BioAffinity Technologies, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited condensed consolidated results include the Company and its wholly owned subsidiary. BioAffinity develops noninvasive diagnostics, including CyPath Lung, and conducts early-stage cancer therapeutic research.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | 2023: $19,738; 2022: $1,306 | 2023: $20,659; 2022: $1,306 |
| Gross profit | 2023: $18,504; 2022: $1,160 | 2023: $19,337; 2022: $1,160 |
| Operating expenses | 2023: $1.797 million; 2022: $685,279 | 2023: $3.356 million; 2022: $1.412 million |
| Net loss | 2023: $1.740 million; 2022: $88,052 | 2023: $3.273 million; 2022: $1.560 million |
| Net loss per share, basic and diluted | 2023: $0.20; 2022: $0.03 | 2023: $0.38; 2022: $0.58 |
- At June 30, cash and cash equivalents were $8.279 million, down from $11.414 million at December 31, 2022. Total assets were $8.873 million; working capital was approximately $7.9 million.
- Six-month cash flows: $2.889 million used in operations, $36,175 used in investing, and $209,412 used in financing. Cash decreased by $3.135 million.
- Total liabilities were $775,151, including a $42,334 short-term loan payable. The filing reports no convertible notes outstanding at June 30.
- Revenue remains very small relative to operating costs. Q2 revenue included approximately $10,000 from a Department of Defense (DoD) study, $7,000 in royalties, and $3,000 in clinical services.
Material changes versus the prior comparable periods
- Revenue rose from a low base, primarily reflecting DoD study sales and CyPath Lung royalties and services. Six-month revenue was $20,659 versus $1,306 a year earlier.
- Six-month operating expenses increased 138% to $3.356 million. General and administrative expense rose to $2.596 million, which management attributed to public-company reporting and professional fees, board compensation, patent costs, and added personnel supporting commercialization. Research and development rose 33% to $704,741; clinical development expense fell 32% to $54,888.
- Six-month net loss increased to $3.273 million from $1.560 million, while operating cash use increased to $2.889 million from $1.010 million. Prior-year results included noncash convertible-note fair-value changes and debt-related interest expense; the notes were converted in connection with the 2022 IPO. These items complicate period-to-period net-loss comparisons.
- Common shares outstanding were 8,555,365 at June 30, up from 8,381,324 at year-end; 8,782,548 were reported outstanding on August 14. Potential dilution includes 4,649,952 warrants and 806,392 options outstanding at June 30.
Outlook, risks, and notable items
- Management expects continued operating losses and negative operating cash flows. It believes June 30 cash can fund operations for at least 12 months after the August 14 filing date, based on expected expenditures. Additional financing may be needed thereafter; unavailable or unacceptable financing could lead to curtailed development or operations.
- Management expects CyPath Lung revenue to grow as physician adoption and geographic reach expand, but revenue depends on test volumes, patient adherence, payer mix, reimbursement levels, and payment patterns. No quantified revenue or earnings guidance is provided.
- The AMA approved a CyPath Lung-specific PLA code in June, scheduled to take effect October 1, 2023. CMS payment decisions were pending: preliminary determination expected in September, with final determination expected in November and effective January 1, 2024.
- For the DoD observational study, 70 CyPath Lung units were ordered and shipped, but only 13 had completed the performance obligation by June 30. The Company recorded approximately $43,000 of unearned revenue for units not yet completed under its revenue-recognition criteria.
- Management concluded internal control over financial reporting was ineffective at June 30 because of limited resources and staffing. The CFO joined in May, additional segregation of duties was implemented, and a senior accountant was hired in July; remediation was ongoing.
- The filing identifies cash balances above FDIC-insured limits as a concentration risk. It reports no material pending legal proceedings and no subsequent events requiring adjustment or disclosure. The laboratory and additional office-space lease is renewable annually and requires renewal in February 2024.
Most important facts for investors to verify
- Whether the cash runway estimate remains valid given the $2.889 million of operating cash used in the first half and expected spending.
- CMS’s final reimbursement decision for the new PLA code, and whether coverage and payment support broader adoption of CyPath Lung.
- Whether physician uptake, DoD activity, and completed test volumes convert into material recurring revenue; verify the timing and recognition of the $43,000 unearned balance.
- Progress in addressing ineffective financial-reporting controls and any subsequent changes in control effectiveness.
- Potential dilution from warrants, options, restricted stock awards, and the increase in authorized common shares.
- Financing plans and terms if additional capital is required after the stated runway.