Company: BIAF
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010787
Chunk: 10

Company: bioAffinity Technologies, Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 7
Chunk 10
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The preparation of financial statements in conformity
with U.S. GAAP 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 revenues and 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.

Patient Fee Revenues

We follow ASC 606, Revenue from Contracts with
Customers, which requires revenue recognition in the period in which the service was performed. To be able to report timely net revenues
for the period, estimates are used for a portion of uncollected balances. 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. The process
for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation.

Patient Fee Receivables and Considerations for
Credit Losses

We follow accounting considerations of CECL - Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. With the acquisition of PPLS
and control of Village Oaks, the Company’s board-certified pathologists provide anatomic and clinical pathology services for patients
and other customers. The Company’s other customer types include contract research organizations (“CROs”), hospitals,
and independent laboratories. The majority of the Company’s revenues stem from fees for services provided to patients, and thus
in those arrangements, the patient is the customer, although the services may be requested by a physician on the patient’s behalf.
Furthermore, in addition to its contracts with patients, the Company separately contracts with third-party payors (insurance companies
and governmental payors), who are typically responsible for all or the majority of the fees agreed upon for such services provided to
patients. Historically, material amounts of gross charges are not collected due to various agreements with insurance companies, capped
pricing levels for government payors, and uncollectible balances from individual payors. To estimate these allowances of credit losses,
the Company assesses the portfolio risk segments and historical data on collection rates. These estimated allowances offset patient revenues
and accounts receivables.

Discount Rate for Finance Le