As filed with the Securities and Exchange Commission on April 25, 2022.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

bioAffinity Technologies, Inc.

(Exact name of registrant as specified in its charter)

22211 W Interstate 10

Suite 1206

San Antonio, Texas 78257

210-698-5334

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Maria Zannes

Chief Executive Officer

22211 W Interstate 10

Suite 1206

San Antonio, Texas 78257

210-698-5334

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated April 25, 2022.

PRELIMINARY PROSPECTUS

____ Shares

bioAffinity Technologies, Inc.

Common Stock

bioAffinity Technologies, Inc., a Delaware corporation headquartered in Texas (the “Company”), develops noninvasive, early-stage diagnostics to detect, and is researching targeted therapies to treat cancer at the cellular level.

This is the initial public offering (the “Offering”) of our Common Stock, $0.001 par value per share (the “Common Stock”). We are offering ________ shares of our Common Stock at an anticipated initial public offering price between $_____ and $_____ per share. The actual public offering price of the Common Stock will be determined between the underwriters and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business.

Prior to this Offering, there has been no public market for our Common Stock. We have applied to list our Common Stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BIAF”.

We are an “emerging growth company” and a “smaller reporting company” under applicable federal securities laws and will be subject to reduced public company reporting requirements.

Immediately after this Offering, our officers and directors will control approximately 70% of the voting power of our Common Stock, as determined in accordance with the beneficial-ownership provisions of Rule 13d-3 and Item 403 of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See the “Principal Stockholders” section beginning on page 95 of this prospectus for a description of how beneficial ownership is calculated and related matters.

For so long as 30% of the shares of our “Series A Convertible Preferred Stock,” par value $0.001 per share (our “Series A Preferred Stock”), remain outstanding, the holders of our Series A Preferred Stock, voting as a separate class, are entitled to elect one director of the Company (such right, the “Series A Director Designation Right”; such director, the “Series A Representative”). Immediately prior to the closing of this Offering, all of the issued and outstanding shares of Series A Preferred Stock will be automatically converted into fully paid and nonassessable shares of Common Stock at the then-effective conversion rate of the Series A Preferred Stock immediately prior to the closing of this Offering. Following such automatic conversion, the Company will never again issue the shares so converted, all such converted shares will cease to be part of the Company’s authorized stock, and the Series A Director Designation Right will cease to exist because fewer than 30% of the Series A Preferred Stock shares will be outstanding. The director who currently serves as the Series A Representative, however, will continue to serve as a director until his earlier resignation or removal or until his successor is duly elected and qualified. The number of Board seats for election by the holders of the Common Stock will be expanded by one so that the director position that the holders of the Series A Preferred Stock were previously entitled to elect will be subject to election by the holders of the Common Stock following the conversion of the Series A Preferred Stock into Common Stock in connection with this Offering. See the “Management—Board of Directors Composition” section of this prospectus.

Investing in our Common Stock involves a high degree of risk. See the “Risk Factors” section beginning on page 14 of this prospectus for a discussion of the factors that you should consider before investing in our Common Stock.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

We have granted the representative of the underwriters a 45-day option to purchase up to a total of ___ additional shares of Common Stock from us at the initial public offering price less the underwriting discounts.

The underwriters expect to deliver the shares of Common Stock to purchasers on or about [Date], 2022 through the book-entry facilities of The Depository Trust Company.

Sole Book-Running Manager

WallachBeth Capital, LLC

The date of this prospectus is April 25, 2022.

bioAffinity Technologies, Inc.

TABLE OF CONTENTS

Market, industry, and other data

About this Prospectus

You should rely only on the information contained in this prospectus prepared by us or on our behalf or to which we have referred you. We have not, and the underwriters have not, authorized any other person to provide you with information different from that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell the securities described herein in any jurisdiction where an offer or sale is not permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our Common Stock. Our business, financial condition, results of operations, and prospects may have changed since that date.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Please read “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Unless the context otherwise requires, the information in this prospectus (other than in the historical financial statements) assumes that the underwriters will not exercise their option to purchase additional shares.

Through and including _______ , 2022 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this Offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

For investors outside of the United States: Neither we nor any of the underwriters have done anything that would permit this Offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this Offering in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus and any free writing prospectus must inform themselves about and observe any restrictions relating to this Offering and the distribution of this prospectus outside of the United States. See “Underwriting—Selling Restrictions” on page 111.

Industry and Market Data

This prospectus includes estimates regarding market and industry data. Unless otherwise indicated, information concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity, and market size, are based on our management’s knowledge and experience in the markets in which we operate, together with currently available information obtained from various third-party sources, including publicly available information, industry reports and publications, surveys, our customers, trade and business organizations, and other contacts in the markets in which we operate. Although we believe these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. Some data is also based on our good faith estimates. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

Trademarks and Trade Names

We own or have rights to various trademarks, service marks, and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks, and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names, or products in this prospectus is not intended to, and does not imply a relationship with or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks, and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks, and trade names.

PROSPECTUS SUMMARY

This summary provides an overview of information appearing elsewhere in this prospectus and highlights the key aspects of this Offering. This summary does not contain all of the information you should consider prior to investing in our Common Stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing at the end of this prospectus, before making any investment decision. Our fiscal year ends on December 31. Unless the context otherwise requires, references to “bioAffinity,” the “Company,” “we,” “us,” and “our” in this prospectus refer to bioAffinity Technologies, Inc. and our consolidated subsidiaries.

Overview

bioAffinity Technologies, Inc. is a privately held company incorporated in Delaware addressing the need for noninvasive diagnosis of early-stage cancer and diseases of the lung, and targeted cancer treatment. Our Company develops proprietary noninvasive diagnostic tests and cancer therapeutics using technology that preferentially targets cancer cells and cell populations indicative of a diseased state. Research and optimization of our platform technologies are conducted in our laboratories at The University of Texas at San Antonio. We are developing our platform technologies so that, in the future, they will be able to detect and monitor diseases of the lung and other cancers and treat many cancers.

More than 100 different types of cancers have been identified, all marked by the abnormal and unrestricted proliferation of cells that can eventually kill a patient stricken with the disease. Lung, breast, prostate, and colorectal cancers are the most common, representing more than half of all cancer diagnoses. Lung cancer alone, by far the deadliest, is responsible for an estimated 1.8 million deaths worldwide annually.¹

A patient’s overall cancer survivability depends on the type of cancer and the stage at which cancer is treated. The early diagnosis of cancer, before it spreads, is a significant contributor to survival. This is true for lung cancer that is most often detected in later stage when the cancer has spread to other parts of the body. However, if lung cancer is detected and treated early (Stage I), the current overall five-year survival rate of 20.5%² for Stages II-IV can leap to a 10-year survival rate of 92%.³

Current diagnostic protocols include lab tests, various imaging techniques, and biopsy followed by microscopic examination of tissue samples. None of these methods perfectly detects cancer cells, especially in the early stages of the disease. Low-dose computed tomography (LDCT) is recommended for screening patients at high risk for lung cancer. Results of a large clinical trial of more than 53,000 patients showed that screening for lung cancer by LDCT lowered the mortality rate by 20% as compared to x-ray imaging.^4,5 However, the study found that of every 100 people screened for lung cancer who received a positive LDCT result, fewer than four of those individuals truly had the disease. Consequently, there is a great and urgent need for better targeted diagnostic methods that are safe, accurate, rapid, noninvasive, and cost effective for the detection of early-stage lung cancer.

Our first diagnostic test, CyPath^® Lung, addresses the need for early detection of lung cancer, the leading cause of cancer-related deaths. In order to identify patients more confidently who need to undergo more invasive follow-up procedures, physicians will be able to order CyPath^® Lung to assist in the assessment of the potential for the disease. CyPath^® Lung thus serves as another tool in the physician’s decision-making process to distinguish between patients who are likely to have lung cancer and will benefit from timely intervention and those who are likely without disease and should continue their annual screening for lung cancer.

CyPath^® Lung is a noninvasive test for the early detection of lung cancer. Our test uses flow cytometry to analyze the different type of cells in a person’s sputum, or phlegm from the lungs, to find characteristics indicative of lung cancer, including cancer and cancer-related cells that have shed from a lung tumor. Flow cytometry is a technology to group cells into populations of cells that look similar, based on their size, internal structures, and the presence of certain molecules on the outside or inside of the cell. Flow cytometry does this one cell at a time, scanning a large number of cells in a relatively short time period. For example, an average sputum sample containing about 20 million cells can be profiled cell-by-cell by flow cytometry in less than 20 minutes using the CyPath^® Lung protocol. To collect a sputum sample, a patient blows into a hand-held, noninvasive assist device that acts to break up mucus in the lungs and help a person cough up the sputum from the lung into a collection cup. The sputum sample is shipped overnight to the laboratory and processed in accordance with CyPath^® Lung protocol. Sample processing includes labeling cells with a synthetic porphyrin that attaches to cancer and cancer-associated cells (specifically, the porphyrin called meso-tetra (4-carboxyphenyl) porphine or “TCPP”). Sample processing also includes the use of antibodies that attach to specific types of cells. The processed sputum sample is run through a flow cytometer that can identify cancer and cancer-related cells labeled by TCPP and other cell populations. The resulting data is automatically analyzed immediately after data acquisition by proprietary automated analysis software that is fully integrated into the test and generates both quantitative and qualitative diagnostic results in the form of a patient report that is provided to the ordering physician.

CyPath^® Lung has the potential to increase overall diagnostic accuracy of lung cancer leading to increased survival, lower the number of unnecessary invasive procedures, reduce patient anxiety, and lower medical costs.⁶ bioAffinity Technologies intends to develop the CyPath^® platform technology for use in the detection of other lung diseases, such as chronic obstructive pulmonary disease (“COPD”) and asthma. The Company further intends to develop tests to detect other cancers, including prostate cancer at an early stage, and to monitor for recurrence of bladder cancer.

Through our wholly owned subsidiary, OncoSelect^® Therapeutics, LLC, our Company is focused on expanding its broad platform technologies to create targeted therapeutics to fight cancer. In researching how TCPP, the porphyrin used in CyPath^® Lung, enters cancer cells, we discovered a novel potential therapy that kills cancer cells that have been grown in petri dishes without apparent harm to normal cells. This approach uses RNA interference (“RNAi”), a natural mechanism for selectively silencing (eliminating or “knocking down”) a gene. Genes provide cells with instructions for making proteins, and silencing a gene by RNAi refers to stopping or reducing production of the protein specified by that gene. We discovered that treating cells in the laboratory with certain small interfering RNAs (“siRNAs,” which are short, chemically synthesized nucleic acid molecules), we can silence the two genes and thereby the production of two cell-surface proteins, causing potent and selective cancer cell death while leaving normal cells virtually unharmed. Our potential therapies will be achieved, in part, by advancing studies of the siRNA-driven silencing of two genes encoding for the cell surface proteins CD320 and LRP2. We found that silencing these two genes resulted in cell death in multiple human cancer cell lines, including lung, breast, prostate, melanoma, and brain cancer cell lines, but left normal human fibroblast and breast epithelial cells virtually unaffected.

Financial

To date, we have devoted a substantial portion of our efforts and financial resources to the development of the CyPath^® Lung test. As a result, since our inception in 2014, we have generated no revenue from sales of the CyPath^® Lung test and have funded our operations principally through private sales of our equity or debt securities. We have never been profitable and, as of December 31, 2021, we had an accumulated deficit of approximately $28.5 million. We currently have a total negative working capital of $11.6 million, including $8.7 million of convertible notes. We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our diagnostic tests or therapeutic products and advance them through clinical trials.

Corporate Information

We were incorporated in the State of Delaware on March 26, 2014. Our principal executive office is located at 22211 West Interstate 10, Suite 1206, San Antonio, Texas 78257, and our telephone number at that address is (210) 698-5334. Our laboratory diagnostic and therapeutic research is conducted at The Harvey Sandler Cancer Research Laboratories, which is located at Science Research Laboratories, Suite 1.424, University of Texas at San Antonio, San Antonio, Texas 78249. Our website address is https://www.bioaffinitytech.com/. Information contained on or that can be accessed through our website is not incorporated by reference into this prospectus. Investors should not consider any such information to be part of this prospectus.

Organizational Structure

The following organizational chart depicts our principal operating subsidiaries:

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” (an “EGC”) as defined in the Jumpstart Our Business Startups Act of 2012. As an EGC, for up to five years, we may elect to take advantage of certain specified exemptions from reporting and other regulatory requirements that are otherwise generally applicable to public companies. For example, these exemptions would allow us to:

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding internal control over financial reporting, to provide a compensation discussion and analysis, or to provide a pay-for-performance graph or CEO pay ratio disclosure, and they may present two, rather than three, years of audited financial statements and related MD&A disclosure.

We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of this Offering or until we are no longer an EGC, which would be the case if (i) our total annual gross revenues are $1.07 billion or more; (ii) we issue more than $1 billion in non-convertible debt during a consecutive three-year period; or (iii) we become a “large accelerated filer,” as defined in the Exchange Act. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting obligations in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. For more information, see “Risk Factors—General Risk Factors—We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock less attractive to investors.”

Our Business

bioAffinity Technologies, Inc. focuses on the need for noninvasive diagnosis of early-stage cancer and diseases of the lung, and targeted cancer therapeutics. The Company has developed a proprietary platform for in vitro diagnostics of which the first is a noninvasive test for early detection of lung cancer. The Company’s diagnostic tests are based on platform technologies that may be applicable to detecting other lung diseases such as chronic obstructive pulmonary disease (COPD) and asthma, and diagnosing other types of cancer such as prostate and bladder cancers.

