Bluejay Diagnostics, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2021. Management’s Annual Report on Internal Control Over Financial Reporting This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the year ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 41 Inherent Limitations of Controls Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 42 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Our Board of Directors has adopted a written Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available on our website (bluejaydx.com) under “Governance Overview” within the “Investor Relations” section. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of this Code and by posting such information on the website address and location specified above. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information regarding our equity compensation plans at December 31, 2021: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted- average exercise price of outstanding options, warrants and rights (b) Number of securities (by class) remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders (1) 589,786 $ 1.86 1,943,269 Equity compensation plans not approved by security holders (2) 559,599 $ 4.20 - (1) Represents shares of common stock issuable upon exercise of outstanding stock options and rights under our 2018 and 2021 Stock Plans. (2) Consists of warrants issued to placement agents, underwriters and consultants. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2021. 43 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: (1) Financial Statements—See Index to Consolidated Financial Statements at Part II, Item 8 on page F-1 of this Annual Report on Form 10-K. (2) All financial statement schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the Notes thereto. (3) See the accompanying Index to Exhibits filed as a part of this Annual Report, which list is incorporated by reference in this Item. (b) See the accompanying Index to Exhibits filed as a part of this Annual Report. (c) Other schedules are not applicable. ITEM 16. FORM 10-K SUMMARY. None. 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 10, 2022. Bluejay Diagnostics, Inc. By: /s/ Neil Dey Neil Dey Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Neil Dey Neil Dey Director and Chief Executive Officer (Principal Executive Officer) March 10, 2022 /s/ Gordon Kinder Gordon Kinder Chief Financial Officer (Principal Financial and Accounting Officer) March 10, 2022 /s/ Douglas C. Wurth Douglas C. Wurth Chairman of the Board of Directors March 10, 2022 /s/ Donald R. Chase Donald R. Chase Director March 10, 2022 /s/Svetlana Dey Svetlana Dey Director March 10, 2022 /s/Fred S. Zeidman Fred S. Zeidman Director March 10, 2022 /s/ Gary Gemignani Gary Gemignani Director March 10, 2022 45 Index to Consolidated Financial Statements Contents Report of Independent Registered Public Accounting Firm (PCAOB ID # 392 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements in Redeemable Preferred Stock and Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Bluejay Diagnostics, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Bluejay Diagnostics, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Wolf & Company, P.C. We have served as the Company's auditor since 2017. Boston, Massachusetts March 10, 2022 F- 2 Bluejay Diagnostics, Inc. Consolidated Balance Sheets December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 19,047,778 $ 912,361 Inventory - 84,762 Prepaid expenses and other current assets 1,612,708 61,071 Total current assets 20,660,486 1,058,194 Property and equipment, net 337,366 459,138 Other non-current assets 21,019 - Total assets $ 21,018,871 $ 1,517,332 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 295,778 $ 374,928 Due to related party 2,000 125,102 Accrued expenses and other current liabilities 339,384 133,820 Notes payable, net - 1,041,186 Note payable, Paycheck Protection Program - 14,725 Derivative warrant liability - 155,629 Total liabilities 637,162 1,845,390 Commitments and Contingencies (See Note 13) Series A redeemable, convertible preferred stock, $ 0.0001 par value; 10,600 shares authorized; 0 and 10,600 shares issued and outstanding at December 31, 2021 and 2020, respectively - 1,077,303 Series B redeemable, convertible preferred stock, $ 0.0001 par value; 5,918 shares authorized; 0 and 5,187 shares issued and outstanding at December 31, 2021 and 2020, respectively - 1,800,347 Series C redeemable, convertible preferred stock, $ 0.0001 par value; 636 shares authorized; 0 and 636 shares issued and outstanding at December 31, 2021 and 2020, respectively - 1,000,465 Stockholders’ equity (deficit): Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 20,112,244 and 3,147,200 shares issued and outstanding at December 31, 2021 and 2020, respectively 2,011 315 Additional paid-in capital 28,074,484 - Accumulated deficit ( 7,694,786 ) ( 4,206,488 ) Total stockholders’ equity (deficit) 20,381,709 ( 4,206,173 ) Total liabilities, redeemable, convertible preferred stocks and stockholders’ equity (deficit) $ 21,018,871 $ 1,517,332 See notes to consolidated financial statements. Reflects a 1-for-3.15 stock dividend effective June 7, 2021. F- 3 Bluejay Diagnostics, Inc. Consolidated Statements of Operations For the Years Ended December 31, 2021 2020 Operating expenses: Research and development $ 1,147,955 $ 527,253 General and administrative 1,792,482 596,116 Marketing and business development 289,726 73,022 Total operating expenses 3,230,163 1,196,391 Operating loss ( 3,230,163 ) ( 1,196,391 ) Other income (expense): Gain on forgiveness of note payable, Paycheck Protection Program 5,000 102,000 Derivative warrant liability gain (loss) 9,676 ( 42,434 ) Interest expense, net of amortization of premium ( 367,459 ) ( 26,997 ) State grant income 75,000 - Other income 19,648 5,537 Total other income (expense), net ( 258,135 ) 38,106 Net loss $ ( 3,488,298 ) $ ( 1,158,285 ) Net loss per share - Basic and diluted $ ( 0.41 ) $ ( 0.37 ) Weighted average common shares outstanding: Basic and diluted 8,522,422 3,147,200 See notes to consolidated financial statements. Reflects a 1-for-3.15 stock dividend effective June 7, 2021. F- 4 Bluejay Diagnostics, Inc. Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity (Deficit) Redeemable, Convertible Preferred Stock Stockholders’ Equity (Deficit) Additional Total Stockholder’s Series A Series B Series C Series D Common Stock Paid-In Accumulated Equity Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance at December 31, 2019 10,600 $ 892,809 4,732 $ 1,575,321 - $ - - $ - 3,147,200 $ 315 $ - $ ( 2,932,753 ) $ ( 2,932,438 ) Issuance of Series B redeemable, convertible preferred stock, net of issuance costs of $ 4,570 - - 455 160,228 - - - - - - - - - Issuance of Series C redeemable, convertible preferred stock, net of issuance costs of $ 8,776 - - - - 636 994,832 - - - - - - - Reclassification of derivative warrant liability - - - ( 16,787 ) - - - - - - - - - Accretion of redeemable, convertible preferred stock to redemption value - 184,494 - 81,585 - 5,633 - - - - ( 156,262 ) ( 115,450 ) ( 271,712 ) Allocation of proceeds to common stock warrants - - - - - - - - 148,892 148,892 Stock-based compensation expense - - - - - - - - - - 7,370 - 3,730 Net loss - - - - - - - - - - ( 1,158,285 ) ( 1,158,285 ) Balance at December 31, 2020 10,600 $ 1,077,303 5,187 $ 1,800,347 636 $ 1,000,465 3,147,200 $ 315 $ - $ ( 4,206,488 ) $ ( 4,206,173 ) Exercise of common stock warrants - - - - - - - - 4,715,836 471 140,990 - 141,461 Accretion of redeemable, convertible preferred stock to redemption value - 73,912 - 33,994 19,961 - - - - ( 127,866 ) - ( 127,866 ) Conversion of convertible debentures into Series D preferred stock - - - - - 4,500 4,036,535 - - - - - Conversion of redeemable, convertible preferred stock into common stock ( 10,600 ) ( 1,151,215 ) ( 5,187 ) ( 1,834,341 ) ( 636 ) ( 1,020,426 ) ( 4,500 ) ( 4,036,535 ) 7,084,323 708 8,041,809 - 8,042,517 Fair value of warrants issued for services - - - - - - - - - - 180,339 - 180,339 Fair value of warrants issued to placement agent in relation to the Convertible debentures - - - - - - - - - 166,816 166,816 Conversion of Amended 2017 Convertible Notes into common stock - - - - - - - - 580,000 58 579,942 - 580,000 Reclassification of Series B Warrants - - - - - - - - - - 145,953 - 145,953 Stock-based compensation expense - - - - - - - - - - 68,458 - 68,458 Issuance of common stock from exercise of stock options - - - - - - - - 56,385 6 22,617 - 22,623 Issuance of common stock in initial public offering, net of offering costs of $ 2,750,601 - - - - - - - - 2,160,000 216 18,855,663 - 18,855,879 Issuance of common stock from exercise of warrants - - - - - - - - 2,368,500 237 ( 237 ) - - Net loss - - - - - - - - - ( 3,488,298 ) ( 3,488,298 ) Balance at December 31, 2021 - $ - - $ - - $ - - 20,112,244 $ 2,011 $ 28,074,484 $ ( 7,694,786 ) $ 20,381,709 See notes to consolidated financial statements. Reflects a 1-for-3.15 stock dividend effective June 7, 2021. F- 5 Bluejay Diagnostics, Inc. Consolidated Statements of Cash Flows For the Year Ended December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ ( 3,488,298 ) $ ( 1,158,285 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 145,719 157,039 Stock-based compensation expense 68,458 7,370 Issuance of warrants for service 180,339 - Gain on forgiveness of note payable, Paycheck Protection Program ( 5,000 ) ( 102,000 ) Non-cash interest expense 227,007 ( 51,530 ) (Gain) loss on revaluation of derivative warrant liability ( 9,676 ) 42,434 Changes in operating assets and liabilities: Accounts receivable - 645 Inventory 84,762 38,746 Prepaid expenses and other current assets ( 1,551,637 ) 19,106 Non-current assets ( 21,019 ) - Accounts payable ( 79,150 ) 345,803 Due to related party ( 123,102 ) 39,097 Accrued expenses 204,839 152,865 Net cash used in operating activities ( 4,366,758 ) ( 508,710 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 23,947 ) - Net cash used in investing activities ( 23,947 ) - CASH FLOWS FROM FINANCING ACTIVITIES: Payments of principal on notes payable ( 289,617 ) - Payments of convertible debenture issuance costs ( 562,842 ) Proceeds from initial public offering, net of offering costs 18,855,879 - Proceeds from issuance of convertible debentures 4,500,000 - Proceeds from issuance of Series B redeemable, convertible preferred stock, net of issuance costs - 60,228 Proceeds from issuance of Series C redeemable, convertible preferred stock, net of issuance costs - 994,832 Proceeds from subscription to the 2020 Promissory Notes - 154,000 Proceeds (payments) on note payable, Paycheck Protection Program ( 9,000 ) 116,000 Proceeds from exercise of common stock warrants 9,079 - Proceeds from exercise of stock options 22,623 - Net cash provided by financing activities 22,526,122 1,325,060 Increase in cash and cash equivalents 18,135,417 816,350 Cash and cash equivalents, beginning of year 912,361 96,011 Cash and cash equivalents, end of year $ 19,047,778 $ 912,361 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH FINANCING ACTIVITIES Interest paid $ 150,228 $ 53,240 Accretion of Series A redeemable, convertible preferred stock dividend $ 17,667 $ 42,400 Accretion of Series A redeemable, convertible preferred stock issuance costs and fair value adjustment $ 56,245 $ 143,094 Accretion of Series B redeemable, convertible preferred stock dividend $ 31,258 $ 74,018 Accretion of Series B redeemable, convertible preferred stock issuance costs $ 2,736 $ 6,567 Accretion of Series C redeemable, convertible preferred stock dividend $ 16,727 $ 4,619 Accretion of Series C redeemable, convertible preferred stock issuance costs $ 3,234 $ 1,014 Exercise of warrants through debt principal conversion $ 132,383 $ - Conversion of convertible debentures into preferred stock $ 4,500,000 $ - Conversion of preferred stock into common stock $ 8,505,982 $ - Conversion of amended 2017 convertible notes $ 580,000 $ - Reclassification of derivative warrant liability into additional paid-in capital $ 145,953 $ 16,787 Fair value of warrants issued to placement agent in relation to the Convertible debentures $ 166,816 $ - Fair value of warrants for common stock issued for services $ 180,339 $ - Relative fair value of warrants for common stock issued in connection with notes payable $ - $ 148,892 Fair value of warrants issued to underwriters $ 2,939,327 $ See notes to consolidated financial statements. F- 6 Bluejay Diagnostics, Inc. Notes to the Consolidated Financial Statements 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Business Bluejay Diagnostics, Inc. (the “Company”), which commenced its activities on March 20, 2015, is incorporated under the laws of the State of Delaware. The Company is a diagnostic company that aims to develop and market a more cost efficient, rapid, near patient product for triage, diagnosis and monitoring of disease progression The Company is utilizing the Symphony technology platform and Symphony IL-6 test licensed from Toray Industries, Inc. of Japan (see Note 3). The Company is also developing biomarkers for detection of other diseases such as hsTNT/I for myocardial injury and NT-proBNP for cardiac heart failure . The Company’s ALLEREYE diagnostic test (“ALLEREYE”) is a POC device that offers healthcare providers a cost effective, reliable, easy to use solution for diagnosis of Allergic Conjunctivitis. ALLEREYE received clearance by the U.S. Food and Drug Administration (the “FDA”) in October 2017. On June 4, 2021, the Company created Bluejay Spinco, LLC, (“SpinCo”) a wholly owned subsidiary of the Company, for purposes of further development of ALLEREYE. The Company transferred assets and liabilities related to ALLEREY to SpinCo in accordance with the Contribution and Assumption Agreement. The assets and liabilities were transferred from the Company to SpinCo at their carrying value. The Company is responsible for the operational activities of SpinCo and bears all costs necessary to operate SpinCo. The Company’s CEO is also the CEO of SpinCo and oversees the business strategy and operations of SpinCo. Initial Public Offering The Company completed its initial public offering (“IPO”) on November 10, 2021 (“IPO Date”), whereby it sold 2,160,000 Units, each Unit consisting of one share of the Company’s common stock, one warrant to purchase one share of common stock at an exercise price of $7.00 per share (“Class A Warrant”), and one warrant to purchase one share of common stock at an exercise price of $10.00 (“Class B Warrant”) (collectively, a “Unit”). Each Unit was sold at a price of $10.00. Each warrant contained within the Units is exercisable until the fifth anniversary of the IPO date, however, holders of Class B Warrants may exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $10.0 million of volume is traded in our common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A Warrants and Class B Warrants, shortly after the IPO date resulting in an additional issuance of 324,000 Class A Warrants and 324,000 Class B Warrants. The gross proceeds from the IPO were approximately $ 21.6 million and were offset by $ 2.8 million in offering costs. Risks and Uncertainties The Company is subject to a number of risks similar to other companies in its industries, including rapid technological change, competition from larger biotechnology companies and dependence on key personnel. The extent of the impact of the COVID-19 pandemic on the Company’s business continues to be highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a lasting national and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain. F- 7 Liquidity Since its inception, the Company has devoted substantially all of its efforts to business planning, business development, research and development, and raising capital. The income potential of the Company’s business and market are unproven. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. As of December 31, 2021, the Company had $ 19.0 million in cash and cash equivalents. The Company believes it has sufficient cash to meet its funding requirements for at least the next 12 months from the issuance of this report. However, the Company has experienced net losses and negative cash flows from operating activities since its inception and has an accumulated deficit of $ 7.7 million as of December 31, 2021. The Company expects to continue to incur net losses for the foreseeable future and believes it will need to raise substantial additional capital to accomplish its business plan over the next several years. The Company plans to continue to fund its losses from operations and capital funding needs through a combination of equity offerings, debt financings and generating revenue from sales to customers. If the Company is not able to secure adequate additional funding or generate sufficient revenue, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include all adjustments necessary for the presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. On June 7, 2021, the Company’s Board of Directors declared a stock dividend of 2.15 shares of common stock for every share of common stock. This stock dividend was deemed a large stock dividend and was treated as a 1-for-3.15 stock split (“Stock Split”). The common stock shares and per share amounts (other than authorized shares) in these consolidated financial statements and related notes have been retroactively restated to reflect the stock dividend for all periods presented. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in accounting for the fair value-based measurement of stock-based compensation, accruals, convertible notes and warrants. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the consolidated financial statements. Cash and cash equivalents The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federal insurance limit. F- 8 Concentration of Credit Risk Cash, and cash equivalents consist of financial instruments that potentially subject the Company to a concentration of credit risk in the event of a default by the related financial institution holding the securities, to the extent of the value recorded in the balance sheet. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments with lower credit risk. Research and Development Expenses Development costs incurred in the research and development of new products are expensed as incurred. Research and development costs include, but are not limited to, salaries, benefits, stock-based compensation, laboratory supplies, fees for professional service providers and costs associated with product development efforts, including preclinical studies and clinical trials. The Company estimates preclinical study and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Derivative instruments The Company does not use derivative instruments to hedge exposures to cash flow or market risks; however, certain warrants to purchase preferred stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net -cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in value charged (credited) to operations each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the then fair value to equity. The Company values its outstanding warrants using the Black-Scholes option pricing model. Stock-based compensation Share-based compensation expense for all share-based payment awards made to employees, directors and non-employees is measured based on the grant-date fair value of the award. Share-based compensation expense for awards granted to non-employees is determined using the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. The Company recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period. For stock awards for which vesting is subject to performance – based milestones, the expense is recorded over the implied service period after the point when the achievement of the milestone is probable, or the performance condition has been achieved. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company does not have a history of market prices of its common stock, and as such, volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method for grants to employees, and is based on the contractual term for non -employee awards. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on history and expectation of paying no dividends. F- 9 The Company recognizes forfeitures related to employee share-based payments when they occur. Forfeited options are recorded as a reduction to stock compensation expense. Fair Value Measurements The Company applies a three-level valuation hierarchy for fair value measurements. The categorization of assets and liabilities within the valuation hierarchy is based on the lowest level of input that is significant to the measurement of fair value. Level 1 inputs to the valuation methodology utilize unadjusted quoted market prices in active markets for identical assets and liabilities. Level 2 inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets and liabilities, quoted prices for identical and similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 inputs to the valuation methodology are unobservable inputs based on management’s best estimate of the inputs that market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. A change to the level of an asset or liability within the fair value hierarchy is determined at the end of a reporting period. Fair Values of Financial Instruments The fair value of cash, cash equivalent, and accounts payable approximates the carrying value of these financial instruments because of the short-term nature of any maturities. The Company determines the estimated fair values of other financial instruments, using available market information and valuation methodologies, primarily input from independent third-party pricing sources. Redeemable Convertible Preferred Stock The Company has classified Series A, Series B, and Series C redeemable, convertible preferred stock (“Preferred Stock”) as temporary equity in the accompanying consolidated balance sheet at December 31, 2020 due to terms that allow for redemption of the shares upon certain events that are outside of the Company’s control. On June 1, 2021, the Company’s outstanding Preferred Stock was converted into common stock (see Note 8). Segment Reporting Management has determined that the Company has one operating segment, which is consistent with the Company structure and how it manages the business. As of December 31, 2021 and 2020, all of the Company’s assets were located in the United States. Income Taxes The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions that require accrual or disclosure as of December 31, 2021. Any interest or penalties are charged to expense. During the years ended December 31, 2021 and 2020, the Company did not recognize any interest and penalties. Tax years subsequent to December 31, 2017 are subject to examination by federal and state authorities. The Company recognizes deferred tax assets and liabilities based on the impact of temporary differences between assets and liabilities recognized for tax and financial reporting purposes measured by applying enacted tax rates and laws that will be in effect when the differences are expected to reverse, net operating loss carryforwards and tax credits. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized. The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. Net Loss per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of convertible preferred stock, convertible notes, options outstanding under the Company’s stock option plan and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. F- 10 Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares): December 31 2021 2020 Redeemable, convertible preferred stock - 2,584,323 Options to purchase common stock 503,433 375,826 Warrants for common stock 811,882 4,846,688 Warrants for Series B redeemable, convertible preferred stock - 115,030 Class A warrants for common stock 2,484,000 - Class B warrants for common stock 115,500 - Newly Adopted Accounting Standards In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This guidance changes how entities account for convertible instruments and contracts in an entity’s own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company elected to early adopt this guidance in the first quarter of 2021. The adoption of this standard had no material impact on the Company’s consolidated financial statements. Recently Issued Accounting Standards In May 2021, the FASB issued ASU 2021-04 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) . The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early application is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the adoption date of this ASU and the impact, if any, adoption will have on its financial position and results of operations. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02 , Leases. The new guidance requires the recognition of lease liabilities, representing future minimum lease payments, on a discounted basis, and corresponding right-of-use assets on a balance sheet for most leases, along with requirements for enhanced disclosures to give financial statement users the ability to assess the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The Company adopted the provisions of ASU 2016-02 on January 1, 2022 and elected to implement the transition package of practical expedients permitted within the new standard, which included (i) not reassessing whether expired or existing contract contain leases, (ii) not reassessing lease classification, and (iii) not revaluing initial direct costs for existing leases. Adoption of the new standard resulted in the recording of initial right-of-use assets and lease liabilities of approximately $ 200,000 as of January 1, 2022. The new standard did not materially impact the Company’s consolidated statements of operations or cash flows. F- 11 3. LICENSE AND SUPPLY AGREEMENT WITH TORAY INDUSTRIES On October 6, 2020, the Company entered into a license and supply agreement (“Toray Agreement”) with Toray Industries, Inc. (“Toray”). Under the Toray Agreement, the Company received the exclusive license to make and distribute the protein detection chips that has a function of automatic stepwise feeding of reagent (“Toray Chips”) outside of Japan. In exchange for the license, the Company committed to make two payments of $ 120,000 each. The first payment was made in January 2021, and the second payment was made in October 2021. In addition, following the first sale of Toray Chips, the Company will also make royalty payments to Toray equal to 15 % of the net sales of the Toray Chips for the period that any underlying patents exist or for 5 years after the first sale. Following the first sale, the Company will pay a one-time minimum royalty of $ 60,000 , which shall be creditable against any royalties owed to Toray in such calendar year. The Company will pay a minimum royalty of $ 100,000 in each year thereafter, which are creditable against any royalties owed to Toray in such calendar year. There were no sales of or revenues from the Toray Chips during the twelve-month periods ended December 31, 2021 and 2020. At December 31, 2020, $ 240,000 were accrued related to the Toray Agreement and was included in current liabilities on the consolidated balance sheet. No amounts were accrued at December 31, 2021. 4. FAIR VALUE MEASUREMENTS The assets and liabilities measured at fair value on a recurring basis at December 31, 2021 and 2021 are summarized in the tables below. December 31, 2021 Level 1 Level 2 Level 3 Total Assets Cash equivalents - money market funds $ 8,795,293 $ - $ - $ - $ 8,795,293 $ - $ - $ - December 31, 2020 Level 1 Level 2 Level 3 Total Liabilities Derivative warrant liability $ - $ - $ 155,629 $ - $ - $ - $ 155,629 $ - The table below presents the changes in Level 3 liabilities measured at fair value on a recurring basis. Warrant Liability Balance at December 31, 2019 $ 96,408 Unrealized loss 42,434 Issuance of Series B warrants 16,787 Balance at December 31, 2020 $ 155,629 Unrealized gain ( 9,676 ) Fair value of Series B warrants converted into warrants for common stock ( 145,953 ) Balance at December 31, 2021 $ - Unrealized gain (loss) on revaluation of derivative warrant liability is included in derivative warrant liability gain (loss) in the consolidated statements of operations. There were no assets or liabilities measured at fair value on a non-recurring basis at December 31, 2021 or 2020. F- 12 5. NOTES PAYABLE 2017 Notes Payable In 2017, the Company entered into multiple Unit Purchase Agreements. In connection with this financing (the “Financing”), the Company issued 106 Units at a purchase price of $ 20,000 each. A Unit consisted of 100 shares of Series A redeemable, convertible preferred stock (“Series A”) at a purchase price of $ 100 per share (“Original Offering Price”) and $ 10,000 in notes payable (the “Notes”). Gross proceeds from the Financing were $ 2,120,000 and were allocated between the Notes and Series A based on their relative fair values with $ 1,643,349 allocated to the Notes and $ 476,651 to the Series A. The Notes are secured by all business assets of the Company and are fully guaranteed by Lana Management and Business Research International, LLC (“LMBRI”), a related party (see Note 10). Certain Notes with aggregate principal amount of $ 930,000 mature on March 20, 2022 while $ 130,000 of the Notes mature on June 22, 2022. The Notes bear interest at 5 % per annum, increasing to 7 % on the amounts in default. For the first twelve months following issuance of the Notes, interest accrued on the Notes of approximately $ 53,000 was added to the principal balance of the Notes and not paid out to investors. The Notes require principal payments of $ 265,000 per year commencing in 2019 on the second anniversary of the Notes’ issuance and annually thereafter, until the final principal payment upon maturity. For the year ended December 31, 2020, no principal payments were made to investors and the remaining unpaid balance on the Notes became immediately due and was classified as short-term at December 31, 2020. The Company defaulted on the Notes in January 2021. On February 17, 2021, the Company repaid in cash $ 268,000 in principal and $ 2,010 in accrued interest on the Notes. On May 26, 2021, the remaining Notes of $ 580,000 were amended and restated (the “Amended Notes”). The Amended Notes accrue no interest and are due in May 2023. On June 8, 2021, the Amended Notes were automatically convertible into 580,000 shares of common stock at the conversion rate of $ 1.00 per share upon the issuance by the Company of securities to Sabby Volatility Warrant Master Fund, Ltd (“Sabby”) (the “Sabby Agreement”) (see Note 6). The amendment and subsequent conversion of the Notes was accounted for as the debt settlement in equity under ASC 470-60 Troubled Debt Restructurings by Debtors . The Company recognized a gain on extinguishment of $ 6,360 , equal to the difference between the carrying amount of the Notes at the conversion date, totaling $ 586,360 , and the fair value of the common stock shares issued to the noteholders of $ 580,000 . This gain on extinguishment is included in other income on the consolidated statement of operations for the year ended December 31, 2021. For the years ended December 31, 2021 and 2020 the interest expense on the Notes was $ 6,360 and $ 59,274 , respectively. The allocation of the gross proceeds from the Financing resulted in recording a premium on the Notes of $ 583,349 . The premium is amortized