AIDX

Business Context and Reporting Period

Company: 20/20 Biolabs, Inc. (AIDX)

Reporting Period: Quarter ended March 31, 2026

Business Overview: The Company develops AI-powered laboratory blood tests for early cancer detection (OneTest) and chronic disease prevention (OneTest for Longevity). It also operates a shared CLIA laboratory (CLIAx) and sells legacy bioterror screening kits (BioCheck). The Company completed a direct listing on Nasdaq on February 19, 2026.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 36.2% to $353,375. OneTest revenue dropped 34.2% due to a delayed renewal from a major fire department customer. BioCheck revenue fell 62.2% as patent expirations and competition continue to impact sales.
• Margin Compression: Gross margin declined from 29.94% to 17.80%. While revenue fell, fixed laboratory costs remained relatively stable, increasing the cost of revenue as a percentage of sales.
• Expense Surge: Operating expenses increased 60.6% to $1.51 million. Sales, General, and Administrative (SG&A) expenses rose 68.9% primarily due to costs associated with the Nasdaq direct listing. R&D expenses increased 12.2% driven by the development of the new Longevity test.
• Non-Operating Losses: The Company recorded significant non-cash losses totaling $731,480 in "Other Expense," including a $322,359 loss on the issuance of convertible notes and a $148,766 loss on the change in fair value of warrant liabilities.
• Capital Structure Shift: All outstanding Series A through D preferred stock was converted to common stock. The Company issued Series E convertible preferred stock and secured convertible promissory notes to raise capital.

Guidance, Outlook, Risks, and Unusual Items

• Liquidity and Capital: The Company raised $5.0 million via a private placement of Series E preferred stock and $250,000 in convertible notes during the quarter. Management anticipates continued operating losses in the near term but believes current cash ($4.2 million) and recent financing are sufficient to fund operations for at least one year.
• Unusual Items: The quarter included significant one-time costs related to the Nasdaq direct listing and the issuance of new debt/equity instruments, resulting in large non-cash charges for debt discounts and derivative liability adjustments.
• Internal Controls: Management identified material weaknesses in internal controls over financial reporting, citing a lack of sufficient trained professionals to handle complex transactions and a lack of segregation of duties. Remediation efforts are underway.
• Subsequent Events: Following the quarter end, the Company exchanged secured convertible notes for Series E preferred stock and entered into a global amendment reducing the exercise price of certain warrants to $2.25 per share.

Investor Verification Checklist

• Cash Burn Rate: Verify the sustainability of the $4.2 million cash balance against the $1.29 million quarterly operating cash burn.
• Revenue Concentration: Assess the impact of the delayed renewal from the "significant fire department customer" on future OneTest revenue stability.
• Dilution Risk: Review the terms of the Series E preferred stock (9% preferred return, conversion features) and the recent warrant price reduction to $2.25, which may significantly increase potential share dilution.
• Debt Covenants: Examine the triggering events in the secured convertible notes (Major/Minor Triggering Events) that could increase the outstanding balance by 5% or 15%.
• Internal Control Remediation: Monitor progress on hiring qualified accounting personnel and implementing formal risk assessment processes to address the disclosed material weaknesses.