Once cancer has been diagnosed, a variety of treatment options are available, depending on the cancer type and stage. Surgery and radiation treatments are typically site-specific, while chemotherapy is usually systemically administered. Chemotherapy presents a particular challenge because of a relative lack of selectivity for cancer cells and inability to differentiate between normal, healthy cells and cancer cells. Ideally, site-specific delivery of cancer-killing drugs would treat the disease and spare healthy cells. Our research to discover how the porphyrin used in CyPath^® Lung enters cancer cells has led to discoveries that could lead to novel cancer therapeutics that selectively kill cancer cells of the lung, breast, brain, skin and prostate without apparent harm to normal (non-cancerous) cells.

Our First Diagnostic Test - CyPath^® Lung

Lung cancer remains the most commonly diagnosed cancer and the leading cause of cancer-related deaths worldwide. Globally, there were an estimated 2.1 million lung cancer cases and 1.8 million lung cancer deaths in 2018.⁷ If detected and treated early (Stage I), the overall five-year survival rate of 21.5% leaps to a 10-year survival rate of 92%.⁸ Unfortunately, most lung cancer is detected in late stages. A large national clinical trial showed that screening for lung cancer using low-dose computed tomography (“LDCT”) can lower the mortality rate by 20% as compared to screening by x-ray if LDCT screening is used by patients at high risk for lung cancer on an annual basis.⁹ LDCT is therefore recommended for screening of an estimated 18 million Americans who are at high risk for lung cancer. However, LDCT was shown to have a low positive predictive rate of less than 4%. This means that for every 100 people who receive a positive result from LDCT screening and are suspected of having lung cancer, only four of those patients truly have the disease. A reliable, noninvasive and cost-effective diagnostic test can increase diagnosis of early-stage lung cancer while lowering the number of unnecessary and invasive procedures for patients with a false positive result from LDCT screening. (False positive means a person who does not have lung cancer but receives a positive result, in this case from LDCT screening.)

CyPath^® Lung is a test for early-stage lung cancer that is designed to meet the need for greater diagnostic certainty. Its use in conjunction with LDCT is predicted to improve the positive predictive value (the probability that patients with a positive LDCT scan truly have the disease) by a factor of five.¹⁰ Our analysis concludes that improving the positive predictive value of LDCT with the use of CyPath^® Lung has the potential to subject fewer patients to the stresses of misdiagnosis or unnecessary diagnostic procedures such as biopsies, while also reducing healthcare costs.¹¹

The CyPath^® Lung diagnostic process uses sputum, or phlegm, that is obtained noninvasively in the privacy of a patient’s home. Physicians can order the test for patients they suspect have lung cancer or patients with a positive LDCT screening result. CyPath^® Lung uses flow cytometry to analyze cell populations in a person’s sputum to find characteristics indicative of lung cancer, including cancer or cancer-related cells that have shed from a lung tumor. A patient collects his or her sample using a hand-held, noninvasive assist device that acts to break up mucus in the lungs and help a person cough up their sputum from the lung into a collection cup. The sputum sample is shipped overnight to a clinical pathology laboratory that is accredited by the College of American Pathologists (“CAP”) and certified by the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) program, and processed with CyPath^® that includes antibodies that distinguish different cell types and the synthetic porphyrin TCPP that identifies cancer cells and/or cancer-associated cells. The sputum sample is analyzed using flow cytometry, a well-established technology that analyzes the properties of single cells in minutes. An average sputum sample containing about 20 million cells can be profiled by flow cytometry in less than 20 minutes. Proprietary automated analysis software developed by the Company analyzes sample data in minutes, resulting in a patient report provided to the physician who orders the test.

A 150-patient test validation trial of people at high risk for lung cancer including patients with the disease and those cancer-free resulted in CyPath^® Lung’s overall 88% specificity, meaning the ability to correctly identify a person without cancer, and 82% sensitivity, meaning the ability to correctly identify cancer in a person with the disease. For the subset of high-risk patients in this trial who had lung nodules smaller than 20 millimeters (“mm”) or no nodules at all, this trial resulted in 92% sensitivity and 87% specificity. The detection of small lung nodules in people who have early-stage cancer can increase lung cancer survival.¹² CyPath^® Lung can be used with LDCT to find early-stage lung cancer. The CyPath^® technology is based on scientific work originating at Los Alamos National Laboratory in collaboration with St. Mary’s Hospital (Colorado) in which cancer samples were differentiated from non-cancer samples with 100% accuracy.¹³ The Los Alamos studies examined the active ingredient of CyPath^®, the synthetic porphyrin TCPP. Porphyrins are pigments that can be taken up by cells and can result in the cell fluorescing a red or purplish color that can be detected under a microscope or by flow cytometry. Porphyrins can be manmade, like TCPP, or they can be naturally occurring, like heme that is responsible for the red color in red blood cells. Cancer cells are known to take up certain porphyrins in higher amounts than non-cancer cells, and the high affinity for cancer cells displayed by TCPP makes it an excellent bio-label for cancer.¹⁴

We conducted market research with pulmonologists, oncologists, cardiothoracic surgeons, radiologists, and internists engaged in the diagnosis and treatment of lung cancer to help assess these stakeholders’ reactions to the new diagnostic test. Research revealed a strong interest in CyPath^® Lung, driven by the high level of unmet clinical need for noninvasive diagnostics. A survey conducted with 240 pulmonologists and internists, the primary audience for the test, showed that 96% would use CyPath^® Lung if it were available today as an adjunct with LDCT screening and diagnosis. Physicians responded favorably to a noninvasive diagnostic technology that gives them more confidence in their decision to proceed with more aggressive follow-up procedures if the test comes back positive. If test results are negative, physicians could rule out lung cancer, thus reducing the number of costly invasive procedures that result from the LDCT false-positive rate.

The CyPath^® Lung laboratory test will be ordered by a physician for use by people at high risk for lung cancer who are recommended for annual screening by LDCT. While LDCT is shown to lower the mortality rate of lung cancer by at least 20% as compared to x-ray screening,¹⁵ the LDCT screening method has a low positive predictive value that can result in many people undergoing unnecessary invasive diagnostic procedures to confirm or rule out the presence of lung cancer. A physician who orders a CyPath^® Lung test can have greater confidence in determining the next steps in patient care.¹⁶ Noninvasive sample collection and the test’s three-day turnaround in providing patient results after sample receipt make CyPath^® Lung well suited for both sophisticated and less developed markets. Existing Current Procedural Terminology (“CPT”) codes have been identified for reimbursement for CyPath^® Lung as a laboratory-developed test (an “LDT”) based on the test’s use of flow cytometry to detect lung cancer.

Patients will use the Smiths Medical’s acapella^® Choice Blue device with CyPath^® Lung to assist patients in opening lung passageways and expelling sputum into a collection cup noninvasively. The acapella^® Choice Blue has been 510(k) cleared by the U.S. Food and Drug Administration (the “FDA”) as a positive expiratory pressure device to help mobilize lung secretions in people with certain lung conditions. bioAffinity Technologies has an agreement with GO2 Partners to produce patient collection kits and to provide warehousing and distributions services for sending out the kits. Laboratory reagents, supplies and equipment are commercially available through multiple vendors. Sample processing, labeling, and data collection can be accomplished by a laboratory technician skilled in general laboratory techniques. Data analysis leading to a physician’s report is done by automated analysis software fully integrated into the test.

The Company’s business-development plan (our “Business Plan”) envisions four phases of expanding market entry that are timed to maximize Company resources and minimize market risk. Each of the four phases are discussed in detail in the “Business—CyPath^® Lung Business Development Plan” section of this prospectus beginning on page 61.

OncoSelect^® Therapeutics Research

OncoSelect^® Therapeutics, LLC, a Delaware limited liability company and wholly owned subsidiary of bioAffinity (“OncoSelect^®”), is a preclinical stage biopharmaceutical discovery company with a focus on therapeutics that deliver cytotoxic (cell-killing) effects on a broad selection of human cancers from diverse tissues while having little or no effect on normal cells.

Unlike many of our industry competitors, OncoSelect^® does not pursue therapies that depend on specific mutations, biomarkers, or other genetic or epigenetic abnormalities for their effect. We pursue research based on our own scientific discoveries demonstrating that inhibition of the expression of two specific cell membrane proteins result in the selective killing of various cancer cell types grown in the laboratory with little or no effect on normal (non-cancerous) cells.

Our scientific discoveries stemmed from research we conducted to better understand the mechanism by which TCPP, the synthetic porphyrin used in CyPath^® Lung, selectively enters cancer cells. We have established several specific areas of therapeutic research that have evolved from our TCPP experiments.

OncoSelect^® therapies offer the possibility of broad applications in cancer treatment. OncoSelect^® will use a licensing business model for selective chemotherapeutic compounds to be developed by the Company.

The Company will pursue its therapeutics business through OncoSelect^®. Initial therapeutic compositions to be developed will be based on market and cost factors. Composition synthesis is being outsourced to one of several select vendors. bioAffinity will conduct initial testing of promising compounds with assistance from select vendors who have contractually relinquished any claim to discoveries, data, or intellectual property. Additional patents will be filed based on testing, and results will be publicized to evaluate the interest in individual compounds and pursue licensing opportunities. The Company will continue to develop, test, publish its findings, and partner to maximize revenues and contain expenses.

Intellectual Property (“IP”) Portfolio

As of April 25, 2022, the Company and its subsidiary OncoSelect^® have a patent estate that includes 12 issued U.S. and foreign counterpart patents, including three U.S. patents and nine foreign counterpart patents in Canada, China, France, Germany, Hong Kong, Italy, Spain, Sweden, and the United Kingdom. Two awarded patents directed at diagnostic applications expire in 2022, and one U.S. patent and nine counterpart foreign patents directed at diagnostic applications expire in 2030. One therapeutic patent accepted in Australia expires in 2037 once issued. One therapeutic patent application that has been accepted in Mexico expires in 2037 once issued.

With regard to our diagnostic test CyPath^® Lung and other diagnostic candidates, we have three issued U.S. patents and nine foreign counterpart patents in Canada, China, France, Germany, Hong Kong, Italy, Spain, Sweden, and the United Kingdom. With regard to our diagnostic patent applications, one of two families is directed at diagnosing lung health using flow cytometry, and the other is directed at proprietary compensation beads used to calibrate the flow cytometry instrument and used in CyPath^® Lung data acquisition. Pending applications directed at diagnosing lung health include one pending U.S. patent application and eight foreign counterpart patent applications in Australia, Canada, China, European Patent Office, Hong Kong, Japan, Mexico, and Singapore filed in 2019, and one provisional patent application filed in 2021. The patent application directed at the composition of compensation beads was filed as a provisional application in 2021.

With regard to our therapeutic product candidates, we have two pending U.S. patent applications, three pending Patent Cooperation Treaty International patent applications, and ten foreign applications pending in Australia, Canada, China, European Patent Office, Hong Kong, India, Japan, and Mexico. The therapeutic IP is made up of four families directed at our therapeutic product candidates, including two families directed at siRNA product candidates, one family directed at soluble CD320 used in the treatment of cancer, and one family directed at porphyrin conjugates for treating cancer.

Industry, Business Development, and Competition

Industry Opportunity

The global market for cancer diagnostic tests is expected to grow dramatically in coming years. Cancer diagnostic tests, including devices, grew from $156.27 billion in 2020 to $170.21 billion in 2021, with a compound annual growth rate of 8.9%, and is projected to reach $239.23 billion in 2025.¹⁷ Lung cancer is the most common cancer globally and its incidence continues to increase in some large nations including China.¹⁸ The global market for lung cancer diagnostic tests was estimated at $2.5 billion in 2020 and is projected to reach a value of $4.3 billion by 2027, with a compounded annual growth rate of 8.1% over 2020-2027.¹⁹ Clinical diagnostics play an important role in disease prevention, detection, and management. bioAffinity’s first test, CyPath^® Lung, focuses on the leading cause of cancer death among both men and women. Each year, more people die of lung cancer than of colon, breast, and prostate cancers combined, making up almost 18% of all cancer deaths worldwide. Lung cancer typically may not be symptomatic in its early stages when it is most treatable. An estimated 18 million patients at high risk for lung cancer in the U.S. are recommended for annual screening. Initially, physicians would order CyPath^® Lung for those high-risk patients as an adjunct to LDCT screening to aid in the decision whether or not to pursue more aggressive follow-up procedures. A more accurate and reliable lung diagnostic pathway using LDCT and noninvasive methods could result in fewer patients being subjected to the stresses of unnecessary, invasive diagnostic procedures such as biopsies. CyPath^® Lung is well suited for use in both sophisticated and less-developed markets because sample collection is noninvasive and conducted at home, the sample can be shipped overnight by commercial carriers and sample processing and automated analysis can be completed by laboratory technicians skilled in general laboratory techniques. Patient reports are provided to the ordering physician within three days of sample receipt at the laboratory.