over the term of the Notes. As a result of the event of default in January 2021 and the Notes becoming due on demand, the Company accelerated the amortization of the premium and discount and amortized the remaining balances during the three-month period ended March 31, 2021. The Company recognized the amortization of the premium of $ 145,837 and $ 116,670 as a reduction to non-cash interest expense during the years ended December 31, 2021 and 2020, respectively. The premium amortization was included within interest income (expense) on the consolidated statements of operations. In connection with the Financing, the Company paid $ 183,194 in issuance costs of which $ 91,597 was recorded as a discount on the Notes and is being amortized over the term of the Notes. The remaining $ 91,597 was netted with the proceeds allocated to Series A (see Note 8). The Company recognized the amortization of the discount of $ 22,899 and $ 18,319 as non-cash interest expense during the year ended December 31, 2021 and 2020, respectively. The discount amortization was included in the interest income (expense) on the consolidated statements of operations. 2020 Subordinated Notes On October 22, 2020, the Company issued $ 154,000 in subordinated promissory notes (“Subordinated Notes”) to the Company’s shareholders, including $ 30,000 to LMBRI. The Subordinated Notes accrued interest at 8 % payable at each quarter end and had a maturity date of March 31, 2021. The Company defaulted on the Subordinated Notes on March 31, 2021, and the Subordinated Notes started to accrue 15 % penalty interest starting on the date of default. For the years ended December 31, 2021 and 2020 interest expense on the Subordinated Notes was $ 7,443 and $ 2,396 respectively. F- 13 In conjunction with the issuance of the Subordinated Notes, the Company issued to each noteholder warrants to purchase shares of the Company’s common stock (“Subordinated Note Warrants”) totaling 4,846,688 Common Stock Warrants, of which 944,160 were issued to LMBRI. The Subordinated Note Warrants have an exercise price of $ 0.03 per share, and are exercisable upon issuance date and have a 5 -year term. The Subordinated Note Warrants may be exercised for cash or through cancellation of the Subordinated Notes. The terms of the Common Stock Warrants were amended in November 2021 to provide for cashless exercise (see Note 7). The fair value of the Subordinated Note Warrants at the issuance date was estimated to be $ 4,488,570 using a Black-Scholes option pricing model. The Subordinated Note Warrants were accounted for as equity under ASC 815 – Derivatives and Hedging . The proceeds from the issuance of the Subordinated Notes were allocated between the Subordinated Notes and the Subordinated Note Warrants based on their relative fair values, with $ 5,108 allocated to the Subordinated Notes and $ 148,892 allocated to the Common Stock Warrants. The proceeds allocated to the Subordinated Note Warrants were recorded in additional paid-in capital on the accompanying consolidated balance sheet as of December 31, 2020. The allocation of the proceeds to the Subordinated Note Warrants resulted in a discount to the Subordinated Notes of $ 148,892 . The Company amortized this discount through non-cash interest expense using the effective interest method, of which $ 83,752 and $ 65,140 was amortized during the years ended December 31, 2021 and 2020, respectively, and included in the interest income (expense) in the consolidated statement of operations. On June 7, 2021, the holders of $ 132,383 in principal of the Subordinated Notes elected to exercise their warrants into 4,166,357 shares of common stock, with the principal from those notes applied to the exercise price of the warrants. The remaining $ 21,617 principal amount of the Subordinated Notes was repaid in cash in 2021. 6. CONVERTIBLE DEBENTURES On June 7, 2021, the Company entered into a Securities Purchase Agreement with Sabby, under which the Company committed to sell, and Sabby agreed to purchase, an aggregate of $ 4,500,000 principal amount of debentures, of which $ 3,000,000 upon execution of the agreement and the remaining $ 1,500,000 within three trading days of the later of (i) the date that the Company files the Registration Statement with the SEC and (ii) the date that the Company files the registration statement registering the shares of Common Stock to be issued in the IPO. On June 8, 2021, the Company issued a total of $ 3,000,000 of 7.5 % Senior Secured Convertible Debentures (the “Convertible Debentures”) to Sabby. On August 4, 2021, the Company issued an additional $ 1,500,000 of Convertible Debentures upon the filing of a registration statement in an Initial Public Offering, which was filed on July 22, 2021. The Convertible Debentures were due on May 31, 2022 and secured by all of the Company’s assets except for the assets transferred to SpinCo. The Convertible Debentures’ principal amount was convertible, at the holder’s option, into the Company’s Series D Convertible Preferred Stock (Series D) at $ 1,000 conversion price per share. The Convertible Debenture was automatically converted into Series D upon the effectiveness of an IPO. The Company was obligated to pay interest on the Convertible Debentures at the rate of 7.5% per annum, payable quarterly beginning on July 1, 2021, on each Conversion Date (as to that principal amount then being converted), on the Forced Conversion Date (as to that principal amount then being converted) and on the Maturity Date in cash. For the year ended December 31, 2021, interest expense on the Convertible Debentures was $ 124,829 . In connection with the IPO, on November 10, 2021, all of the Company’s outstanding Convertible Debentures automatically converted into 4,500 shares of Series D Preferred Stock. Subsequently the holder of all the 4,500 outstanding shares of Series D Preferred Stock exercised their option to convert their Series D preferred stock shares into 4,500,000 shares of common stock. The Company incurred $ 729,658 in issuance costs consisting of cash payments and 225,000 warrants (“Dawson Warrants”) issued to the placement agent for compensation for their services in relation to the issuance of the Convertible Debentures. The Dawson Warrants are exercisable after May 10, 2022 at the exercise price of $ 1.25 per share of common stock, and have a 5-year term. These warrants were accounted for as equity under ASC 815 – Derivatives and Hedging , and the grant date fair value was estimated to be $ 166,816 using Black-Scholes option pricing model and is included in issuance costs related to the Convertible Debentures. F- 14 The resulting discount is amortized over the term of the Convertible Debentures using the effective interest method. The Company recognized $ 266,193 of amortization of the discount during the year ended December 31, 2021, which was included within interest income (expense) in the consolidated statement of operations. The remaining $ 463,465 of unamortized discount was credited to the capital accounts at the time of conversion. 