| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use
of Estimates The
preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include the valuation allowance on the Company’s deferred tax assets, stock-based
compensation, valuation of goodwill and intangible assets related to the business combination, allowance for contractual adjustments
and discounts related to service revenues, and the useful lives of fixed assets. Principles
of Consolidation The
Company’s condensed consolidated financial statements reflect its financial statements, those of its wholly owned subsidiaries,
and certain variable interest entities where the Company is the primary beneficiary. The accompanying condensed consolidated financial
statements include all the accounts of the Company, its wholly owned subsidiaries, OncoSelect ® In
determining whether the Company is the primary beneficiary of a variable interest entity, it applies a qualitative approach that determines
whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses
of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company continuously
assesses whether it is the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions
may result in the Company consolidating or deconsolidating one or more of its collaborators or partners. Business
Combination On
September 18, 2023, the Company, in connection with the Asset Purchase Agreement it entered into with Village Oaks and Roby P. Joyce, M.D., dated September 18, 2023, acquired substantially all the assets and assumed certain liabilities of Village Oaks
in exchange for total consideration of $ 3,500,000 2.5 564,972 1 ® The
Company recognized goodwill of $ 1,404,000 The
following table summarizes the purchase price and preliminary purchase price allocations relating to the acquisition: SCHEDULE
OF PURCHASE PRICE AND PRELIMINARY PURCHASE PRICE ALLOCATIONS
Cash $ 2,500,000
Common Stock 1,000,000
Total purchase consideration $ 3,500,000
Assets
Net working capital (including cash) $ 912,000
Property and equipment 326,000
Other assets 8,000
Customer relationships 700,000
Trade names and trademarks 150,000
Goodwill 1,404,000
Total net assets $ 3,500,000 Goodwill
represents the excess fair value after the allocation to the identifiable net assets. The calculated goodwill is not deductible for tax
purposes. The
preliminary purchase price allocations relating to the acquisition previously reported in the Quarterly Report on Form 10-Q filed October
14, 2023, reported net working capital of $ 1,167,000 1,149,000 811,000 For
prior year comparative purposes, the pro-forma statement of operations as if combined on January 1, 2023, would result in net revenues
of $ 3,631,208 3,765,983 0.44 Cash
and Cash Equivalents For
the purpose of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months
or less at the time of purchase to be cash equivalents. Cash equivalents are stated at cost, which approximates market value, because
of the short maturity of these instruments. Concentration
of Risk The
Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit
of $ 250,000 Advertising
Expense The
Company expenses all advertising costs as incurred. Advertising expense was $ 131,125 27,741 119,205 21,692 Loss
Per Share Basic
loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of the Company’s
Common Stock outstanding during the period. Diluted loss per share is computed by dividing net loss attributable to common stockholders
by the sum of the weighted-average number of shares of Common Stock outstanding during the period and the weighted-average number of
dilutive Common Stock equivalents outstanding during the period, using the treasury stock method. Dilutive Common Stock equivalents are
comprised of in-the-money stock options, convertible notes payable, and warrants based on the average stock price for each period using
the treasury stock method. The
following potentially dilutive securities have been excluded from the computations of weighted average shares of Common Stock outstanding
as of June 30, 2024 and 2023, as they would be anti-dilutive: SCHEDULE
OF POTENTIALLY DILUTIVE SECURITIES
2024 2023
As of June 30,
2024 2023
Shares underlying options outstanding 337,810 806,392
Shares underlying warrants outstanding 8,838,669 4,649,952
Anti-dilutive securities 9,176,479 5,456,344 Revenue
Recognition The
Company recognizes as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods sold
or services rendered primarily upon completion of the testing process (when results are reported) or when services have been rendered. Patient
Service Fee Revenue Net
revenues from patient service fees accounted for greater than 85 The
process for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation. The
Company follows a standard process, which considers historical denial and collection experience and other factors (including the period
of time that the receivables have been outstanding), to estimate contractual allowances and implicit price concessions, recording adjustments
in the current period as changes in estimates. Further adjustments to the allowances, based on actual receipts, may be recorded upon
settlement. SCHEDULE
OF REVENUE RECOGNITION
2024 2023
For the six months ended June 30,
2024 2023
Patient service fees 1 $ 4,209,955 $ —
Histology service fees 530,053 —
Medical director fees 33,193 —
Department of Defense observational studies 6,923 —
Other revenues 2 23,919 20,659
Total net revenue $ 4,804,043 $ 20,659
1 Patient
services fees include direct billing for CyPath ® 199,000
2 Other
revenues include pre-acquisition CyPath ® Property
