inflammation including those for some of the largest selling drugs such as Tezspire, Dupixent and Nucala. We believe that the ability to measure therapeutic targets could assist doctors in selecting among these drugs for individual patients and provide personalized medicine. Our tests also have the potential to be used to evaluate patients prior to undergoing therapy, providing baseline inflammatory information and to monitor lung inflammation during therapy.

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 a commercial clinical laboratory accredited by the College of American Pathology (CAP) and certified under the Clinical Laboratory Improvement Amendments of 1988 ("CLIA"). We now own and operate the clinical anatomic and clinical pathology laboratory. CyPath^® Lung is offered for sale to physicians by PPLS. Development of our lung inflammation tests is conducted at our Steven and Sondra Girgenti Research Laboratory in San Antonio.

Through our wholly owned subsidiary, OncoSelect^® Therapeutics, LLC, we continue to advance our discoveries of novel cancer therapeutic approaches that specifically and selectively target cancer cells. At our research laboratory, we are nurturing squamous cell skin cancer spheroids in vitro and will be treating the 3D spheroids with our self-delivering siRNAs. This approach serves as an intermediate research model between traditional flat two-dimensional cell monolayers and actual living tumors. Dosing is being optimized. Our work is built on our discovery of two cell receptors (CD320 and LRP2) whose silencing results in killing cancer cells without harm to normal 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.

Current Year Financial Highlights

Key financial results for the nine months ended September 30, 2026, include:

	●	Unit sales for CyPath® Lung diagnostic for the nine months ended September 30, 2026, achieved 100% growth compared to 2025, reflecting accelerating physician adoption and expanding clinical use of the Company's noninvasive lung cancer diagnostic test.
	●	CyPath® Lung testing revenue increased approximately 79% to $1.1 million for the nine months ended September 30, 2026, as compared to $619,000 for the nine months ended September 30, 2025.
	●	The number of ordering physicians increased by 89% in Q3 2026 compared to Q3 2025. Physicians who ordered CyPath® Lung through Q3 2025 continued to expand utilization of the test, with sales volume increasing by 37% year-over-year.
	●	On August 14, 2026, the Company closed a $4.0 million private placement offering priced at-the-market under Nasdaq rules.
	●	On September 9, 2026, the Company announced it had regained compliance with Nasdaq listing requirements.
	●	On October 9, 2026, the Company closed a $4 million registered direct financing of common stock and concurrent private placement priced at-the-market under Nasdaq rules.

Recent Developments

	●	In October 2026, the Company presented positive research data to industry and physicians pertaining to its development of a new test measuring asthma and COPD-related lung inflammation and drug-related receptors at CHEST 2026.
	●	As of September 2026, 11 clinical sites have been activated and are open for enrollment for the CyPath® Lung longitudinal clinical trial that opened in March 2026, including 9 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 September 17, 2026, bioAffinity Technologies announced the grant of a Hong Kong patent for the Company's CyPath® Lung diagnostic platform.
	●	On September 1, 2026, the Company announced that it is advancing the potential application of its CyPath® Lung test for surveillance of lung cancer patients who have completed curative-intent treatment with the potential to complement imaging in monitoring lung cancer recurrence and new cancers.
	●	On August 18, 2026, the Company announced it has entered into a distribution agreement with AvMEDICAL, a Service-Disabled Veteran-Owned Small Business (SDVOSB) and established distributor of premium medical-surgical and laboratory services, supplies and equipment to government agencies.
	●	On August 8, 2026, the Company announced notification of a Japanese patent allowance covering CyPath® Lung and its AI-built algorithm. The patent, when awarded, will be an important addition to bioAffinity Technologies' patent portfolio, which includes 22 awarded U.S. and foreign patents and 36 pending patent applications related to its diagnostic platform and cancer treatment therapeutics.
	●	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.

