DEF: bioAffinity Technologies Seeks Shareholder Approval for Reverse Stock Split and Significant Dilution to Maintain Nasdaq Listing and Fund Operations

bioAffinity Technologies, a developer of noninvasive lung cancer diagnostics, is calling an Annual Meeting on July 25, 2025, to seek shareholder approval for a reverse stock split, a substantial increase in authorized shares, and the issuance of millions of shares from warrant exercises, primarily to address Nasdaq listing compliance and facilitate future capital raising.

Summary

• The Annual Meeting of Stockholders will be held on Friday, July 25, 2025, at 8:00 a.m. Central Time, at the company's principal office in San Antonio, Texas.
• Shareholders will vote on eight proposals, including the election of seven director nominees and the ratification of WithumSmith+Brown, PC as the independent registered public accounting firm for fiscal year 2025.
• A key proposal is to approve a reverse stock split at a ratio of 1-for-2 to 1-for-100, primarily to increase the per-share trading price and regain compliance with Nasdaq's minimum bid price requirement of $1.00, following a non-compliance notice received on February 7, 2025.
• Shareholders are also asked to approve the issuance of up to 2,926,166 shares of Common Stock upon the exercise of warrants issued in a private placement offering that closed on February 26, 2025, with an exercise price of $0.85.
• Another critical proposal seeks to increase the authorized number of shares of Common Stock from 100,000,000 to 350,000,000 to provide flexibility for future financing and business purposes.
• Approval is sought for an anti-dilution provision of Common Stock purchase warrants issued in a public offering that closed on May 7, 2025, which could lead to the issuance of up to an aggregate maximum of 49,907,811 shares of Common Stock if a dilutive issuance occurs and the exercise price is reduced to a floor of $0.10 per share.
• The company reported Audit Fees of $293,940 and Audit-Related Fees of $35,360 for the year ended December 31, 2024, with total fees of $329,300.
• As of May 29, 2025, there were 28,459,541 shares of Common Stock outstanding.
• The company completed the acquisition of the laboratory assets of Village Oaks Pathology Services, P.A., d/b/a Precision Pathology Services (PPLS), on September 18, 2023, for $3,500,000, including $1,000,000 paid by the issuance of 564,972 shares of restricted Common Stock to the Joyce Trust.
• The company employs 62 individuals, with 25 at bioAffinity Technologies and 37 at its subsidiary laboratory, Precision Pathology Laboratory Services (PPLS).

Sentiment

Score: 3

Explanation: The sentiment is negative due to the company's non-compliance with Nasdaq's minimum bid price, necessitating a reverse stock split. The significant potential for future dilution from multiple warrant exercises and a substantial increase in authorized shares indicates ongoing financial challenges and a likely negative impact on existing shareholder value, despite the positive developments in product adoption and management expertise.

Positives

• The company is committed to developing noninvasive diagnostics for lung cancer and other lung diseases, with a mission to increase early-stage detection.
• There is growing adoption and use by physicians of the company's first test, CyPath Lung, a noninvasive test for lung cancer.
• The company has an experienced team of scientists and business professionals, including a Chief Science Officer with FDA approval experience and a Chief Operating Officer skilled in clinical laboratory management and commercialization.
• The Board of Directors has implemented sound corporate governance practices, including a majority vote standard for director elections and a commitment to long-term stockholder benefit.
• The separation of the Executive Chairman and CEO roles is believed to best serve the company's needs, leveraging diverse expertise.
• The acquisition of Precision Pathology Laboratory Services (PPLS) expands the company's capabilities, including offering CyPath Lung as a Laboratory Developed Test (LDT) and other laboratory services.