and Equipment In
accordance with ASC 360-10, Accounting for the Impairment of Long-Lived Assets Property
and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the
estimated useful life of the asset. Amortization of leasehold improvements is computed using the shorter of the lease term or estimated
useful life of the asset. Additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. Useful
lives of each asset class are as follows: SCHEDULE
OF PROPERTY AND EQUIPMENT USEFUL LIFE
Asset Category Useful Life
Computer equipment 3 5
Computer software 3
Equipment 3 5
Furniture and fixtures 5 7
Vehicles 5
Leasehold improvements Lesser of lease term or useful life Intangible
Assets Intangible
assets, net of accumulated amortization, and goodwill are summarized as follows as of June 30, 2024: SCHEDULE
OF INTANGIBLE ASSETS ADJUSTMENTS
Description Date Acquired Useful Life Cost Amortization Net
Goodwill 9/18/2023 $ 1,404,486 $ — $ 1,404,486
Trade names and trademarks 9/18/2023 18 150,000 (6,527 ) 143,473
Customer relationships 9/18/2023 14 700,000 (39,167 ) 660,833
Total intangible assets, net $ 2,254,486 $ (45,694 ) $ 2,298,792 The
Company incurred amortization of intangible assets of $29,167 0 14,538 0 Recent
Accounting Pronouncements The
Company continues to monitor new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) and
does not believe any accounting pronouncements issued through the date of this Quarterly Report will have a material impact on the Company’s
condensed consolidated financial statements. The
Company adopted FASB issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures on December 31, 2023. The Company used the five steps to ASC 280 to evaluate what, if any, segment reporting would
be beneficial for shareholders. These five steps included: 1) evaluate operating segments for aggregation, 2) perform quantitative threshold
tests, 3) evaluate remaining operating segments for aggregation, 4) ensure that 75% of revenue is reported, and 5) consider practical
limit. Based on the analysis above against those five steps, management concludes that segment reporting is required for two segment
operations: 1) diagnostic R&D and 2) laboratory services. Segment
Information The
Company is organized in two operating segments, Diagnostic Research and Development (“R&D”) and Laboratory Services, whereby its chief
operating decision maker (“CODM”) assesses the performance of and allocates resources. The CODM is the Chief Executive Officer.
Diagnostic R&D includes research and development and clinical development on diagnostic tests. Any revenues assigned to Diagnostic
R&D are proceeds received from observational studies. Laboratory services include all the operations from Village Oaks and PPLS in
addition to sales and marketing costs of CyPath ® SCHEDULE
OF SEGMENT INFORMATION
2024 2023 2024 2023
Three months ended June 30, Six months ended June 30,
2024 2023 2024 2023
Net revenue:
Diagnostic R&D $ 4,038 $ — $ 6,923 $ —
Laboratory
services 1 2,393,614 19,738 4,797,120 20,659
Total net revenue 2,397,652 19,738 4,804,043 20,659
Operating expenses:
Diagnostic R&D (453,895 ) (370,384 ) (896,494 ) (759,629 )
Laboratory services (2,535,285 ) (1,235 ) (5,272,284 ) (1,322 )
General corporate activities (1,496,270 ) (1,426,469 ) (2,668,293 ) (2,596,028 )
Total operating loss (2,087,798 ) (1,778,350 ) (4,033,028 ) (3,336,320 )
Non-operating income (expense), net (17,062 ) 42,764 (29,975 ) 79,763
Net loss before income tax expense (2,104,860 ) (1,735,586 ) (4,063,003 ) (3,256,557 )
Income tax expense (5,419 ) (4,587 ) (9,091 ) (16,406 )
Net loss $ (2,110,279 ) $ (1,740,173 ) $ (4,072,094 ) $ (3,272,963 )
1 The
majority of the increase versus the prior year is from the acquisition of Precision Pathology Laboratories Services, LLC on September
18, 2023. Research
and Development Research
and development costs are charged to expense as incurred. The Company’s research and development expenses consist primarily of
expenditures for lab operations, preclinical studies, compensation, and consulting costs. The
Company incurred research and development expenses of $ 796,072 704,741 402,433 335,125 Accrued
Research and Development Costs The
Company records accrued liabilities for estimated costs of research and development activities conducted by service providers, which
include preclinical studies. The Company records the estimated costs of research and development activities based upon the estimated
amount of services provided but not yet invoiced and includes these costs in accrued expenses in the accompanying condensed consolidated
balance sheets and within research and development expense in the accompanying condensed consolidated statements of operations. The
Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established
with service providers. The Company makes significant judgments and estimates in determining the accrued expenses balance in each reporting
period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences
between accrued costs and actual costs incurred since its inception. Regulatory
Matters Regulations
imposed by federal, state, and local authorities in the United States (“U.S.”) are a significant factor in providing medical
care. In the U.S., drugs, biological products, and medical devices are regulated by the Federal Food, Drug, and Cosmetic Act (“FDCA”),
which is administered by the Food and Drug Administration (“FDA”) and the CMS. The Company has not yet obtained marketing
authorization from the FDA but is able to market its CyPath ® |