Recent Financings

In October 2026, the Company raised $4.0 million, before deducting placement agent fees and other offering expenses, with the issuance of: (i) 116,545 shares of Common Stock of the Company, and (ii) pre-funded warrants to purchase up to an aggregate of 536,836 shares of Common Stock at the offering price of $6.122 per share and $6.115 per pre-funded warrant. All the pre-funded warrants have now been exercised. The investor also received unregistered warrants to purchase an aggregate of 980,072 shares of Common Stock at an exercise price of $6.122 per share for a period of five years. The exercise price is subject to customary adjustments in the event of stock splits, stock dividends and similar recapitalization transactions.

In August 2026, the Company raised $4 million, before deducting placement agent fees and other offering expenses, with issuance of 564,136 shares of Common Stock, or pre-funded warrants in lieu thereof, together with two warrants to purchase up to an aggregate 1,128,272 shares of Common Stock, in a private placement offering priced at-the-market under Nasdaq rules. The combined effective offering price for each share of Common Stock and accompanying two warrants issued was $7.0905. The exercise price is $4.9757 after the adjustment in the event of a reverse stock split.

In June 2026, the Company consummated a best efforts public offering of an aggregate of (i) 69,333 shares of Common Stock, par value $0.007 per share and (ii) pre-funded warrants to purchase up to 197,333 shares of Common Stock in lieu of Shares. Each Share was sold at a public offering price of $12.00. Each Pre-Funded Warrant was sold at a public offering price of $11.895. 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 266,666 shares of Common Stock at $12.00, of which 197,333 were issued as prefunded warrants. As of September 30, 2026, all the pre-funded 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 September 30, 2026, we had cash and cash equivalents of $2.6 million. As of November 3, 2026, we had cash and cash equivalents of $4.6 million, which we expect will support our operations through March 2027. 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 September 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 third 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 September 30, 2026, we had working capital of approximately $1.3 million and an accumulated deficit of approximately $80.8 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.

Results of Operations

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

Net loss for the three months ended September 30, 2026, was approximately $5.3 million, compared to a net loss of approximately $5.1 million for the three months ended September 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 September 30,
		2026				2025
Patient service fees1		$	863,488			$	1,172,948
Histology service fees			189,524				255,586
Medical director fees			17,207				17,274
Other revenues			61				258
Total net revenue		$	1,070,280			$	1,446,066

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 $1.1 million and $1.4 million for the three months ended September 30, 2026 and 2025, respectively. Consolidated revenue decreased approximately $0.4 million, or 26%, to $1.1 million for the three months ended September 30, 2026, as compared to $1.4 million for the three months ended September 30, 2025, primarily as a result of a decrease in lab revenue due to fewer total cases completed compared to the same period in prior year. CyPath^® Lung testing revenue also decreased approximately $23,000, or 8%, to $273,000 for the three months ended September 30, 2026, compared to $296,000 for the three months ended September 30, 2025. We delivered a total of 526 test results for the three months ended September 30, 2026, an increase of approximately 140 tests, or 37%, compared to 385 tests for the three months ended September 30, 2025. While the number of completed tests increased compared to prior year, this growth did not translate into higher revenue due to a decline in the average reimbursement per test. The impact was primarily attributable to changes in insurance reimbursement, including certain providers categorizing the test as experimental, which offset the additional revenue expected from the increase in test volume. We continue to work with insurance providers to convey the clinical benefit of the test and improve reimbursement levels.

Operating Expenses

		Three Months Ended								Change in 2026
		September 30,								Versus 2025
		2026				2025				$				%
Operating expenses:
Direct costs and expenses		$	1,114,176			$	942,211			$	171,965				18	%
Research and development			389,122				330,589				58,533				18	%
Clinical development			251,043				143,311				107,732				75	%
Selling, general and administrative			2,759,769				2,209,441				550,328				25	%
Depreciation and amortization			66,842				113,360				(46,518	)			(41	)%
Total operating expenses		$	4,580,952			$	3,738,912			$	842,040				23	%

Operating expenses totaled approximately $4.6 million and $3.7 million during the three months ended September 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 $0.9 million during the three months ended September 30, 2026 and 2025, respectively. The increase of $172,000, or 18%, is primarily attributable to the addition of personnel to process tests related to sales of CyPath^® Lung, as well as to process tests related to our longitudinal clinical study.