7. WARRANTS The following table summarizes information with regard to warrants outstanding at December 31, 2021: Shares Exercisable for Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Common Stock Warrants 811,882 Common Stock $ 3.24 4.1 Class A Warrants 2,484,000 Common Stock $ 7.00 4.9 Class B Warrants 115,500 Common Stock $ 10.00 4.9 The following assumptions were used in the Black-Scholes option pricing model to estimate the fair value of the warrants granted during the year ended December 31, 2021: Risk-free interest rate 0.37 % - 0.73 % Dividend rate 0 % Volatility 106.00 % - 142.46 % Expected life (in years) 5 Common Stock Warrants In March 2021, the Company granted to a financial advisor warrants to purchase 226,599 shares of the Company’s common stock (“Advisor Warrants”) as consideration for services in connection with the planned initial public offering (“IPO”). The warrants are exercisable at any time from the issuance date at the exercise price of $ 3.177 per share of common stock, subject to adjustment based on the amounts raised in the IPO, and have a 5 -year term. These warrants were accounted for as equity under ASC 815 – Derivatives and Hedging , and the grant date fair value was estimated to be $ 180,339 using a Black-Scholes option pricing model and were netted against the IPO proceeds. The terms of the advisory services agreement also provide for an incentive bonus of $ 200,000 payable upon closing of the IPO if such a closing occurs on or before January 31, 2022. This amount was netted against the IPO proceeds. As of December 31, 2021, all of the Advisor Warrants remain outstanding. In August 2021, the Company granted 225,000 warrants (“Dawson Warrants”) to its placement agent for compensation for their services in relation to the issuance of the Convertible Debentures (see Note 6). As of December 31, 2021, all of the Dawson Warrants remain outstanding. In November 2021, the Company granted 108,000 warrants (“Underwriter Warrants”) with an exercise price of $ 12.50 , and a fair value of approximately $ 356,000 , to the underwriter of the IPO which is in addition to the cash fees paid for underwriting the Company’s IPO. As of December 31, 2021, all of the Underwriter Warrants remain outstanding. In October 2020, in conjunction with the issuance of the Subordinated Notes, the Company granted 4,846,688 warrants (“Subordinated Note Warrants”) to the noteholders, of which 944,160 warrants were issued to LMBRI (see Note 5). In November 2021, the terms of some of the Subordinated Note Warrants were amended to provide for cashless exercise. During 2021, 4,718,251 of the Subordinated Note Warrants were exercised. As of December 31, 2021, 128,438 of the Subordinated Note Warrants were outstanding. F- 15 Class A Warrants and Class B Warrants In conjunction with the Company’s IPO as described in Note 1 the Company issued 2,160,000 Class A Warrants and 2,160,000 Class B Warrants. Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A Warrants and Class B Warrants, shortly after the IPO date resulting in an additional issuance of 324,000 Class A Warrants and 324,000 Class B Warrants. From the net IPO proceeds, $ 5,164,751 and $ 7,323,161 , respectively, were apportioned to the Class A Warrants and Class B Warrants. Class A Warrants entitle the holder to purchase one share of common stock at an exercise price of $ 7.00 per share. As of December 31, 2021 all Class A Warrants were outstanding. Class B Warrants entitle the holder to purchase one share of common stock at an exercise price of $ 10.00 per share. Holders of Class B Warrants may also exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $10.0 million of volume is traded in our common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). In such event, the aggregate number of shares of common stock issuable in such cashless exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the Class B Warrant in accordance with its terms if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.00. During 2021, 2,368,500 Class B Warrants were exercised, all on a cashless basis. As of December 31, 2021, 115,500 Class B Warrants were outstanding. Warrants for Series B Redeemable, Convertible Preferred Stock The 643 Series B Warrants issued in conjunction with the Series B Preferred Stock (see Note 8) were accounted for as a derivative liability under ASC 480 – Distinguishing Liabilities from Equity and adjusted to their fair valued of at $ 155,629 as of December 31, 2020. On June 1, 2021, the Series B Warrants were amended (“Amended Series B Warrants”) to become exercisable into 115,190 shares of common stock at an exercise price of $ 2.30 per share and are now reflected as common stock warrants in the table of outstanding warrants above. The Amended Series B Warrants were accounted for as equity and reclassified from liabilities into additional paid-in capital at the fair value determined as of the amendment date of $ 145,953 . The fair value of the outstanding Series B redeemable preferred stock warrants at June 1, 2021 and December 31, 2020 was based on the assumptions as follows: June 1, December 31, 2021 2020 Risk-free interest rate 0.31 % - 0.56 % 0.17 % - 0.36 % Dividend rate 0 % 0 % Volatility 88.60 % 88.60 % Expected life (in years) 2.81 – 4.22 3.23 – 4.64 8. PREFERRED STOCK Series A, B and C Preferred Stock The Company’s Certificate of Incorporation, as amended on June 7, 2021, provided authorization for issuance of up to 35,000,000 shares, par value of $ 0.0001 , of which 30,000,000 shares shall be common stock and 5,000,000 