Competitive Strengths

bioAffinity Technologies conducts an ongoing competitive analysis of companies in the lung cancer diagnostic sector of the clinical diagnostics market. In 2022, the Company evaluated companies that reported an interest in diagnosing lung cancer, focusing on 67 companies and academic institutions it identified as active in the early lung cancer diagnostic sector. A thorough evaluation of the early lung cancer diagnostic landscape reveals multiple reasons why CyPath^® Lung is positioned to be a market leader. CyPath^® Lung performance shown in a test validation trial resulted in 92% sensitivity and 87% specificity in high-risk patients who had lung nodules 20 mm or smaller. Eight out of ten (80%) Stage I tumors were correctly identified, indicating that CyPath^® Lung can find lung cancer at its earliest stage. Overall, when diagnosing lung cancer in all stages, the clinical trial resulted in CyPath^® Lung specificity of 88% and sensitivity of 82%, similar to far more invasive procedures and surgery currently used to diagnose lung cancer. (See the “Comparison of CyPath^® Lung to Current Standards of Care” chart in the “Business” section of this prospectus.) The majority of competitors’ tests either incorrectly classify a high proportion of people without cancer as having the disease (known as false negatives) more than 50% of the time or misdiagnose people as cancer-free (known as false positives) more than 50% of the time. It is important to note that most competitors who have conducted clinical trials also have not designed their trials to evaluate the test’s measure of accuracy – such as sensitivity and specificity – in the high-risk population for whom the test is intended. CyPath^® Lung has identified existing CPT codes for use with CyPath^® Lung that have a reimbursable track record. A patient collects his or her sample at home, which is a particular benefit during a pandemic. Sample processing for CyPath^® Lung can be done by laboratory technicians, and reagents used by the test are widely available. Data acquisition and analysis and test results are fully automated.

Business Strategies

The Company is moving forward with commercialization of CyPath^® Lung in a systematic, four-phased Business Plan that is expected to maximize resources and minimize market risk. Briefly, Phase 1 of the Business Plan begins with a market launch in Texas of CyPath^® Lung as an LDT under the CLIA program administered by the Centers for Medicare and Medicaid Services (“CMS”), in partnership with the states, and standards issued by CAP. An LDT is a type of in vitro diagnostic (“IVD”) test that is developed, validated and performed within a single laboratory. CyPath^® Lung has been validated and is being performed by Precision Pathology Services (“Precision Pathology”), a CAP-accredited, CLIA-certified clinical pathology laboratory in San Antonio, Texas, pursuant to a licensing agreement with the Company. Precision Pathology has completed the required analytical validation in accordance with CLIA, which looks at the performance characteristics of a test used to describe the quality of patient test results and includes an analysis of accuracy, precision, analytical sensitivity, analytical specificity, reportable range, reference interval, and other performance characteristics that the test system must be evaluated by in the laboratory that intends to offer the test system for sale. This analytical validation is limited to the specific conditions, staff, equipment and patient population of the particular laboratory. Having completed the CLIA analytical validation, Precision Pathology is offering the CyPath^® Lung test for sale with a controlled rollout beginning in Texas, which we anticipate will require six months, before expanding throughout the Southwest region of the U.S. through the first half of 2023. After establishing CyPath^® Lung in the Southwest market, the laboratory will expand sales in 2023 to additional states with plans to market the test nationwide.

In Phase 2, the Company will launch CyPath^® Lung as a CE-marked IVD test in the European Union (the “EU”). We intend to execute an agreement in Phase 2 with one or more commercial laboratories to sell CyPath^® Lung in the EU market. In Phase 3, we will submit a request for de novo classification to the FDA to classify CyPath® Lung as a Class II IVD medical device for the detection of lung cancer. In order to seek de novo classification and marketing approval of CyPath^® Lung by the FDA, we must conduct a “pivotal clinical trial” to demonstrate the safety and efficacy of CyPath^® Lung. We are currently working with a contract research organization (a “CRO”) to finalize the design of the pivotal clinical trial and plan to submit a pre-submission package to the FDA in the third quarter of 2022 to obtain the FDA’s feedback on the study design. A pivotal clinical trial is scheduled to begin in early 2023. Final design of the pivotal clinical trial has not been determined at this time. We expect to conduct a pivotal clinical trial that requires between two to three years depending on the clinical trial’s size, objectives and endpoints. Assuming the study is successful, we intend to submit a request for de novo classification to the FDA within six months of study completion. If the de novo request is granted by the FDA, we expect FDA clearance will result in a larger market and greater market share for CyPath^® Lung. FDA clearance also can lead to higher reimbursement, expanded claims and additional indications for use of CyPath^® Lung for the early detection of lung cancer. Phase 4 will accelerate the diagnostic’s market presence to expand into other global markets, including China, Southeast Asia, and Australia. The timeline for commercialization is discussed in the “Business—CyPath^® Lung Business Development Plan” section on page 61.

Summary of Risk Factors

Like any emerging growth company, we face significant risk factors that may impede our plans for successful commercialization of our diagnostic and therapeutic products. These risks are discussed in detail under the “Risk Factors” discussion beginning on page 14 of this prospectus.

The following summarizes the principal factors that make an investment in our Company speculative or risky, all of which are more fully described in the section below titled “Risk Factors.” This summary should be read in conjunction with the section below titled “Risk Factors” and should not be relied upon as an exhaustive summary of the material risks facing our business. The following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts:

THE OFFERING

Except as otherwise indicated, all information in this prospectus assumes:

SUMMARY FINANCIAL DATA

We have derived the following summary of our consolidated statement of operations data for the years ended December 31, 2021 and 2020, and the balance sheet data as of December 31, 2021 and 2020, from our audited consolidated financial statements appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future.

You should read the following summary financial data together with our financial statements and the related notes appearing elsewhere in this prospectus and the MD&A section of this prospectus.

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (amounts in thousands, except share and per share data):

The following table summarizes our balance sheets at December 31, 2021 and 2020 (amounts in thousands):

Cautionary Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include the words “may,” “could,” “plan,” “project,” “budget,” “predict,” “pursue,” “target,” “seek,” “objective,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of being a publicly traded corporation, and our capital programs.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to, statements about:

In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus and, although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this prospectus, whether as a result of any new information, future events or otherwise.

You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good-faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties, and other factors, including the factors described under “Risk Factors,” which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance, or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances, or otherwise, unless required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

RISK FACTORS

Investing in our Company involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Prospectus before deciding to invest in our Company. The occurrence of any of the following risks could have a material and adverse effect on our business, reputation, financial condition, results of operations, and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the market value of our Common Stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and market value.

Risks Related to Our Business

Our Business Plan relies upon our ability to obtain additional sources of capital and financing. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may be required to cease operations.

To become and remain profitable, we must succeed in developing and commercializing our diagnostic tests and therapeutic products that generate significant income in the planned timeframe. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our diagnostic and therapeutic technologies, obtaining regulatory approval for our diagnostic and therapeutic technologies, manufacturing, marketing and selling any diagnostic tests and therapeutic products for which we may obtain regulatory approval, and establishing and managing our collaborations at various phases of each diagnostic test and therapeutic product candidate’s development. We are in the preliminary phases of these activities. We may never succeed in these activities and, even if we do, may never generate sufficient income to achieve profitability.

To become profitable, we must develop our diagnostic tests and therapeutic products, which will depend in large part on our ability to:

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our Company and could impair our ability to raise capital, expand our business, maintain the research and development efforts that will be initially funded by the proceeds of this Offering, diversify our diagnostic tests and therapeutic product offerings, or even continue our operations. A decline in the value of our Company could also cause you to lose all or part of your investment.

We must raise additional capital to fund our operations in order to continue as a going concern.

WithumSmith+Brown, PC, our independent registered public accounting firm for the fiscal year ended December 31, 2021, has included an explanatory paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2021, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. As of December 31, 2021, we had total negative working capital of $11.6 million, including $11.2 million of convertible notes, and a stockholders’ deficit of $15.8 million. 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. Without funding from the proceeds of this Offering, management anticipates that our cash resources are sufficient to continue operations through June 2022. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. There can be no assurance that we will be successful in accomplishing these objectives. Without such additional capital, we may be required to curtail or cease operations and be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.

We have a limited operating history, which makes it difficult to evaluate our current business and future prospects.

We are a company with limited operating history, and our operations are subject to all of the risks inherent in establishing a new business enterprise. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the formation of a new business, the development of new technologies or those subject to clinical testing, and the competitive and regulatory environment in which we will operate. We may not be able to maintain certification of CyPath^® Lung as an LDT in accordance with CAP/CLIA guidance and regulations, or obtain approval of our diagnostic tests in development by the CMS, the FDA, European Medicines Agency, or Chinese National Medical Products Administration. Even if we do so and are also able to commercialize our diagnostic tests, we may never generate revenue sufficient to become profitable. Our failure to generate revenue and profit would likely cause our securities to decrease in value or become worthless.

We will require additional financing to implement our Business Plan, which may not be available on favorable terms or at all, and we may have to accept financing terms that would place restrictions on us.

We believe that we must raise additional funds to be able to continue our business operations. We may not be able to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy. As a result, adequate capital may not be available to finance our current development plan, take advantage of business opportunities or respond to competitive pressures. If we are unable to raise additional funds, we may be forced to curtail or even abandon our Business Plan and focus on fewer commercial opportunities that may result in more limited growth than forecast.

Until such time, if ever, as we can generate substantial income from sale of our diagnostic test(s) and therapeutic product candidates, we expect to finance our cash needs through a combination of equity offerings, debt financings, and license and collaboration agreements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of the holders of our Common Stock (the “Common Stockholders”). In addition, the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct our business. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, or making acquisitions or significant asset sales.

If we raise additional funds through collaborations, strategic alliances or marketing, or distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, or research programs or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our Common Stock.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States, such as the European Medicines Agency.

Patient enrollment is affected by many other factors, including:

We are unable to forecast with precision our ability to enroll patients. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs, which would cause the value of our Company to decline and limit our ability to obtain additional financing.

Clinical trials are expensive, time-consuming, and may not be successful.

Clinical trials are expensive, time-consuming, and may not be successful. They involve the evaluation of diagnostic tests and testing of potential therapeutic agents and effective treatments in humans to determine the safety and efficacy of the diagnostic tests and therapeutic products necessary for an approved diagnostic and therapeutic technology. Many tests and products in human clinical trials fail to demonstrate the desired safety and efficacy characteristics. Even if our tests and products progress successfully through initial or subsequent human testing, they may fail in later phases of development. We may engage others to conduct our clinical trials, including clinical research organizations and government-sponsored agencies. These trials may not start or be completed as we forecast or may not achieve desired results.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our diagnostic and therapeutic technologies, including:

If we are required to conduct additional clinical trials or other testing beyond those that we currently contemplate, if we are unable to successfully complete clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

Our product and test development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our diagnostic technology or allow our competitors to bring diagnostic tests and therapeutic products to market before we do, potentially impairing our ability to successfully commercialize our diagnostic and therapeutic technologies and harming our business and results of operations.

If testing of a particular diagnostic test or therapeutic product candidate does not yield successful results, then we will be unable to commercialize that test or product candidate.

We must demonstrate that the product safety and efficacy of our candidates for diagnostic tests and therapeutic products in humans through extensive clinical testing. Our research and development programs are at an early stage of development. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of any test or product, including the following:

Even if our diagnostic tests or therapeutic products receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payers and others in the medical community necessary for commercial success.

Even if our products receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payers, and others in the medical community. If we do not generate significant product revenues, we may not become profitable. The degree of market acceptance of our products and tests, if approved for commercial sale, will depend on a number of factors, including:

If we are unable to address and overcome these and similar concerns, our business and results of operations could be substantially harmed.

If we are unable to establish effective sales, marketing, and distribution capabilities or enter into agreements with third parties with such capabilities, we may not be successful in commercializing our diagnostic tests or therapeutic products if and when they are approved.

We do not have a sales or marketing infrastructure and have limited experience in the sale, marketing, or distribution of our diagnostic tests or therapeutic products. To achieve commercial success for any diagnostic test or therapeutic product for which we obtain marketing approval, we will need to successfully establish and maintain relationships directly and with third parties to perform sales and marketing functions.

Factors that may inhibit our efforts to commercialize our diagnostic tests or therapeutic products on our own include:

If we do not establish sales, marketing, and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our diagnostic tests or therapeutic products.

If we are unable to convince physicians as to the benefits of our proposed diagnostic tests or therapeutic products, we may incur delays or additional expense in our attempt to establish market acceptance.

Broad use of our proposed diagnostic tests and products may require pathology laboratories and physicians to be informed regarding our proposed diagnostic tests and products and the intended benefits. Inability to carry out this physician education process may adversely affect market acceptance of our proposed diagnostic tests or therapeutic products. We may be unable to timely educate physicians regarding our proposed diagnostic tests or therapeutic products in sufficient numbers to achieve our marketing plans or to achieve acceptance of our diagnostic tests or therapeutic products. Any delay in physician education may materially delay or reduce demand for our diagnostic tests or therapeutic products. In addition, we may expend significant funds toward physician education before any acceptance or demand for our proposed diagnostic tests or therapeutic products is created, if at all.

We face substantial competition, which may result in others discovering, developing, or commercializing competing diagnostic tests or therapeutic products before or more successfully than we do.

The development and commercialization of new diagnostic and therapeutic technologies is highly competitive. We face competition and will face competition with respect to any diagnostic and therapeutic technology that we may seek to develop or commercialize in the future, from major diagnostic and pharmaceutical companies, LDT laboratories, smaller diagnostic and pharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

A substantial number of the companies against which we are competing have or, against which we may compete in the future may have, significantly greater financial resources, established presence in the market, and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved diagnostic tests or therapeutic products than we do. Mergers and acquisitions in the diagnostic, pharmaceutical, and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, sales, marketing, and management personnel, establishing clinical trial sites and patient registration for clinical trials, and acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize diagnostic tests or therapeutic products that are more accurate, more convenient, or less expensive than any diagnostic tests or therapeutic products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their diagnostic tests or therapeutic products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a stronger market position. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors.

We may be unable to compete in our target marketplaces, which could impair our ability to generate revenues, thus causing a material adverse impact on our results of operations.

Our success depends upon our ability to retain key executives and to attract, retain, and motivate qualified personnel, and the loss of these persons could adversely affect our operations and results.