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 $389,000 and $331,000 for the three months ended September 30, 2026 and 2025, respectively. The increase of $58,000, or 18%, for the three months ended September 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 $251,000 and $143,000 for the three months ended September 30, 2026 and 2025, respectively. The increase of $108,000, or 75%, for the three months ended September 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 September 30, 2026, 11 clinical sites have been activated and are open for enrollment, including 9 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.

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 $2.8 million and $2.2 million for the three months ended September 30, 2026 and 2025, respectively. The increase of approximately $550,000, or 25%, for the three months ended September 30, 2026, compared to the same period in 2025 was primarily attributable to an increase in 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 $67,000 and $113,000 for the three months ended September 30, 2026 and 2025, respectively. The decrease of approximately $47,000, or 41%, for the three months ended September 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, partially offset by new additions for our new laboratory space.

Other Income (Expense)

		Three Months Ended								Change in 2026
		September 30,								Versus 2025
		2026				2025				$				%
Interest (expense) income, net		$	(5,979	)		$	(4,270	)		$	(1,709	)			40	%
Other income (expense), net			(9,928	)			(3,326	)			(6,602	)			198	%
Offering costs allocated to warrant liability			(532,209	)			-				(532,209	)			0	%
Loss on warrant liabilities			(1,218,235	)			(2,747,460	)			1,529,225				(56	)%
Total other income (expense)		$	(1,766,351	)		$	(2,755,056	)		$	988,705				(36	)%

Total other income (expense), net totaled approximately $(1.8 million) and ($2.8 million) for the three months ended September 30, 2026 and 2025, respectively. The increase in the total other expenses of approximately $980,000 is mostly attributable to the loss on the issuance and remeasurement of the warrants and offering costs attributed to the liability-classified warrants from the August 2026 private placement compared to the remeasurement of warrant liability and offering costs for the May 2025 public offering.

Nine months Ended September 30, 2026, Compared to Nine months Ended September 30, 2025

Net loss for the nine months ended September 30, 2026, was approximately $12.3 million, compared to a net loss of approximately $11.8 million for the nine months ended September 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 Nine months Ended September 30,
		2026				2025
Patient service fees1		$	3,189,840			$	3,685,397
Histology service fees			688,300				827,944
Medical director fees			52,212				51,171
Department of War observational studies			1,131				-
Other revenues			903				4,634
Total net revenue		$	3,932,386			$	4,569,146

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 $0.6 million, or 14%, to approximately $3.9 million for the nine months ended September 30, 2026, as compared to $4.6 million for the nine months ended September 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 $0.5 million, or 79%, to $1.1 million for the nine months ended September 30, 2026, compared to $0.6 million for the nine months ended September 30, 2025, as a result of a total of approximately 1,600 test results delivered for the nine months ended September 30, 2026, compared to 775 tests for the nine months ended September 30, 2025.

Operating Expenses

		Nine months Ended								Change in 2026
		September 30,								Versus 2025
		2026				2025				$				%
Operating expenses:
Direct costs and expenses		$	3,130,649			$	3,326,673			$	(196,024	)			(6	)%
Research and development			1,100,404				1,009,347				91,057				9	%
Clinical development			1,060,968				410,943				650,025				158	%
Selling, general and administrative			8,859,961				6,876,551				1,983,410				29	%
Depreciation and amortization			242,916				381,177				(138,261	)			(36	)%
Total operating expenses		$	14,394,898			$	12,004,691			$	2,390,207				20	%

Operating expenses totaled approximately $14.4 million and $12.0 million during the nine months ended September 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 $3.1 million and $3.3 million during the nine months ended September 30, 2026 and 2025, respectively. The decrease of approximately $0.2 million, or 6%, 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 longitudinal clinical study.

