bioAffinity Technologies, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited consolidated statements include the company and its wholly owned subsidiary, OncoSelect Therapeutics. bioAffinity develops noninvasive lung-disease diagnostics and early-stage cancer therapeutics; its first test, CyPath Lung, is in a limited market launch through licensee Precision Pathology Services.
Financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $921 | $0 |
| Cost of sales / gross profit | $87 / $834 | $0 / $0 |
| Research and development | $369,617 | $279,848 |
| Clinical development | $19,628 | $52,503 |
| Selling, general and administrative | $1,169,559 | $394,692 |
| Total operating expenses | $1,558,804 | $727,043 |
| Loss from operations | $(1,557,970) | $(727,043) |
| Net loss | $(1,532,790) | $(1,472,020) |
| Basic and diluted loss per share | $(0.18) | $(0.55) |
| Net cash used in operating activities | $(1,529,041) | $(633,967) |
Cash and cash equivalents were $9.77 million at March 31, 2023, down $1.64 million from year-end 2022. Investing activities used $32,314, mainly for equipment; financing activities used $83,316 for loan payments. Current assets were $10.23 million and current liabilities $796,303. The company reported working capital of approximately $9.4 million and stockholders’ equity of $9.67 million.
There was no long-term debt reported; the $168,430 loan payable was current. The loan originated in September 2022 to finance directors’ and officers’ insurance, with ten monthly payments and a fixed 4.3% annual rate. The filing does not provide a meaningful operating margin given the very limited revenue and ongoing losses.
Material changes and notable items
- Operating expenses increased about $832,000 (114%), driven mainly by a $775,000 increase in SG&A (196%), including public-company compliance and professional costs, board compensation, patent costs, and personnel supporting CyPath Lung’s launch.
- R&D increased about $90,000 (32%) with additional research staff, supplies, and equipment. Clinical development expense fell about $33,000 (62%), primarily because the prior-year period included consulting fees for clinical-strategy evaluation.
- Net loss was broadly similar year over year, despite higher operating expenses. Q1 2022 included substantial noncash debt-related interest expense and a fair-value loss on convertible notes; those notes were converted in connection with the 2022 IPO. Q1 2023 recorded $36,999 in net interest income.
- CyPath Lung revenue began in Q2 2022 and remained minimal in Q1 2023. Management described the South Texas launch as limited, intended to refine marketing and the patient-care pathway before broader expansion.
- Common shares outstanding rose to 8,463,052 at quarter-end from 8,381,324 at year-end 2022. The company also had 4,649,952 warrants outstanding at a weighted-average exercise price of $6.39, plus 806,392 options.
- On May 2, 2023, after quarter-end, the company announced Michael Dougherty as CFO; Michael Edwards stepped down from the role and continued as a consultant.
Liquidity, outlook, and risks
Management stated that March 31 cash was expected to fund planned operations for at least 12 months following issuance of the filing. The company has incurred recurring losses and negative operating cash flows, expects substantial further losses, and may need additional equity or debt financing, collaborations, grants, or other arrangements thereafter. Management cautioned that unavailable or unacceptable financing could force it to curtail development, delay clinical trials, cease operations, or file for bankruptcy. No specific revenue or earnings guidance was provided.
Key risks include the need to establish market acceptance and commercial reach for CyPath Lung; clinical-trial results, costs and timing; regulatory approvals; reliance on third parties; competition; intellectual-property protection and potential claims; and the ability to obtain future capital. The company reported no material pending legal proceedings. Its lab and office lease arrangements include an annual renewal due in February 2024 for laboratory and additional office space.
Management concluded that internal control over financial reporting was ineffective as of March 31, 2023, due to limited resources and staffing. It relies heavily on management oversight and outside legal and accounting professionals; no material control changes during the quarter were reported.
Important facts for investors to verify
- Whether CyPath Lung test volume, physician adoption, reimbursement, and royalty revenue grow beyond the limited launch.
- Whether the reported cash runway remains achievable as operating cash use and commercialization costs evolve, and what financing may be required.
- Progress, timing, cost, and results of CyPath Lung clinical development and any regulatory or commercialization requirements.
- Potential dilution from outstanding warrants, options, and future equity financing.
- Remediation plans and progress for the disclosed ineffective internal controls.