We are highly dependent on the principal members of our management, scientific, and clinical teams, including Maria Zannes, J.D., our President and Chief Executive Officer, and Vivienne Rebel, M.D., Ph.D., our Chief Science and Medical Officer and Executive Vice President.

The loss of the services of any of our executive officers could impede the achievement of our research, development, and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize diagnostic tests or therapeutic products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain, or motivate key personnel on acceptable terms given the competition among numerous biotechnology companies for similar expertise. We also face competition from universities and research institutions for qualified scientific and clinical personnel. In addition, we rely and expect to continue to rely to a significant degree on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategies. Our consultants and advisors may be engaged by other entities and may have commitments under consulting or advisory contracts that may limit their availability to us. If we are unable to continue to attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.

Our lack of operating experience may make it difficult to manage our growth which could lead to our inability to implement our Business Plan.

We have limited experience in marketing and the selling of diagnostic tests and pharmaceutical products. Any growth will require us to expand our management and our operational and financial systems and controls. If we are unable to do so, our business and financial condition would be materially harmed. If rapid growth occurs, it may strain our operational, managerial, and financial resources.

If we fail to comply with our obligations imposed by any intellectual property licenses with third parties that we may need in the future, we could lose rights that are important to our business.

We may in the future require licenses to third-party technology and materials. Such licenses may not be available in the future or may not be available on commercially reasonable terms, or at all, which could have a material adverse effect on our business and financial condition. We may rely on third parties from whom we license proprietary technology to file and prosecute patent applications and maintain patents and otherwise protect the intellectual property we license from them. We may have limited control over these activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We may have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property that may be licensed to us. It is possible that the licensors’ infringement proceeding or defense activities may be less vigorous than if we conduct them ourselves. Even if we acquire the right to control the prosecution, maintenance and enforcement of the licensed and sublicensed intellectual property relating to our diagnostic tests or therapeutic product candidates, we may require the cooperation of our licensors and any upstream licensor, which may not be forthcoming. Therefore, we cannot be certain that the prosecution, maintenance and enforcement of these patent rights will be in a manner consistent with the best interests of our business. If we or our licensor fail to maintain such patents, or if we or our licensor lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our diagnostic tests or therapeutic product candidates that are the subject of such licensed rights could be adversely affected. In addition to the foregoing, the risks associated with patent rights that we license from third parties will also apply to patent rights we may own in the future. Further, if we fail to comply with our diligence, development and commercialization timelines, milestone payments, royalties, insurance and other obligations under our license agreements, we may lose our patent rights with respect to such agreement, which would affect our patent rights worldwide.

Termination of our current or any future license agreements would reduce or eliminate our rights under these agreements and may result in our having to negotiate new or reinstated agreements with less favorable terms or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology. Any of the foregoing could prevent us from commercializing our other diagnostic tests or therapeutic product candidates, which could have a material adverse effect on our operating results and overall financial condition.

In addition, intellectual property rights that we in-license in the future may be sublicenses under intellectual property owned by third parties, in some cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are in compliance with all of the obligations under our license agreements. Should our licensors or any of the upstream licensors fail to comply with their obligations under the agreements pursuant to which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended, our ability to develop and commercialize our diagnostic tests or therapeutic product candidates may be materially harmed.

In the future, we may need to obtain additional licenses of third-party technology that may not be available to us or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated.

We currently own intellectual property directed to our diagnostic tests or therapeutic product candidates and other proprietary technologies. Other pharmaceutical companies and academic institutions may also have filed or are planning to file patent applications potentially relevant to our business. From time to time, in order to avoid infringing these third-party patents, we may be required to license technology from additional third parties to further develop or commercialize our diagnostic tests or therapeutic product candidates. Should we be required to obtain licenses to any third-party technology, including any such patents required to manufacture, use or sell our product candidates, such licenses may not be available to us on commercially reasonable terms, or at all. The inability to obtain any third-party license required to develop or commercialize any of our product candidates could cause us to abandon any related efforts, which could seriously harm our business and operations. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if we are able to obtain a license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitors access to the same technologies licensed to us.

Moreover, some of our owned and in-licensed patents or patent applications or future patents may be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing diagnostic tests or therapeutic products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Furthermore, our owned and in-licensed patents maybe subject to a reservation of rights by one or more third parties. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

We will depend on third parties to manufacture and market our diagnostic tests and to design trial protocols, arrange for and monitor the clinical trials, and collect and analyze data.

We do not have, and do not now intend to develop, facilities for the manufacture of the contents of our collection kits needed for clinical or commercial production. In addition, we are not a party to any long-term agreement with any of our suppliers, and accordingly, we have the products used in our diagnostic tests manufactured on a purchase-order basis from primary suppliers. We have entered into relationships with manufacturers on a contract basis but will need to expand those relationships. We expect to depend on such collaborators to supply us with reagents and other materials manufactured in compliance with standards imposed by the CMS, FDA, and foreign regulators.

Moreover, as we develop our diagnostic tests or therapeutic products eligible for clinical trials, we intend to contract with independent parties to design the trial protocols, arrange for and monitor the clinical trials, and collect and analyze the data. In addition, certain clinical trials for our products may be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. Our dependence on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical trials.

We are exposed to product liability and pre-clinical and clinical liability risks which could place a substantial financial burden upon us, should we be sued.

Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing, and marketing of diagnostic tests and therapeutic products. Such claims may be asserted against us. In addition, using diagnostic tests and therapeutic products that may be developed with potential collaborators in our clinical trials and the subsequent sale of these tests and products by bioAffinity or our potential collaborators may cause us to bear a portion of or all product liability risks. A successful liability claim, or series of claims, brought against us could have a material adverse effect on our business, financial condition, and results of operations.

While we have obtained product liability insurance covering CyPath^® Lung as a commercialized LDT to be sold by Precision Pathology, a CAP-accredited, CLIA-certified clinical pathology laboratory, in the future we may not be able to obtain or maintain adequate product liability insurance, when needed, on acceptable terms, if at all, or such insurance may not provide adequate coverage against our potential liabilities. Furthermore, potential partners with whom we intend to have collaborative or strategic agreements or our future licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage that we may obtain could have a material adverse effect on our business, financial condition, and results of operations.

In addition, we may be unable to obtain or to maintain clinical trial liability insurance on acceptable terms, if at all. Any inability to obtain and/or maintain insurance coverage on acceptable terms could prevent or limit the commercialization of any tests or products we develop.

Our collection, use and disclosure of personal information, including health and employee information, is subject to U.S. state and federal privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm.

The privacy and security of personal information stored, maintained, received or transmitted, including electronically, is a major issue in the United States and abroad. Numerous federal and state laws and regulations govern the collection, dissemination, use and confidentiality of personal information, including genetic, biometric and health information, including state privacy, data security and breach notification laws, federal and state consumer protection and employment laws, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and the Genetic Information Nondiscrimination Act of 2008. These laws and regulations are increasing in complexity and number, may change frequently and sometimes conflict. Penalties for violations of these laws vary, but can be severe.

While we strive to comply with all applicable privacy and security laws and regulations, including our own posted privacy policies, these laws and regulations continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause us to lose customers, which could have a material adverse effect on our business. Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the data-collection activities of various government agencies and in the number of private privacy-related lawsuits filed against companies. Concerns about our practices with regard to the collection, use, retention, disclosure or security of personal information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.

If users of our proposed diagnostic tests or therapeutic products are unable to obtain adequate reimbursement from third-party payers or if new restrictive legislation is adopted, market acceptance of our proposed tests or products may be limited, and we may not achieve revenues.

The continuing efforts of government and insurance companies, health maintenance organizations (“HMOs”) and other payers of healthcare costs to contain or reduce costs may affect our future revenues and profitability, as well as the future revenues and profitability of our potential customers, suppliers, and collaborative partners and the availability of capital. For example, in certain international markets, pricing or profitability of diagnostic tests and therapeutic products is subject to government control. In the U.S., given recent federal and state government initiatives directed at lowering the total cost of healthcare, the U.S. Congress and state legislatures will likely continue to focus on healthcare reform, the cost of medical devices, tests and prescription pharmaceuticals, and Medicare and Medicaid reforms. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals could materially harm our business, financial condition, and results of operations.

Our ability to commercialize our proposed tests or products will depend in part on the extent to which appropriate reimbursement levels for the cost of our tests or products are obtained by governmental authorities, private health insurers, and other organizations such as HMOs. Third-party payers are increasingly challenging the prices charged for medical tests, drugs, and services. Also, the trend toward managed healthcare in the U.S. and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of healthcare services, diagnostics, and drugs, as well as legislative proposals to reform healthcare or reduce government insurance programs, may all result in lower prices for or rejection of our tests or products.

Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors and customers will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties. We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners, vendors and agents acting on behalf of us or our affiliates. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with the regulations of the FDA or foreign health authorities; provide true, complete and accurate information to the FDA or foreign health authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors and customers are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, transparency laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Healthcare providers and others play a primary role in the recommendation and ordering of prescription of any diagnostic tests or therapeutic products for which we obtain marketing approval. Although we do not currently have any products on the market, our operations and current and future arrangements with investigators, healthcare professionals, customers and third-party payors, may be subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal civil and criminal false claims laws and the Physician Payments Sunshine Act and regulations. These laws may impact, among other things, our current business operations, including our clinical research activities, and proposed sales, marketing and education programs and constrain the business of financial arrangements and relationships with healthcare providers and other parties through which we may market, sell and distribute our diagnostic tests or therapeutic products for which we obtain marketing approval. In addition, we may be subject to additional healthcare, statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices, including certain arrangements with physicians who receive stock, warrants or stock options as compensation for services provided to us, do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the delay, reduction, termination or restructuring of our operations. Further, defending against any such actions can be costly and time-consuming, and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business and our results of operations.

We face intense competition in the biotechnology and pharmaceutical industries.

The biotechnology and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies focusing on diagnostic tests and pharmaceutical products, which are rapidly evolving. Our competitors include major multinational diagnostic and pharmaceutical companies, specialized biotechnology firms, and universities and other research institutions. Many of these competitors have greater financial and other resources, larger research and development staffs, and more effective marketing and manufacturing organizations than we do. In addition, academic and government institutions are increasingly likely to enter into exclusive licensing agreements with commercial enterprises, including our competitors, to market commercial tests or products based on technology developed at such institutions. Our competitors may succeed in developing or licensing technologies, tests and products that are more effective or less costly than ours or succeed in obtaining CAP/CLIA-validation or FDA or other regulatory approvals for diagnostic test and therapeutic product candidates before we do. Acquisitions of, or investments in, competing diagnostic, pharmaceutical, or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing, and other resources.

The market for our proposed tests and products is competitive and rapidly changing, and new diagnostic technologies which may be developed by others could impair our ability to maintain and grow our business and remain competitive.

The diagnostic, pharmaceutical, and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render our proposed tests or products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Technological competition from diagnostic, pharmaceutical and biotechnology companies, universities, governmental entities, and others diversifying into the field is intense and is expected to increase.

As a pre-revenue company engaged in the development of diagnostic technology, our resources are limited, and we may experience technical challenges inherent in such technologies. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means of accomplishing similar diagnostic efficacy compared to our proposed tests or products. Our competitors may develop diagnostic technologies that are more effective or less costly than our proposed tests or products and therefore present a serious competitive threat.

The potential widespread acceptance of diagnostic tests or therapies that are alternatives to ours may limit market acceptance of our proposed tests or products, even if commercialized. Many of our targeted diseases and conditions can also be detected by other tests or treated by other medications. These tests and treatments may be widely accepted in medical communities and have a longer history of use. The established use of these competitive technologies may limit the potential for our technologies, formulations, tests and products to receive widespread acceptance if commercialized.

Healthcare cost containment initiatives and the growth of managed care may limit our returns.

Our ability to commercialize our diagnostic tests and therapeutic products successfully may be affected by the ongoing efforts of governmental and third-party payers to contain the cost of healthcare. These entities are challenging prices of healthcare products and services, denying or limiting coverage and reimbursement amounts for new diagnostic tests and therapeutic products, and CAP/CLIA-validated LDTs and FDA-approved diagnostic tests and therapeutic products considered experimental or investigational or which are used for disease indications without FDA marketing approval. Even if we succeed in bringing any tests or products to the market, they may not be considered cost-effective, and third-party reimbursement might not be available or sufficient. If adequate third-party coverage is not available, we may not be able to maintain price levels sufficient to realize an appropriate return on our investment in research and test or product development. In addition, legislation and regulations affecting the pricing of diagnostic tests, pharmaceuticals, or healthcare services may change in ways adverse to us before or after any of our proposed tests and products are approved for marketing.

Our competitive position depends on protection of our intellectual property.

Development and protection of our intellectual property are critical to our business. If we do not adequately protect our intellectual property, or if competitors develop technologies incorporating the same or similar technologies that already are in the public domain, those competitors may be able to develop similar technologies to our own. Our success depends in part on our ability to obtain patent protection for our diagnostic tests, therapeutic products, or processes in the U.S. and other countries, protect trade secrets, and prevent others from infringing on our proprietary rights.

Since patent applications in the U.S. are maintained in secrecy for at least portions of their pendency periods (published on U.S. patent issuance or, if earlier, 18 months from earliest filing date for most applications) and since other publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we are or will be the first to make the inventions to be covered by our patent applications. The patent position of biopharmaceutical and biotechnology firms generally is highly uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents.

The patent applications we file, including applications that will follow the filing of provisional patents, may not issue as patents or the claims of any issued patents may not afford meaningful protection for our technologies, tests, or products. In addition, patents issued to us or to any future licensors may be challenged and subsequently narrowed, invalidated, or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue such litigation or to protect our patent rights.