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 $1.1 million and $1.0 million for the nine months ended September 30, 2026 and 2025, respectively. Research costs increased slightly as we incur development expenses related to the development of our flow cytometry platform and ELISA assays to address the need for tests that can characterize lung inflammation and provide precision diagnostics for personalized medicine when prescribing drugs and therapies for asthma and COPD, as well as research advancing 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 $1.1 million and $0.4 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of approximately $0.7 million, or 158%, for the nine months ended September 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 longitudinal clinical trial that began in March 2026, as well as costs to activate 11 clinical trial sites and related patient enrollment costs.

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 $8.9 million and $6.9 million for the nine months ended September 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 $243,000 and $381,000 for the nine months ended September 30, 2026 and 2025, respectively. The decrease of approximately $138,000, or 36%, for the nine months ended September 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.

		Nine months Ended								Change in 2026
		September 30,								Versus 2025
		2026				2025				$				%
Interest (expense) income, net		$	(19,005	)		$	(27,648	)		$	8,643				(31	)%
Other income (expense), net			(41,754	)			21,740				(63,494	)			(292	)%
Offering costs allocated to warrant liability			(532,209	)			(479,696	)			(52,513	)			11	%
Loss on warrant liabilities			(1,218,235	)			(3,810,278	)			2,592,043				(68	)%
Total other (expense) income		$	(1,811,203	)		$	(4,295,882	)		$	2,484,679				(58	)%

Other Income (Expense)

Total other income (expense), net totaled approximately $(1.8 million) and ($4.3 million) for the nine months ended September 30, 2026 and 2025, respectively. The increase in the total other expenses of approximately $2.5 million is mostly attributable to the loss on the issuance and remeasurement of the warrants and offering costs attributed to the liability-classified warrants from the August 2026 private placement compared to the remeasurement of warrant liability and offering costs for 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 $69.4 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 nine months ended September 30, 2026 and 2025, we had net losses of $12.3 million and $11.8 million, respectively, and we expect to incur substantial additional losses in future periods. We have an accumulated deficit of approximately $80.8 million as of September 30, 2026. Despite our recent financing in October 2026 in which we raised gross proceeds of $4.0 million, we believe our current cash and anticipated revenue from operations will be sufficient to support our operations through March 2027. Based on our current expected level of operating expenditures, current expected levels of revenue, and the cash and cash equivalents on hand at September 30, 2026, of $2.6 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:

		Nine months Ended
		September 30,
		2026				2025
Cash and cash equivalents at beginning of period		$	6,449,782			$	1,105,291
Net cash used in operating activities			(10,301,215	)			(6,769,279	)
Net cash used in investing activities			(172,683	)			(60,567	)
Net cash provided by financing activities			6,574,150				13,393,750
Cash and cash equivalents at end of period		$	2,550,034			$	7,669,195

Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $10.3 million and $6.8 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of approximately $3.6 million in cash used by operations during the nine months ended September 30, 2026, compared to the same period in 2025 was primarily attributable to an increase of approximately $500,000 in our loss from operations offset by an increase in the change in accounts receivable by $0.9 million compared to the prior year, a decrease in the change of $0.1 million in prepaid expenses and other current assets compared to the prior year, a decrease in the change of $0.1 million in accounts payable and accrued expenses compared to the prior year, as well as an increase in stock-based compensation of $0.3 million compared to the prior year, $0.1 million related to the issuance of Placement Agent warrants and a loss on issuance of warrant liabilities by $2.6 million when comparing the August 2026 and May 2025 warrant transactions.

Net Cash Used in Investing Activities

We used approximately $173,000 for the nine months ended September 30, 2026, in investing activities related primarily to purchase of computer and lab equipment, compared to approximately $61,000 used in investing activities for the nine months ended September 30, 2025.

Net Cash Provided by Financing Activities

Cash provided in financing activities was approximately $6.6 million compared to cash provided by financing activities of approximately $13.4 million for the nine months ended September 30, 2026 and 2025, respectively. The change in proceeds from prior year was primarily related to net proceeds from the equity transactions of approximately $6.6 million offset by payments for loans and finance leases of $0.1 million in the current year, compared to the prior year net proceeds of approximately $13.7 million in the prior year, offset by payments for loans and finance leases of $0.3 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.

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.

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.