Negatives

• The company received a Nasdaq notice on February 7, 2025, for non-compliance with the minimum bid price requirement ($1.00 per share), indicating a low stock price.
• The proposed reverse stock split, while aimed at Nasdaq compliance, may not result in a sustained increase in stock price or could decrease liquidity.
• The approval of the Warrant Exercise Proposal could lead to the issuance of up to 2,926,166 additional shares, causing dilution for existing stockholders.
• The Anti-Dilution Adjustment Proposal, if approved, could result in the issuance of up to an aggregate maximum of 49,907,811 shares from May 2025 Warrants, representing substantial potential dilution.
• The proposal to increase authorized Common Stock from 100,000,000 to 350,000,000 shares, while providing flexibility, also increases the potential for future dilution.
• Failure to approve the capital-raising related proposals could adversely impact the company's ability to fund operations and maintain its Nasdaq listing.

Risks

• The company faces the risk of delisting from the Nasdaq Capital Market if it fails to regain compliance with the $1.00 minimum bid price requirement by August 6, 2025.
• There is no assurance that the reverse stock split, if completed, will result in a sustained increase in the market price of the Common Stock.
• The reverse stock split may decrease the liquidity of the Common Stock due to a reduced total number of outstanding shares and potentially fewer market makers.
• The reverse stock split may result in some stockholders owning 'odd lots' (less than 100 shares), which can be more difficult to sell and incur higher transaction costs.
• The reverse stock split could lead to a decrease in the overall market capitalization of the company if the per-share price does not increase proportionally.
• Significant future dilution of existing stockholders' ownership interests is possible upon the exercise of New Warrants and May 2025 Warrants, especially if the anti-dilution provision is triggered.
• The increase in authorized shares could be used to deter hostile takeover attempts, potentially limiting opportunities for stockholders to dispose of shares at a premium.
• If the proposals related to capital raising are not approved, the company's financing alternatives may be limited, and its ability to attract and retain skilled employees through equity incentives could be adversely impacted.

Future Outlook

The company's future outlook is focused on increasing the per-share trading price of its Common Stock to maintain its Nasdaq listing, which is crucial for attracting a broader range of investors, improving liquidity, and facilitating future capital raising activities. The company intends to continue advancing its noninvasive diagnostics for lung cancer and other lung diseases, aiming to increase early detection and reduce medical costs. Future financing opportunities are anticipated, and the increase in authorized shares is intended to support these efforts and other business opportunities integral to growth.

Management Comments

• Maria Zannes, President and CEO, stated: "I am greatly encouraged by the growing adoption and use by physicians of our first test, CyPath Lung, a noninvasive test for lung cancer, and of the technological advancements that our team continues to make in its fight to address the urgent need for noninvasive, early-stage diagnosis."
• Maria Zannes also expressed: "Your trust in our team and belief in our technology are invaluable."

Industry Context

bioAffinity Technologies operates within the rapidly evolving medical diagnostics industry, specifically focusing on noninvasive solutions for lung cancer and other lung diseases. This sector is driven by a critical need for early and accurate disease detection to improve patient outcomes, reduce invasive procedures, and lower healthcare costs. The company's emphasis on Laboratory Developed Tests (LDTs) through its subsidiary PPLS, and its pursuit of technological advancements, aligns with broader industry trends towards personalized medicine and less invasive diagnostic methods. The market for lung cancer diagnostics is significant, given the prevalence and severity of the disease, and innovations in noninvasive screening are highly valued.

Comparison to Industry Standards

• The document does not provide specific comparisons to comparable companies, projects, or results within the industry.