Although we have executed assignment of invention agreements with current scientific and technical employees and in the future will require our scientific and technical employees and consultants to enter into broad assignment of invention agreements, and all of our employees, consultants, and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored.

Diagnostic tests and therapeutic products we develop could be subject to infringement claims asserted by others.

We cannot assure that diagnostic tests and therapeutic products based on our patents or intellectual property that we license from others will not be challenged by a third-party claiming infringement of its proprietary rights. If we are not able to successfully defend patents that may be issued to us, that we may acquire, or that we may license in the future, we may have to pay substantial damages or licensing fees, possibly including treble damages, for past infringement.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and ultimately unsuccessful.

Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we intend to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly, or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could adversely affect us.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology, we also intend to rely on trade secrets, including unpatented know-how, technology, and other proprietary information, to maintain our competitive position. We have executed and will continue to seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and other third parties. We also have executed and will continue to seek to enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our diagnostic tests and therapeutic product candidates.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs, and may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our owned and licensed patents. Patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third-party submission of prior art to the United States Patent and Trademark Office (the “USPTO”) during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Further, because of a lower evidentiary standard in these USPTO post-grant proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

After March 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third-party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before we file an application covering the same invention, could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our diagnostic tests and therapeutic product candidates and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing the claimed invention where the other party can show that they used the invention in commerce before our filing date. Thus the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in the 2013 case Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuities fees and various other governmental fees on patents and/or patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent and/or patent application. The USPTO and various foreign governmental patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse, including due to the effect of the COVID-19 pandemic on us or our patent maintenance vendors, can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our diagnostic tests or therapeutic product candidates, our competitive position would be adversely affected.

Patent terms may be inadequate to protect our competitive position on our diagnostic tests or therapeutic product candidates for an adequate amount of time.

The term of any individual patent depends on applicable law in the country where the patent is granted. In the United States, provided all maintenance fees are timely paid, a patent generally has a term of 20 years from its application filing date or earliest claimed non-provisional filing date. Extensions may be available under certain circumstances, but the life of a patent and, correspondingly, the protection it affords is limited. Even if we or our licensors obtain patents covering our diagnostic tests and therapeutic product candidates, when the terms of all patents covering a diagnostic test or therapeutic product expire, our business may become subject to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review and approval of new diagnostic test or therapeutic product candidates, patents protecting such candidates may expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing diagnostic tests and therapeutic products similar or identical to ours.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO.

If we or a licensee initiate legal proceedings against a third party to enforce a patent covering one of our diagnostic tests or therapeutic product candidates, the defendant could counterclaim that the patent covering our diagnostic tests or therapeutic product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our diagnostic tests or therapeutic product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our diagnostic tests or therapeutic product candidates. Such a loss of patent protection could have a material adverse impact on our business.

If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of marketing exclusivity for our diagnostic tests or therapeutic product candidates, our business may be harmed.

In the United States, a patent that covers an FDA-approved drug or biologic may be eligible for a term extension designed to restore the period of the patent term that is lost during the premarket regulatory review process conducted by the FDA. Depending upon the timing, duration and conditions of FDA marketing approval of our diagnostic tests or therapeutic product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), which permits a patent term extension of up to five years for a patent covering an approved diagnostic test or therapeutic product as compensation for effective patent term lost during diagnostic test or therapeutic product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of diagnostic test or therapeutic product approval, and only claims covering such approved diagnostic test or drug product, a method for using it or a method for manufacturing it may be extended. In Europe, our diagnostic test or therapeutic product candidates may be eligible for term extensions based on similar legislation. In either jurisdiction, however, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Even if we are granted such extension, the duration of such extension may be less than our request. If we are unable to obtain a patent term extension, or if the term of any such extension is less than our request, the period during which we can enforce our patent rights for that product will be in effect shortened and our competitors may obtain approval to market competing diagnostic tests or products sooner. The resulting reduction of years of revenue from applicable diagnostic tests or products could be substantial.

We enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents covering our diagnostic tests and therapeutic product candidates in all countries throughout the world would be prohibitively expensive, and even in countries where we have sought protection for our intellectual property, such protection can be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly developing countries, and the breadth of patent claims allowed can be inconsistent. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. In-licensing patents covering our diagnostic tests and therapeutic product candidates in all countries throughout the world may similarly be prohibitively expensive, if such opportunities are available at all. And in-licensing or filing, prosecuting and defending patents even in only those jurisdictions in which we develop or commercialize our diagnostic tests and therapeutic product candidates may be prohibitively expensive or impractical. Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection or licensed patents to develop their own diagnostic tests and therapeutic products and, further, may export otherwise infringing products to territories where we and our licensors have patent protection, but where enforcement is not as strong as that in the United States or Europe. These diagnostic tests and products may compete with our diagnostic tests and therapeutic product candidates, and our or our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending proprietary rights in such jurisdictions. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets or other forms of intellectual property, particularly those relating to biotechnology tests and products, which could make it difficult for us to prevent competitors in some jurisdictions from marketing competing tests and products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, are likely to result in substantial costs and divert our efforts and attention from other aspects of our business, and additionally could put at risk our or our licensors’ patents of being invalidated or interpreted narrowly, could increase the risk of our or our licensors’ patent applications not issuing, or could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, while damages or other remedies may be awarded to the adverse party, which may be commercially significant. If we prevail, damages or other remedies awarded to us, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our diagnostic tests and product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our diagnostic tests and product candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition in those jurisdictions.

In some jurisdictions including European countries, compulsory licensing laws compel patent owners to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties under patents relevant to our business, or if we or our licensors are prevented from enforcing patent rights against third parties, our competitive position may be substantially impaired in such jurisdictions.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our current or future trademarks or trade names may be challenged, infringed, circumvented or declared generic or descriptive or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive rejections of our applications by the USPTO or in other foreign jurisdictions.

Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected. We may license our trademarks and tradenames to third parties, such as distributors. Although these license agreements may provide guidelines for how our trademarks and tradenames may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.

Moreover, any name we have proposed to use with our therapeutic product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA (or an equivalent administrative body in a foreign jurisdiction) objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. If we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Our internal information technology systems, or those of our third-party clinical research organizations or other contractors or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of our diagnostic tests’ or therapeutic product candidates’ development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit confidential information (including but not limited to intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We have also outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidential information.

Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party clinical research organizations and other contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, extortion, account takeover attacks, degradation of service attacks, denial-of-service attacks, “phishing,” or social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure or lead to data leakage. We have technology security initiatives and disaster recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage.

Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks which may remain undetected until after they occur. We cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition. For example, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs and the development of our diagnostic tests and therapeutic product candidates could be delayed. In addition, the loss of clinical trial data for our diagnostic tests and therapeutic product candidates could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore, significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us. Like all businesses we may be increasingly subject to ransomware or other malware that could significantly disrupt our business operations, or disable or interfere with necessary access to essential data or processes. Numerous recent attacks of this nature have also involved exfiltration and disclosure of sensitive or confidential personal or proprietary information, or intellectual property, when victim companies have not paid the cyber criminals substantial ransom payments. For example, any such event that leads to unauthorized access, use, disclosure, unavailability, or compromised integrity of personal or other sensitive or essential information, including personal information regarding our clinical trial subjects or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, increase the costs we incur to protect against such information security breaches, such as increased investment in technology, render key personnel unable to perform duties or communicate throughout the organization and otherwise subject us to fines and other liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

The costs of mitigating cybersecurity risks are significant and are likely to increase in the future. These costs include, but are not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; and costs related to maintaining redundant networks, data backups and other damage-mitigation measures. We also cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or in amounts sufficient to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage of any future claim.

Our business is affected by the ongoing COVID-19 pandemic and may be significantly adversely affected as the pandemic continues or if other events out of our control disrupt our business or that of our third-party providers.

While the extent of the impact of the COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition and operating results. We have experienced and may in the future experience disruptions from COVID-19 to our business in a number of ways, including:

The most significant impact of the COVID-19 pandemic has been closure of clinical collection sites during the test validation trial. Should the pandemic continue and result in closure of clinical collection sites during the pivotal clinical trial, the trial may be delayed due to a lack of collecting sputum samples necessary to conduct the trial. Further delays could result if we are required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the COVID-19 virus. For example, in March 2020, the FDA issued a guidance on conducting clinical trials during the pandemic, which was updated in July 2020, January 2021, and August 2021. The guidance describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical trial report (or as a separate document): contingency measures implemented to manage the trial and any disruption of the trial as a result of the COVID-19 pandemic; a list of all subjects affected by the COVID-19 pandemic-related trial disruptions by unique subject identifier and by investigational site and a description of how the individual’s participation was altered; and analyses and corresponding discussions that address the impact of implemented contingency measures (e.g., participant discontinuation from investigational diagnostic test and therapeutic product and/or trial; alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the trial. In its most recent update to this guidance, the FDA addressed questions from clinical practitioners aiming to adapt their operations in a pandemic environment. The questions focused on when to suspend, continue, or initiate a trial, how to handle remote-site monitoring visits, and related matters. There is no assurance that the FDA’s guidance governing clinical trials during the pandemic will remain in effect or, even if it does, help address the risks and challenges enumerated above.

Other potential impacts of the COVID-19 pandemic on our future planned clinical trials could relate to the prioritization of healthcare resources toward pandemic efforts, potentially resulting in the diminished attention of physicians serving as our clinical trial investigators and the reduced availability of site staff supporting the conduct of our clinical trials, and interruptions or delays in the operations of the FDA.

If the COVID-19 pandemic continues, other aspects of our future planned clinical trials may be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials, clinical trial site data monitoring and efficacy, safety and translational data collection, and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our trials or we may have to pause enrollment or we may choose to or be required to pause enrollment and/or patient dosing in our ongoing or planned clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue. Patients may need to withdraw due to COVID-19 infections or experience increased adverse events and deaths in our clinical trials due to COVID-19-related infections.

In addition, we currently rely on third parties to, among other things, manufacture materials used in our patient collection kit, ship clinical trial samples, perform quality testing, and supply other goods and services to run our business. If the operations of any third party in our supply chain for materials is adversely impacted by the COVID-19 pandemic, including due to staffing shortages, production slowdowns. and disruptions in delivery systems, our supply chain may be disrupted and our costs could be increased for future clinical trials and for our research and development operations as planned.

We previously closed our offices and requested that most of our personnel work remotely, excepting researchers, laboratory personnel and contractors who must perform essential activities that must be completed on-site. bioAffinity Technologies’ research laboratories are located on The University of Texas at San Antonio campus and have followed safety procedures as instructed by the university. Our increased reliance on personnel working from home could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees, research or clinical trial sites, and other important agencies and contractors. Further, we and our third-party service providers, including the clinical trial sites, our manufacturers and suppliers, may experience staffing shortages.

Our employees and contractors conducting research and development activities may not be able to access our laboratory for an extended period of time as a result of the possibility that governmental authorities further modify current restrictions. In addition, when our facilities are open, we could encounter delays in connection with implementing precautionary measures to mitigate the risk of exposing our facilities and employees to COVID-19 or otherwise in connection with addressing an actual or potential exposure to COVID-19. As a result, this may delay research and development initiatives.

The trading prices for shares of other biotechnology companies have been highly volatile as a result of the COVID-19 pandemic and following this Offering the trading prices for shares of our Common Stock could also experience high volatility. As a result, we may face difficulties raising capital through sales of our Common Stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the COVID-19 could materially and adversely affect our business and the value of our Common Stock.

The COVID-19 pandemic continues to evolve. The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted, including the duration of the pandemic, additional or modified government actions, and the actions taken to contain COVID-19 or address its impact, among others. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy. We will continue to monitor the situation closely.

In addition, our business could be significantly adversely affected by other business disruptions to us or our third-party providers that could seriously harm our potential future revenue and financial condition and increase our costs and expenses. Our operations and contractors, consultants, and third parties could be subject to other global pandemics, earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

Risks Related to Government Regulations

CyPath^® Lung is currently being offered as an LDT by Pathology Laboratory Services pursuant to a licensing agreement with the Company. Should the FDA disagree that CyPath^® Lung is an LDT, or if the FDA’s regulatory approach to LDTs should change in the future, our commercialization strategy may be adversely affected, which would negatively affect our results of operations and financial condition.

The FDA considers an LDT to be a test that is developed, validated, and performed within a single laboratory. The FDA has historically asserted its authority to regulate LDTs as medical devices under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), but it has generally exercised enforcement discretion with regard to LDTs. This means that even though the FDA believes it can impose regulatory requirements on LDTs, such as requirements to obtain premarket approval, de novo classification, or clearance of LDTs, it has generally chosen not to enforce those requirements. The FDA has, on occasion, sent warning letters to laboratories offering LDTs that the agency believed were not eligible for enforcement discretion because of how they were developed, validated, performed or marketed and consequent risks to the public.

There have been numerous legislative proposals to clarify the FDA’s regulatory authority over medical devices. These include two bills reintroduced in 2021: the VALID Act, which would expressly grant the FDA authority to regulate LDTs under a risk-based framework; and the VITAL Act, which would assign LDTs to regulation solely under CLIA and would direct CMS to update its CLIA regulations. We cannot predict if either of these bills will be enacted in their current (or any other) form and cannot quantify the effect of these bills on our business. In the meantime, the regulation by the FDA of LDTs remains uncertain.

If FDA premarket review, classification or approval is required for CyPath^® Lung before we obtain de novo classification, our phased strategy for market entry would be adversely affected. Our laboratory licensee could be forced to stop performing CyPath^® Lung while we worked to obtain de novo classification. Our business, results of operations and financial condition would be negatively affected unless and until such review were completed and our request for de novo classification were granted.

