BioAffinity Technologies, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter results report; the filing compares full-year 2022 with full-year 2021. The financial statements received an unqualified audit opinion.
Business context
BioAffinity is a development-stage diagnostics and therapeutics company. Its lead product, CyPath Lung, is a noninvasive sputum-based test intended to help assess lung cancer risk after low-dose CT screening. It is marketed in Texas by Precision Pathology as a laboratory-developed test (LDT); the company had not obtained FDA marketing authorization. The company also conducts early-stage research on lung diagnostics and targeted cancer therapies.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $4,803 | $0 |
| Gross profit | $4,336 | $0 |
| Operating expenses | $4.015 million | $2.207 million |
| Loss from operations | $4.011 million | $2.207 million |
| Net loss | $8.154 million | $6.326 million |
| Net cash used in operating activities | $4.071 million | $2.049 million |
- Revenue consisted solely of royalties on CyPath Lung sales by Precision Pathology. The 2022 launch was limited, and revenue remained nominal.
- Research and development expense was $1.143 million, up 13%; clinical development expense was $146,000, up 12%; selling, general and administrative expense was $2.727 million, up 155%. The SG&A increase reflected IPO/public-company costs, professional and patent expenses, stock compensation, and commercial launch support.
- Net interest expense was $2.486 million, including approximately $2.1 million of debt-discount amortization. The company also recorded a $1.867 million loss from fair-value adjustments to convertible notes. In 2021, it recorded a $4.080 million warrant expense and a $725,000 gain on convertible-note fair value changes.
- At year-end, cash and cash equivalents were $11.414 million; current assets were $11.962 million and current liabilities $1.139 million, implying working capital of about $10.823 million. Accumulated deficit was $36.667 million.
- Year-end total liabilities were $1.139 million, including a $252,000 loan payable. Convertible notes had been converted or repaid by year-end; the filing reports no year-end convertible-note balance.
- Operating cash outflow was funded principally by $14.344 million of financing cash flow, including $6.027 million net IPO proceeds and $7.713 million from warrant exercises. Investing cash outflow was $220,000, mainly for lab equipment.
Material changes and capital structure
- In September 2022, the company completed its IPO, receiving approximately $6.0 million net proceeds. Approximately $16.1 million of convertible notes, accrued interest, and fair-value adjustments converted into common stock. It also raised approximately $7.8 million from warrant and option exercises.
- Common shares outstanding increased to 8,381,324 at December 31, 2022, from 2,677,140 a year earlier. The filing lists 5,456,344 shares underlying outstanding options and warrants at year-end, a material potential source of dilution.
- Operating expenses increased 82% year over year and operating cash use nearly doubled. Net loss rose by approximately $1.8 million, although noncash financing-related fair-value and interest charges significantly affect comparisons between periods.
Outlook, risks, and notable disclosures
- Management said year-end cash was expected to fund planned operations for at least 12 months following issuance of the report. The company expects continued operating losses and anticipates needing additional financing thereafter; it cautioned that unavailable or unacceptable financing could force it to delay or curtail development or cease operations.
- Management planned a controlled Texas launch followed by broader U.S. expansion. It anticipated starting a pivotal trial in 2023, enrolling approximately 1,800 participants, and pursuing FDA authorization after successful completion; the business plan referenced a 2026 FDA authorization objective. These are plans, not assurances.
- The company reported validation-trial performance of 82% sensitivity and 88% specificity overall, and 92% sensitivity and 87% specificity in a subgroup with no nodules or nodules under 20 mm. A pivotal trial and FDA review remain necessary to support the intended regulatory pathway. The test’s LDT status should not be confused with FDA clearance.
- Management concluded internal control over financial reporting was ineffective at December 31, 2022, citing limited resources and staffing. The auditor did not express an opinion on internal-control effectiveness.
- There were no material pending legal proceedings disclosed. The company reported cash balances at financial institutions regularly exceeding the federally insured limit. Clinical, regulatory, commercialization, reimbursement, competition, intellectual-property, and future-funding risks remain material.
Important facts for investors to verify
- Current cash, burn rate, and financing runway against the stated minimum 12-month outlook.
- CyPath Lung test volumes, royalty economics, payer reimbursement, and commercial uptake beyond the limited Texas launch.
- Progress, enrollment, cost, and results of the planned pivotal trial, and the timing and outcome of FDA interactions or submissions.
- Potential dilution from outstanding warrants and options, and any subsequent financing or changes in share count.
- Remediation of ineffective internal controls and whether future filings identify control improvements or deficiencies.