Management Changes

Corporate Governance

Related Party Transactions

• On September 18, 2023, the company's subsidiary, PPLS, acquired the laboratory assets of Village Oaks Pathology Services, P.A., d/b/a Precision Pathology Services, for $3,500,000. This included $1,000,000 paid by the issuance of 564,972 shares of restricted Common Stock to the Joyce Trust. Dr. Roby Joyce, a current director, was the Medical Director and Laboratory Director of Village Oaks and continues in that role for PPLS.
• In connection with the PPLS acquisition, PPLS entered into a Management Services Agreement with Village Oaks, where PPLS provides comprehensive management and administrative services for a management fee of 70% of net revenues received by Village Oaks. The initial term is 20 years.
• A Succession Agreement was entered into with Dr. Joyce, restricting the disposal of his equity interests in Village Oaks and providing for automatic transfer to a successor physician under certain conditions.
• PPLS also entered into a Professional Services Agreement with Village Oaks, where Village Oaks provides pathology interpretation services to PPLS.
• An Executive Employment Agreement was signed with Dr. Joyce for a three-year term, appointing him as Medical Director and Laboratory Director of PPLS with an annual base salary of $333,333.34, and appointing him to the Board.
• PPLS assumed certain leases, including the Hologic Equipment Lease ($16,914/month, expires Dec 20, 2027) and the Leica Equipment Lease ($19,790/month, expires March 23, 2026).
• PPLS assumed a License Agreement with Pathology Watch for a digital imaging platform ($25,000/month) and support/marketing services ($38,000/month), totaling $63,000 per month.
• On September 17, 2023, Mr. Girgenti (Executive Chairman), the Cranye Girgenti Testamentary Trust, Gary Rubin (Director), The Harvey Sandler Revocable Trust (of which Mr. Rubin is a co-trustee), Ms. Zannes (President & CEO), and Dr. Joyce (Director) consented to an amendment of their outstanding warrants, making them exercisable upon the increase in authorized shares (which occurred on June 5, 2024).
• Timothy Zannes, brother of CEO Maria Zannes, is employed as General Counsel and Secretary. For fiscal year 2024, he received a salary of $80,000 and a bonus of $21,000.

Stakeholder Impact

• **Shareholders**: Face significant potential dilution from the exercise of New Warrants (up to 2.9 million shares) and May 2025 Warrants (up to 49.9 million shares if anti-dilution is triggered). The proposed reverse stock split aims to maintain Nasdaq listing, which is beneficial, but carries risks of reduced liquidity and potential decrease in overall market capitalization. Shareholders will also receive cash in lieu of fractional shares if the reverse split is effected.
• **Employees**: The company emphasizes recruitment, development, and retention, offering competitive pay, retirement programs, broad-based bonuses, stock options, health and welfare benefits, financial counseling, paid time off, and family leave. The increase in authorized shares is intended to provide future equity incentive opportunities, which is crucial for attracting and retaining highly skilled scientific, commercial, and managerial employees.
• **Customers/Patients**: The company's focus on developing noninvasive diagnostics for lung cancer, such as CyPath Lung, aims to benefit patients by increasing early detection, potentially leading to longer lives, fewer unnecessary invasive procedures, reduced anxiety, and lower medical costs. The acquisition of PPLS expands the range of laboratory services offered.
• **Creditors**: The company's ability to conduct capital raising activities through warrant exercises and potential future financings, supported by the increase in authorized shares, could impact its financial health and ability to meet its obligations to creditors. Failure to secure necessary approvals could limit access to capital.

Next Steps

• The Annual Meeting of Stockholders will be held on July 25, 2025, to vote on the proposed matters.
• If approved, the Board of Directors will determine whether and when to effect the reverse stock split based on market conditions and Nasdaq listing requirements.
• The company will file a certificate of amendment to its Certificate of Incorporation for the reverse stock split and/or the increase in authorized shares if approved and deemed advisable by the Board.
• The company agreed to file a registration statement for the resale of the New Warrant Shares within 45 calendar days of February 26, 2025, and to use commercially reasonable efforts to keep it effective.
• If Warrant Stockholder Approval is not obtained at the first meeting, the company is required to call a meeting every three months thereafter until approval is obtained or the May 2025 Warrants are no longer outstanding.
• The company will continue to issue annual equity awards to executive officers in the first quarter and to directors on July 1 of each year.

Key Dates

Recommendation

Keywords

bioAffinity Technologies, SEC filing, proxy statement, DEF 14A, reverse stock split, share authorization, warrant exercise, anti-dilution, Nasdaq compliance, lung cancer diagnostics, CyPath Lung, corporate governance, capital raise, financial reporting, biotechnology, medical diagnostics