Delay by or failure of the FDA to grant our request for de novo classification, or failure on our part to comply with applicable requirements, would adversely affect our business, results of operations and financial condition.

The FDCA requires that medical devices introduced to the United States market, unless exempted by regulation, be authorized by the FDA pursuant to either the premarket notification pathway, known as 510(k) clearance, the de novo classification pathway, or the Premarket Approval (“PMA”) pathway. We plan to seek de novo classification for the CyPath^® Lung test in the second quarter of 2026. The FDA may not agree that agree that CyPath^® Lung meets the criteria for de novo classification, in which case we would be required to submit a PMA to obtain marketing approval, which would require manufacturing information and a pre-approval inspection of the manufacturing facilities and could require review by an FDA advisory panel comprised of experts outside the FDA. Any delay by or failure of the FDA to grant our de novo request or PMA could adversely affect our consolidated revenues, results of operations and financial condition.

Additionally, obtaining FDA clearance, approval or de novo classification for diagnostics can be expensive, time consuming and uncertain, and for higher-risk devices can take several years and requires detailed and comprehensive scientific and clinical data. In addition, medical devices are subject to ongoing FDA obligations and continued regulatory oversight and review. Ongoing compliance with FDA regulations increases the cost of conducting our business and subjects us to heightened regulation by the FDA and penalties for failure to comply with these requirements.

Failure by us or our laboratory licensee to comply with applicable laws pertaining to LDTs or IVDs could adversely affect our business, results of operations and financial condition.

The clinical laboratory testing sector is highly regulated in the United States. Our laboratory licensee, Pathology Laboratory Services, is accredited by CAP and holds a CLIA certificate of accreditation. Any failure by our laboratory licensee to comply with CLIA/CAP requirements could result in adverse findings on inspection that, if not timely corrected, could result in loss of accreditation and the inability to perform laboratory testing.

Additionally, certain states, including California, Maryland, Nevada, Pennsylvania, and Rhode Island, require laboratories testing specimens from their jurisdictions to hold an out-of-state laboratory license or permit. New York is exempt from, and imposes requirements in addition to, CLIA, including a requirement for test-specific permits of LDTs before they can be used to test specimens from patients in New York. The failure of our laboratory licensee to obtain state licenses or permits, where required, could interfere with our strategy for a national rollout of CyPath^® Lung.

Smiths Medicals is providing the acapella^® Choice Blue device to assist patients in expelling sputum out of the lungs into a collection cup noninvasively. This device is 510(k) cleared as a positive expiratory pressure device to help mobilize lung secretions in people with certain lung conditions. The device does not have a cleared indication for use as a specimen collection device. Promotion of the device by us or our partners for use of the device for specimen collection could cause the FDA to consider the device to be adulterated or misbranded in violation of the FDCA, and to require a 510(k) clearance for a specimen collection indication as a condition of distributing the device. Any disruption to our ability to distribute the acapella^® Choice Blue could interfere with our ability to collect adequate patient samples necessary for CyPath^® Lung.

CyPath^® Lung also relies on a proprietary algorithm, which has been licensed to Pathology Laboratory Services and used by the laboratory to develop and validate software integrated into the test procedure that generates the quantitative and qualitative diagnostic results that are included in their laboratory report. Certain types of standalone diagnostics software are subject to FDA regulation as a medical device (specifically, software as a medical device or “SaMD”). Some types of SaMD are subject to premarket authorization requirements. If the FDA were to conclude that we or our laboratory licensee is required to obtain premarket authorization for the software, our ability to offer CyPath^® Lung as an LDT could be delayed or prevented, which would adversely affect our business.

The third-party licensors of our future therapeutic products, when ready, may be unable to obtain regulatory approval. The denial or delay of any such approval would delay commercialization of our future therapeutic products and have a material adverse effect on our potential to generate revenue, our business and our results of operations.

We plan to license our therapeutic candidates to third parties for development including clinical testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting, and export and import. These activities that are to be undertaken by third-party licensees of our future therapeutic products are subject to extensive regulation by the FDA, and by foreign health authorities in other countries. These regulations differ from country to country. In the United States, we are not permitted to market our therapeutic product candidates until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years following research and development, and thereafter the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. For our licensors to gain approval to market our product candidates, they must provide clinical data that adequately demonstrate the safety and efficacy of the product for the intended indication. We or any third party has not yet obtained regulatory approval to market any of our product candidates in the United States or any other country. Our business depends upon licensing our therapeutic products to third-party pharmaceutical companies that would obtain these regulatory approvals. The FDA can delay, limit or deny approval of these product candidates for many reasons, including:

Even if eventually clinical testing approval of any regulatory filing for our product candidates is completed, the FDA may grant approval contingent on the performance of costly additional post-approval clinical trials. The FDA may also approve our product candidates for a more limited indication or a narrower patient population than the third party originally requested, and the FDA may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates. If the FDA requires the licensors to narrow the indications to smaller patient subsets, the market opportunities for our product candidates, if approved, and the ability to generate revenues and royalties may be materially limited. To the extent the licensors seeks regulatory approval in foreign countries, they may face challenges similar to those described above with regulatory authorities in applicable jurisdictions.

Obtaining and maintaining regulatory approval of our diagnostic tests or therapeutic product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions. Failure to obtain regulatory approval in foreign jurisdictions would prevent our product candidates from being marketed abroad.

In addition to regulations in the United States, to market and sell our diagnostic tests and therapeutic products in the EU, many Asian countries and other jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements, both from a clinical and manufacturing perspective. Approval by the FDA does not ensure approval by regulatory or payor authorities in other countries or jurisdictions, and approval by one regulatory or payor authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a diagnostic test or therapeutic product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the diagnostic test or therapeutic product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a diagnostic test or therapeutic product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our diagnostic tests or therapeutic products is also subject to approval. A diagnostic test or therapeutic product candidate that has been approved for sale in a particular country may not receive reimbursement approval in that country. We may not be able to obtain approvals from regulatory authorities or payor authorities outside the United States on a timely basis, if at all.

We may also submit marketing applications in other countries, such as countries in Europe or Asia. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our diagnostic tests or therapeutic products in any jurisdiction. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of diagnostic tests or therapeutic product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our diagnostic tests or therapeutic products in certain countries. We do not have any diagnostic tests or therapeutic product candidates approved for sale in any foreign jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we are unable to obtain approval of any of our diagnostic tests or therapeutic product candidates by regulatory or payor authorities in the EU, Asia or elsewhere, or if we fail to comply with the regulatory requirements in foreign jurisdictions, the commercial prospects of that diagnostic test or therapeutic product candidate may be significantly diminished, and our target market will be reduced and our ability to realize the full market potential of our diagnostic tests or therapeutic product candidates will be harmed.

Even if we obtain FDA approval of any of our diagnostic tests or therapeutic product candidates, we may never obtain approval or commercialize such products outside of the United States, which would limit our ability to realize their full market potential.

In order to market any diagnostic test or therapeutic product outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional diagnostic and therapeutic product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials, which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our diagnostic tests or therapeutic products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any diagnostic test or therapeutic product candidate approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or fail to obtain and maintain required approvals, our ability to realize the full market potential of our diagnostic tests or therapeutic products will be harmed.

The impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending on us is currently unknown, and may adversely affect our business model.

Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or payment for healthcare tests, products and services could negatively impact our business, operations and financial condition.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, including proposals aimed at lowering prescription drug prices and increasing competition for prescription drugs, as well as additional regulation on pharmaceutical transparency and reporting requirements, any of which could negatively impact our future profitability and increase our compliance burden. We cannot predict the initiatives that may be adopted in the future, including future challenges or significant revisions to the Affordable Care Act. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.

Risks Related to Ownership of Our Common Stock

There has been no prior public market for our Common Stock, the stock price of our Common Stock may be volatile or may decline regardless of our operating performance and you may not be able to resell your shares at or above the IPO price.

There has been no public market for our Common Stock prior to this Offering. The IPO price for our Common Stock will be determined through negotiations between the underwriter and us and may vary from the market price of our Common Stock following this Offering. If you purchase shares of our Common Stock in this Offering, you may not be able to resell those shares at or above the IPO price. An active or liquid market in our Common Stock may not develop upon the completion of this Offering or, if it does develop, it may not be sustainable. Further, an inactive market may also impair our ability to raise capital by selling shares of our Common Stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of Common Stock as consideration.

We do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our Common Stock.

We do not anticipate paying cash dividends on our Common Stock in the foreseeable future. The payment of dividends on our Common Stock will depend on earnings, financial condition, and other business and economic factors affecting it at such time as our Board of Directors (our “Board”) may consider relevant. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will occur only if our stock price appreciates.

We will have broad discretion in the use of the net proceeds of this Offering and may not use them effectively or in ways that increase the value of our share price.

While we believe that our use of the net proceeds that we will receive from this Offering will be accomplished, we cannot assure you that circumstances could result in a change of such use. As a result, we will have discretion in the application of the net proceeds, including working capital and other general corporate purposes, and you and other stockholders may disagree with how we spend or invest these proceeds. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from our Offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

Future sales of substantial amounts of the shares of Common Stock by existing shareholders could adversely affect the price of our Common Stock.

If our existing shareholders sell substantial amounts of the shares following an IPO, the market price of our Common Stock could fall. Such sales by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time and place we deem appropriate. At this time, the overhang from existing shares is 10-12%. The shares of Common Stock offered in this Offering will be eligible for immediate resale in the public market without restrictions. All remaining shares, which are currently held by our existing shareholders, may be sold in the public market in the future subject to the lock-up agreements and the restrictions contained in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). If any existing shareholders sell a substantial amount of shares, the prevailing market price for our shares could be adversely affected.

If you purchase our Common Stock in this Offering, you will incur immediate and substantial dilution in the book value of your shares.

The IPO price will be substantially higher than the net tangible book value per share of our Common Stock. Investors purchasing Common Stock in this Offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing Common Stock in this Offering will incur immediate dilution of $                per share, based on the assumed IPO price of $                per share of our Common Stock, which is the midpoint of the price range set forth on the cover page of this prospectus. Further, investors purchasing Common Stock in this Offering will contribute approximately                % of the total amount invested by stockholders since our inception, but will own only approximately                % of the total number of shares of our Common Stock outstanding after this Offering.

This dilution is due to our investors who purchased shares prior to this Offering having paid substantially less when they purchased their shares than the price offered to the public in this Offering and the exercise of stock options granted to our employees. To the extent that our convertible notes, bridge notes, or Preferred Stock shares are converted into Common Stock or outstanding warrants or stock options are exercised, we issue restricted stock to our employees under our equity incentive plan or if we otherwise issue additional shares of our Common Stock in each case at per share prices below the price to the public in this Offering, there will be further dilution to new investors. As a result of the dilution to investors purchasing Common Stock in this Offering, investors may receive significantly less than the purchase price paid in this Offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this Offering, see “Dilution.”

The financial and operational projections that we may make from time to time are subject to inherent risks.

The projections that we provide herein or our management may provide from time to time (including, but not limited to, those relating to potential peak sales amounts, clinical and regulatory timelines, production and supply matters, commercial launch dates, and other financial or operational matters) reflect numerous assumptions made by management, including assumptions with respect to our specific as well as general business, regulatory, economic, market, and financial conditions and other matters, all of which are difficult to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate. There may be differences between actual and projected results, and actual results may be materially different from those contained in the projections.

The market price of our Common Stock may be subject to fluctuation and you could lose all or part of your investment.

Our public offering price has been arbitrarily determined by us and may not be indicative of prices that will prevail in the trading market. The price of our shares may decline following our public offering. The stock market in general has been, and the market price of our Common Stock shares in particular, will likely be subject to fluctuation, whether due to, or irrespective of, our operating results and financial condition. The market price of our shares may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not limited to:

These factors and any corresponding price fluctuations may materially and adversely affect the market price of our shares and result in substantial losses being incurred by our investors. In the past, following periods of market volatility, public company shareholders have often instituted securities class action litigation. If we were involved in securities litigation, it could impose a substantial cost upon us and divert the resources and attention of our management from our business.

An investment in our Company may involve tax implications, and you are encouraged to consult your own advisors as neither we nor any related party is offering any tax assurances or guidance regarding our Company or your investment.

The formation of our Company, as well as an investment in our Company generally, involves complex federal, state, and local income tax considerations. Neither the Internal Revenue Service nor any state or local taxing authority has reviewed the transactions described herein and may take different positions than the ones contemplated by management. You are strongly urged to consult your own tax and other advisors prior to investing, as neither we nor any of our officers, directors, or related parties can offer tax or similar advice, nor are any such persons making any representations and warranties regarding such matters.

Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, including the completion of our offering taken together with other transactions we may consummate in the succeeding three-year period. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which potentially could result in increased future tax liability.

Our Certificate of Incorporation permits “blank check” Preferred Stock, which can be designated by our Board without stockholder approval.

We are authorized to issue 20,000,000 shares of Preferred Stock. The shares of our Preferred Stock may be issued from time to time in one or more series, each of which shall have a distinctive designation or title as is determined by our Board prior to the issuance of any shares thereof. The Preferred Stock may have such voting powers, full, enhanced or limited, or no voting powers, and such preferences and relative, participating, optional, or other special rights and such qualifications, limitations, or restrictions thereof as adopted by the Board, which may include enhanced dividend rights, rights of redemption, sinking funds to pay dividends, liquidation and other rights that would be different than, and preferential to, the rights of the Common Stockholders. Because our Board is able to designate the powers and preferences of the Preferred Stock without the vote of a majority of our stockholders, Common Stockholders will have no control over what designations and preferences our Preferred Stock will have. If Preferred Stock is designated and issued, then depending upon the designation and preferences, the holders of the Preferred Stock may exercise voting control. As a result, our stockholders would have no control over the operations of our Company.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation (our “A&R Charter”) and amended and restated bylaws (our “A&R Bylaws”) that will become effective upon the closing of this Offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our Common Stock, thereby depressing the market price of our Common Stock. In addition, because our Board is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board. Among other things, these provisions:

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired 15% or more of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our Common Stock, including transactions that may be your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

Certain provisions in our A&R Charter and A&R Bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our Common Stock.

Our A&R Charter and A&R Bylaws contain provisions that could depress the trading price of our Common Stock by acting to discourage, delay or prevent a change of control of our Company or changes in our management that the stockholders of our Company may deem advantageous. These provisions include the following:

Any provision in our A&R Charter or A&R Bylaws, that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock.

Certain provisions of the DGCL may have anti-takeover effects that could delay, defer, or discourage another party from acquiring control of us, prevent changes in our Board or management, and make certain transactions more challenging that stockholders might otherwise believe to be in their best interests.

Upon completion of this Offering, we will be subject to the provisions of Section 203 of the DGCL, which will generally prohibit us from engaging in a “business combination,” meaning a merger, asset sale, or other transaction resulting in a stockholder’s financial benefit, with an “interested stockholder” for a three-year period following the time that such stockholder becomes an interested stockholder, unless the business combination is approved in a manner prescribed by Section 203. Section 203 defines an “interested stockholder” as a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of a corporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring, or preventing changes in control of our Company and of averting changes in our Board or management. They are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and, as a consequence, they might also inhibit temporary fluctuations in the market price of our Common Stock that often result from actual or rumored hostile takeover attempts. These provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.

Our A&R Charter designates a state or federal court located within the state of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

Our A&R Charter provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf under Delaware law, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the DGCL, our A&R Charter, or our A&R Bylaws, (4) any other action against us or any of our directors, officers or other employees asserting a claim that is governed by the internal affairs doctrine, or (5) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court having jurisdiction over indispensable parties named as defendants. These exclusive-forum provisions do not apply to claims under the Securities Act or the Securities Exchange Act of 1934, as amended (the Exchange Act).

To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, our A&R Charter contains a federal forum provision which provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find the exclusive forum provision in our A&R Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

Certain limitation-of-liability and indemnification provisions in our A&R Charter and A&R Bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties, may reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit the Company and other stockholders, and may adversely impact stockholders’ investments to the extent that the Company pays the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Our A&R Charter will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

Our A&R Charter and our A&R Bylaws will require us to indemnify our directors and officers, and allow us to indemnify other employees and agents, to the fullest extent permitted by the DGCL. Subject to certain limitations and limited exceptions, our A&R Charter will also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted.

While we believe that including the limitation-of-liability and indemnification provisions in our A&R Charter, A&R Bylaws, and indemnification agreements is necessary to attract and retain qualified persons such as directors, officers and key employees, those provisions may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Our management collectively owns a substantial majority of our Common Stock.

Based on the provisions for determining beneficial ownership in accordance with Rule 13d-3 and Item 403 of Regulation S-K under the Exchange Act, immediately after this Offering, our officers and directors will own or exercise control of approximately 70% of the voting power of our outstanding Common Stock. As a result, investors may be prevented from affecting matters involving our Company, including:

Furthermore, this concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also adversely affect the trading price for our Common Stock because investors may perceive disadvantages in owning stock in a company that is controlled by a small number of stockholders.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If no or only very few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Common Stock would be negatively affected. If one or more of the analysts who cover us downgrade our Common Stock or publish inaccurate or unfavorable research about our business, our Common Stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common Stock could decrease, which might cause our Common Stock price and trading volume to decline.

If we fail to establish and maintain an effective system of internal control or disclosure controls and procedures are not effective, we may not be able to report our financial results accurately and timely or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires us to evaluate and report on our internal controls over financial reporting and, depending on our future growth, may require our independent registered public accounting firm to annually attest to our evaluation, as well as issue its own opinion on our internal controls over financial reporting. The process of implementing and maintaining proper internal controls and complying with Section 404 is expensive and time consuming. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need may become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for future listing on one of the Nasdaq Stock Markets or national securities exchanges, and the inability of registered broker-dealers to make a market in our Common Stock, which may reduce our stock price.

General Risks

We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common shares less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including:

In addition, as an “emerging growth company” the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, unless we later irrevocably elect not to avail ourselves of this exemption. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult. We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (1) following the fifth anniversary of the completion of this Offering, (2) in which we have total annual gross revenue of at least $1.07 billion, or (3) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30^th; and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this Offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K, and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.

Investors may find our find our Common Stock less attractive to the extent we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

We will incur significantly increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, and Nasdaq have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits smaller “emerging growth companies” to implement many of these requirements over a longer period and up to five years from the pricing of this Offering. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costlier. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon the completion of this Offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make any related party transaction disclosures. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Future changes in financial accounting standards or practices may cause adverse and unexpected revenue fluctuations and adversely affect our reported results of operations.

Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our reported financial position or results of operations. Financial accounting standards in the United States are constantly under review and new pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future. As a result, we may be required to make changes in our accounting policies. Those changes could affect our financial condition and results of operations or the way in which such financial condition and results of operations are reported. We intend to invest resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from business activities to compliance activities. See the “MD&A—Recent Accounting Pronouncements” section of this prospectus.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this Offering will provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:

Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated bylaws that will be in effect upon the closing of this Offering will provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws will also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We believe that these amended and restated certificate of incorporation and amended and restated bylaws provisions are necessary to attract and retain qualified persons as directors and officers.

While we maintain directors’ and officers’ liability insurance, such insurance may not be adequate to cover all liabilities that we may incur, which may reduce our available funds to satisfy third-party claims and may adversely impact our cash position.

use of proceeds

We estimate that the net proceeds to us from the sale of shares of our Common Stock in this Offering will be approximately $          million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. This assumes a public offering price of $          per share. If the underwriters exercise their option to purchase additional shares in full, the net proceeds to us will be approximately $           million.

We intend to use the net proceeds from this Offering for working capital and for general corporate purposes, which may include product and test development, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments. We expect the proceeds from this Offering together with anticipated sales of our diagnostic LDT test should be sufficient for the Company to complete the de novo pivotal clinical trial and, if results are positive, to submit and obtain FDA clearance of CyPath^® Lung for sale and enter the EU market for sale of CyPath^® Lung as a CE-marked IVD test.

We cannot specify with certainty all of the uses of the net proceeds that we will receive from this Offering. Accordingly, we will have broad discretion in the application of these proceeds and our investors will be relying on the judgment of our management regarding the application of the net proceeds of this Offering.

Each $1.00 increase or decrease in the assumed public offering price of $          per share would increase or decrease the net proceeds to us from this Offering by approximately $          million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each 1,000,000 share increase or decrease in the number of shares offered by us would increase or decrease the net proceeds to us from this Offering by approximately $          million, assuming that the assumed public offering price of $          per share remains the same, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects, and other factors our Board may deem relevant.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2021:

The information set forth in the table below is illustrative only and our capitalization following the completion of this Offering will be adjusted based on the actual IPO price, the number of shares of Common Stock sold in this Offering and other terms of this Offering determined at pricing. You should read the following table in conjunction with our consolidated financial statements and related notes appearing at the end of this prospectus as well as the MD&A and “Description of Securities” sections of this prospectus.

A $1.00 increase (decrease) in the assumed IPO price of $           per share of Common Stock, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $           million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of Common Stock offered by us would increase (decrease) each of our pro forma as adjusted cash, cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $           million, assuming the assumed IPO price of $           per share of Common Stock remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses.

dilution

If you invest in our Common Stock in this Offering, your ownership interest will be immediately diluted to the extent of the difference between the IPO price per share of our Common Stock and the pro forma as adjusted net tangible book value per share of our Common Stock immediately after this Offering. Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of Common Stock in this Offering and the pro forma as adjusted net tangible book value per share of Common Stock immediately after completion of this Offering.

Our historical net tangible book value (deficit) as of December 31, 2021 was approximately $(12.8) million, or $(0.67) per share of our Common Stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets, adjusted to remove capitalized deferred offering costs we expect to recognize as an offset to the proceeds from this Offering, less our total liabilities and convertible Preferred Stock, which is not included within our stockholders’ (deficit) equity. Historical net tangible book value per share represents historical net tangible book value (deficit) divided by 18,988,278, the number of shares of our Common Stock outstanding as of December 31, 2021.

After giving effect to the (i) sale and issuance by us of shares of our Common Stock in this Offering, based on an assumed IPO price of $___ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriter’s option is not exercised, our pro forma as adjusted net tangible book value as of _______, 2022 would have been $______, or $____per share. This represents an immediate increase in pro forma net tangible book value of $____ per share to our existing stockholders and immediate dilution of $___ per share to investors purchasing shares of our Common Stock in this Offering at the assumed IPO price. The following table illustrates this dilution:

Each $1.00 increase or decrease in the assumed IPO price of $___ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share to new investors by approximately $___, and would increase or decrease, as applicable, dilution per share to new investors in this Offering by approximately $___, assuming that the number of shares of our Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares of our Common Stock from us in full, the pro forma as adjusted net tangible book value per share of our Common Stock immediately after this Offering would be increased by $____ per share, and the dilution in pro forma net tangible book value per share to new investors in this Offering would be $____ per share.

We may also increase or decrease the number of shares we are offering. A one million share increase in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase the pro forma as adjusted net tangible book value per share by $___ and decrease the dilution per share to investors participating in this Offering by $____, assuming the assumed IPO price of $____ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A one million share decrease in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this Offering by $___ and increase the dilution per share to new investors participating in this Offering by $_____, assuming the assumed IPO price of $____ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. sensitivity

The following table presents, on a pro forma as adjusted basis as of _________, 2022, after giving effect to the new investors purchasing shares of our Common Stock in this Offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of Common Stock, and the average price per share paid or to be paid to us at an assumed IPO price of ____ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

Each $1.00 increase or decrease in the assumed IPO price of $____ per share (the midpoint of the range of offering prices set forth on the cover page of this prospectus) would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all stockholders by approximately $_____, assuming that the number of shares of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us.

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares of Common Stock in this Offering. If the underwriters exercise their option to purchase additional shares of Common Stock in full from us, our existing stockholders would own ___% and our new investors would own ___% of the total number of shares of our Common Stock outstanding upon the completion of this Offering.

The number of shares of Common Stock that will be outstanding after this Offering is based on ___________ shares of our Common Stock outstanding as of __________, 2022, and excludes ____________ shares of Common Stock reserved for issuance under our 2014 Equity Incentive Plan and __________ shares of Common Stock reserved for issuance for ___________.

Management’s Discussion and Analysis of Financial Conditions and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis is set forth at the end of this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward- looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Market, Industry and Other Data.”

Overview

This section presents management’s perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this prospectus, and should be read in conjunction with the sections “Prospectus Summary—Summary Historical Consolidated Financial and Other Data” and our consolidated financial statements and notes thereto appearing at the end of this prospectus. It 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 results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Data as of and for the years ended December 31, 2020 and 2021 has been derived from our audited consolidated financial statements appearing at the end of this prospectus.

Our MD&A is organized as follows:

Company Overview

Business

bioAffinity Technologies, Inc. is a privately held biotech company incorporated in Delaware with laboratories at The University of Texas at San Antonio.

Recent Developments

Financial

To date, we have devoted a substantial portion of our efforts and financial resources to the development of our first diagnostic test, CyPath^® Lung. As a result, since our inception in 2014, we have generated no revenue from sales of the CyPath^® Lung test and have funded our operations principally through private sales of our equity or debt securities. We have never been profitable and, as of December 31, 2021, we had total negative working capital of $11.6 million, including $8.7 million of convertible notes, and an accumulated deficit of approximately $28.5 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our diagnostic tests or therapeutic products and advance them through clinical trials.

In the fourth quarter of 2021 and the first quarter of 2022, the Company raised an additional $2.4 million through the sale of bridge notes that are convertible into the Company’s Common Stock at the time of an IPO, or at the noteholder’s option, at $0.60 per share, adjusted to reflect any stock split, stock dividend or other similar change in the Common Stock. The bridge notes bear interest at six percent (6%) and have a maturity date of May 31, 2022. Additionally, each noteholder received a warrant to purchase one share of Common Stock based on the investor’s bridge note principal balance investment. The warrants have a five-year term at an exercise price equal to the Company’s IPO price or $0.75 per share if the Company does not complete an IPO by the maturity date. In connection with the sale of our convertible bridge notes, we will pay commissions of nine percent (9.0%) and will issue to WallachBeth Capital, LLC, Placement Agent’s Warrants equal to ten percent (10.0%) of the Common Stock issuable by the Company in the private placement with substantially the same terms as the warrants issued to our noteholders. For noteholders who were not introduced to the Company by the Placement Agent, we will pay commissions of four and one-half percent (4.5%) and will issue Placement Agent’s Warrants to our Placement Agent equal to two and one-half percent (2.5%) of the Common Stock issuable by the Company in the private placement. The warrants will have substantially the same terms as those issued to our noteholders.

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.

Development of Our Diagnostic Tests

Our first diagnostic test, CyPath^® Lung, is a noninvasive test to detect early-stage lung cancer in people at high risk for the disease.

Our current five-year Business Plan for the commercial development of CyPath^® Lung contemplates the following major initiatives:

Notwithstanding that initial and interim data appear promising, the outcomes of our future clinical trials are uncertain and future clinical trials may ultimately be unsuccessful.

Results of Operations

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the years ending December 31, 2021 and 2020. We do anticipate generating revenues during 2022. Net loss for 2021 and 2020 were $6.3 million and $7.3 million, respectively, resulting from the operational activities described below.

Operating Expenses

Operating expenses totaled $2.2 million and $2.6 million during 2021 and 2020, respectively. The decrease in operating expenses is the result of the following factors.

Research and Development

Our research and development expenses consist primarily of expenditures for lab operations, preclinical studies, compensation and consulting costs.

Research and development expenses totaled $1.2 million and $1.4 million during 2021 and 2020, respectively. The decrease of approximately $219,000, or 16%, for 2021 compared to 2020 was primarily attributable to a decrease of almost $115,000 related to compensation and benefits as a result of a decrease in personnel, as well as decreases in lab operations of $80,000 as we minimized personnel in our labs to assist in maintaining recommended social distancing requirements due to the COVID-19 pandemic. Additionally, this decrease was due to a decrease in stock compensation expense of approximately $44,000 related to option grants to employees and consultants in 2021 compared to 2020. These decreases were partially offset by an increase of approximately $35,000 in legal costs for patents and annuities in 2021.

Clinical development

Clinical development expenses totaled approximately $130,000 and $195,000 during 2021 and 2020, respectively. The decrease of approximately $65,000, or 33%, for 2021, compared to 2020 was primarily attributable to a decrease of approximately $75,000 in professional fees including consulting and legal fees incurred in the prior year related to finalizing the evaluation and output for our CyPath^® Lung test.

General and Administrative

Our general and administrative expenses consist primarily of expenditures related to compensation, legal, accounting and tax and other professional, and general operating.

General and administrative expenses totaled approximately $0.9 million and $1.0 million during 2021 and 2020, respectively. The decrease of $113,000, or 11%, for 2021 compared to 2020 was primarily attributable to a decrease of approximately $55,000 in compensation due to a change in the number of personnel as well as decreases of approximately $190,000 for stock-based compensation related to forfeitures of stock options previously granted. These decreases were partially offset by an increase of more than $100,000 in consulting and legal fees in 2021, largely related to the costs of filing new patents, responding to examiner comments on applications, and utilizing consulting services for purposes of the 2019–2020 and 2020–2021 audits.

Other Income (Expense)

Other income (expense) totaled approximately ($4.1) million and ($4.7) million for 2021 and 2020, respectively.

Interest income (expense)

We had net interest expense of approximately $1.0 million and $381,000 for the year ended December 31, 2021 and 2020, respectively. The increase of approximately $620,000, or 163%, was attributable to an increase of $3.3 million in convertible notes and bridge notes outstanding compared to prior year, partially offset by interest earned on average outstanding cash balances. Additionally, in 2022 the Company recorded interest expense of approximately $0.5 million for the amortization of debt discount related to the issuance of bridge notes.

Gain on Extinguishment of Debt

In April 2020, the Company received an initial U.S. Small Business Administration (the “SBA”) Paycheck Protection Program Loan (the “PPP Loan”). In June 2021, the Company received forgiveness from the SBA and recorded a gain of $239,000 on the extinguishment of the PPP Loan.

Fair value of warrants

During the fourth quarter 2021, in connection with the issuance of the bridge notes, the Company amended the terms of certain convertible notes. As an inducement to amending the notes, the Company issued Common Stock warrants with the same terms and conditions as the warrants issued to the bridge note holders. The estimated fair value of the warrants was $4.1 million and immediately expensed within the accompanying statement of operations.

(Loss) gain on change in fair value of convertible notes

The gain on the change in fair value of convertible notes totaled approximately $0.7 million during 2021 compared to a loss of $4.3 million during 2020, respectively. The change in the fair value of convertible notes resulted primarily from changes in the calculation of the fair value of our stock, the reduction in the expected term and other assumptions during the reported periods. Refer to our notes to audited financial statements for further discussion on our convertible notes.

Liquidity and Capital Resources

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. We have an accumulated deficit of approximately $28.5 million as of December 31, 2021. We anticipate that we will continue to incur additional losses for the foreseeable future. To date, we have funded our operations primarily through the sale of our equity and debt securities, resulting in gross proceeds of approximately $17.9 million. Cash and cash equivalents were approximately $1.4 million as of December 31, 2021.

In the fourth quarter of 2021 and the first quarter of 2022, the Company issued a total of $2.4 million in bridge notes convertible into the Company’s Common Stock, at the time of an IPO, or at the noteholder’s option, at $0.60 per share, adjusted to reflect any stock split, stock dividend or other similar change in the Common Stock. The convertible bridge notes bear interest at six percent (6%) and have a maturity date of May 31, 2022. Additionally, each noteholder received a warrant to purchase one share of Common Stock based on the investor’s bridge note principal balance investment. The warrants have a five-year term at an exercise price equal to the Company’s IPO price or $0.75 per share if the Company does not complete an IPO by the maturity date. In connection with the sale of our convertible bridge notes, we will pay commissions of nine percent (9.0%) and will issue Placement Agent’s Warrants to our Placement Agent equal to ten percent (10%) of the Common Stock issuable by the Company in the private placement with substantially the same terms as our noteholders.

Based on our current level of expected operating expenditures, we expect to be able to fund our operations until June of 2022. This assumes that we spend minimally on general operations, and that we do not encounter any unexpected events or other circumstances that could shorten this time period.

We are actively seeking sources of financing, including 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 or 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.

Our financial statements include explanatory disclosures regarding substantial doubt about our ability to continue as a going concern. Future reports on our financial statements may also include explanatory disclosures with respect to our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue our operations.

Cash Flows

The following information reflects cash flows for the years presented:

Net Cash Used in Operating Activities

Net cash used in operating activities was $2.0 million and $2.2 million during the years ended 2021 and 2020, respectively. The decrease of approximately $130,000 in cash used during 2021 compared to 2020 was primarily attributable to a decrease of almost $400,000 in our loss from operations, partially offset by a decrease of approximately $230,000 in non-cash charges related to stock-based compensation.

Net Cash Used in Investing Activities

The Company did not use any cash in investing activities in 2021, compared to $3,000 for the year ended December 31, 2020. The decrease in cash used in investing activities in 2021, compared to 2020, is attributable to the purchase of lab and office equipment in 2020.

Net Cash Provided by Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities was $3.3 million consisting of $3.3 million from the issuance of convertible notes, as well as receiving a second draw on our PPP Loan of $212,000 in March 2021, partially offset by the payment of approximately $180,000 in debt issuance costs. In April 2022, the Company submitted an application for forgiveness for the second draw on our PPP Loan and received notice of forgiveness from the SBA. During the year ended December 31, 2020, net cash provided by financing activities was $1.5 million from the issuance of convertible notes during the year, and an initial draw on our PPP Loan of $239,000 in April 2020. In June 2021, the Company received notice of forgiveness from the SBA for the first draw on our PPP Loan.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 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.

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.

Fair Value of Convertible Notes Payable

We follow FASB No. 2016-01 “Financial Instruments—Overall (Subtopic 825-10).” In applying ASC 825, it is necessary to determine whether to bifurcate the Beneficial Conversion Feature from the convertible note. Under ASC 825, provided the fixed conversion price stipulated in the convertible note is greater than the fair market value at the date of issuance (“out of the money”), the beneficial conversion feature guidance is not applicable, and the convertible notes are eligible to be valued at fair value and any adjustments recorded in the statement of operations.

The Company has elected to account for the convertible notes payable at fair value with any changes in fair value being recognized through the statements of operations until the convertible notes are settled. The fair value of the convertible notes is determined with the assistance of a third-party valuation firm. Given the conversion terms that exist, there were two scenarios considered: i) conversion into a preferred share class, ii) conversion into the common share class. Given the recent issuance dates, a negotiation discount was calibrated and applied such that the probability weighted valuation of the recently issued notes is equal to par value as of the respective issuance dates. The probabilities of each conversion scenario were discussed and assigned based on the expectations regarding the future of the Company.

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.

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 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.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

Change in Auditors

On October 18, 2021, the finance committee of the Board approved the engagement of WithumSmith+Brown, PC (“Withum”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2021, replacing Ernst & Young LLP (“EY”), subject to completion of services related to the year ended December 31, 2020.

The report of EY on bioAffinity Technologies’ balance sheet as of December 31, 2020 and the statements of operations, changes in stockholders’ deficit and cash flows for the years then ended, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainties, audit scope or accounting principles.

During the period from January 1, 2020 to December 31, 2020 there were no disagreements between the Company and EY on any matter of accounting principles or practices, financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EY, would have caused it to make reference to the subject matter of the disagreements in its reports on bioAffinity Technologies’ financial statements for such period.

During the period from January 1, 2020 to December 31, 2020, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act).

For the period through October 17, 2021, neither the Company nor anyone on the Company’s behalf consulted with Withum with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on the Company financial statements, and neither a written report nor oral advice was provided to the Company that Withum concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any other matter that was the subject of a disagreement.

Emerging Growth Company Status

As an EGC under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board, and less extensive disclosure about our executive compensation arrangements.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of this Offering, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of any year before that time, or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.

BUSINESS

bioAffinity Technologies, Inc. focuses on the need for noninvasive diagnosis of early-stage cancer and diseases of the lung, and targeted cancer treatment. The Company has developed a proprietary platform, called CyPath^®, for in vitro diagnostics, the first of which is a noninvasive test for early detection of lung cancer called CyPath^® Lung. CyPath^® Lung detects lung cancer and the platform will be further developed to detect other forms of cancer and lung diseases. bioAffinity Technologies’ OncoSelect^® therapies are being developed based on novel discoveries shown in vitro to kill cancer lung, breast, brain, skin, and prostate cells without apparent harm to normal cells.

More than 100 different types of cancers have been identified, all marked by the abnormal and unrestricted proliferation of cells that can eventually kill a patient stricken with the disease. Breast, prostate, lung, and colorectal cancers are the most common, representing more than half of all cancer diagnoses. Lung cancer alone, by far the deadliest, is responsible for 18% of all cancer deaths.²⁰ Worldwide, 10 million cancer-related deaths were reported in 2020.²¹ Nearly 33 million people have been living with cancer for at least five years. The number of cancer survivors is expected to increase with time.²²

A patient’s overall cancer survivability often depends on the type of cancer and the stage at which cancer is diagnosed and treated. The early diagnosis of cancer, before it spreads, is a significant contributor to survival. Current diagnostic protocols include lab tests, various imaging techniques, and biopsy followed by microscopic examination of tissue samples. None of these methods perfectly detects cancer cells, especially in the early stages of the disease. Consequently, there is a great need for better targeted diagnostic methods that are safe, accurate, rapid, noninvasive, and cost-effective for the detection of early-stage cancers.

Once cancer has been diagnosed, a variety of treatment options are available, depending on the cancer type and stage. Surgery and radiation treatments are typically site-specific, while chemotherapy is usually systemically administered. Chemotherapy presents a particular challenge because of a relative lack of selectivity for cancer cells, i.e., its inability to differentiate between healthy and cancer cells. Ideally, cancer-specific delivery of cytotoxic (cell-killing) drugs would treat the disease and spare healthy cells.

Our First Diagnostic Test – CyPath^® Lung

Lung cancer is the leading cause of cancer-related death worldwide, claiming nearly 1.8 million lives annually.²³ If detected and treated early (Stage I), the dismal overall five-year survival rate of 20.5%²⁴ can leap to a 10-year survival rate of 92%.²⁵ Individuals at high risk for lung cancer are recommended for annual screening by low-dose computed tomography (“LDCT”). High-risk individuals are defined as those who are 50-80 years of age and have smoked at least 20 pack-years, or an equivalent of one pack of cigarettes a day for 20 years, and who are currently smoking or have not quit smoking in the past 15 years.²⁶ The National Lung Cancer Screening Trial (the “NLCST”) of more than 53,000 patients showed that screening for lung cancer by LDCT lowered the mortality rate by 20% as compared to screening using x-ray, but had a low positive predictive value of less than 4%.^27,28 More simply stated, the NLCST found that of every 100 people screened for lung cancer that resulted in a positive LDCT result, fewer than four of those individuals had the disease. Apart from LDCT, there is currently no reliable noninvasive method that can detect lung cancer at an early stage. CyPath^® Lung is designed to be a cost-effective,²⁹ noninvasive, early-stage lung cancer diagnostic. Its use in conjunction with LDCT, CyPath^® Lung is predicted to improve the positive predictive value (the proportion of true positive results) by a factor of five.²⁹ Improving the positive predictive value of LDCT with the use of CyPath^® Lung can result in fewer patients unnecessarily subjected to invasive diagnostic procedures, earlier detection of lung cancer , and a reduction in healthcare costs.³⁰

CyPath^® Lung uses well-established flow cytometry technology to detect and analyze cell populations in a person’s sputum, or phlegm, to find characteristics indicative of lung cancer, including cancer and/or cancer-related cells that have shed from a lung tumor. In particular, CyPath^® uses a fluorescent bio-label, the synthetic porphyrin TCPP, that has an unusually high affinity for cancer and cancer-related cells.³¹ As used in CyPath^® Lung, the proportion of cells with high TCPP fluorescence intensity in a patient’s sputum sample is a significant predictor of lung cancer. bioAffinity holds multiple patents protecting its use of TCPP for the diagnosis, monitoring, and treatment of cancer. In addition, the Company has multiple domestic and foreign patent applications to protect the use of flow cytometry and its automated analysis in the detection of lung diseases using sputum as a sample.