shares shall be preferred stock. The Certificate of Incorporation was amended on October 22, 2021, to increase the authorized shares for preferred and common stock to 5,000,000 and 100,000,000 , respectively. F- 16 In 2017 in connection with the Financing (see Note 5), the Company issued 10,600 shares of Series A. The allocation of proceeds from the Financing was based on the relative fair values of the Notes and Series A resulting in the Series A being recorded at $ 476,651 , net of $ 91,597 of issuance costs. The Series A were being accreted to the redemption value through December 31, 2021, the redemption date. Accretion of the Series A to redemption value, including the accretion of dividends and issuance costs, was $ 73,912 and $ 184,494 for years ended December, 2021 and 2020, respectively. In 2019, the Company entered into Subscription Agreements, as amended, for the issuance of 4,455 shares of Series B (the “Series B Financing”) plus the committed future issuance of 415 of additional shares. Combined, 4,732 shares of Series B at a purchase price of $ 361.50 per share were issued in 2019. Gross proceeds from the Series B Financing were approximately $ 1,710,000 in 2019. The Subscription Agreements, as amended, also specified that purchasers investing $150,000 or more in Series B were to be issued a five year stock purchase warrant (“Series B Warrants”) exercisable into a total number of Series B shares equal to 15 % of the purchase price divided by $ 361.50 . A total of 663 Series B Warrants were issued in 2019 in connection with the Series B Financing. The remaining Series B committed shares were drawn in January 2020 and the Company issued 138 shares of Series B and 21 Series B Warrants. In July and August 2020, the Company issued an additional 317 shares of Series B and 47 warrants to purchase Series B at an exercise price of $ 361.50 per share for gross proceeds of approximately $ 115,000 . The Series B were subject to accretion to the redemption value through December 31, 2024, the redemption date. Accretion of the Series B to redemption value, including the accretion of dividends and issuance costs, was $ 33,994 and $ 81,585 for the years ended December, 2021, respectively. On November 19, 2020, the Company entered into a Subscription Agreement for the issuance of Series C (the “Series C Financing”) with Toray. In connection with the Series C Financing, the Company issued 636 shares of Series C at a purchase price of $ 1,578.50 per share. Proceeds from the Series C Financing, net of issuance costs, were $ 994,832 . The Series C were being accreted to the redemption value through December 31, 2021, the redemption date. Accretion of the Series C to redemption value, including the accretion of dividends and issuance costs, was $ 19,961 for the year December 31, 2021. On June 1, 2021, in connection with the debt financing by Sabby (see Note 6), the Company’s Series A were converted into 1,668,016 shares of common stock, Series B were converted into 816,226 shares of common stock, and Series C were converted into 100,081 shares of common stock. The conversion was effected through the joint consent of the Company’s Board of Directors and shareholders and was subject to and in accordance with the terms of the Certificates of Designation. As a result of the conversion, the temporary equity balances at the conversion date were reclassified into the stockholders’ equity. The Series A ranked senior to Series B and Series C. Series B was pari passu with the Series C. Significant terms of the Series A, Series B and Series C (collectively, “Voting Preferred Stock”) were as follows: ● Voting - The holder of each share of Voting Preferred Stock has the right to vote for each share of common stock into which such Preferred Stock could convert. Except as otherwise provided, the holders of Voting Preferred Stock and Common Stock shall vote together as a single class. ● Dividends - The holders of Voting Preferred Stock shall be entitled to receive dividends at a rate per annum of 4 %. Dividends shall accrue whether or not declared and are cumulative. The dividends shall be paid quarterly on the first day of March, June, September, and December only if and when declared by the Board of Directors. No dividends have been declared by the Company to date. ● Liquidation Preference- In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A shall be entitled to be paid out of the assets of the Company, after all creditors of the Company have been paid, before any payments shall be made to the holders of Series B, Series C and common stock, in the amount of the Original Offering Price per share, plus all accrued but unpaid dividends thereon. If insufficient assets and funds are available to permit payment to the Series A holders, then all available assets and funds shall be distributed to the Series A holders on a pro rata basis. All dividends accrued and unpaid to the date of such distribution shall be paid out of the assets of the Company before any distribution is made to the holders of any junior stock of the Company. F- 17 ● In the event of any liquidation, dissolution or winding up of the Company, the holders of Series B and Series C, which are pari passu stocks, shall be entitled to be paid out of the assets of the Company before any payments shall be made to the holders of the common stock, in the amount of the Original Offering Price per share, plus all accrued but unpaid dividends thereon. If insufficient assets and funds are available to permit payment to the Series B and Series C holders, then all available assets and funds shall be distributed to the Series B and Series C holders on a pro rata basis. All dividends accrued and unpaid to the date of such distribution shall be paid out of the assets of the Company before any distribution is made to the holders of any junior stock of the Company. ● Conversion - Each share of Voting Preferred Stock is entitled to convert into 157.36 shares of common stock at $ 0.64 , $ 2.30 and $ 10.03 per share, respectively, at any time by the holder following issuance. ● Redemption - If the Company has not had an Initial Public Offering, or has not been acquired by December 31, 2024, the Company will be required, upon request of the holders of at least two thirds of the outstanding shares, to redeem the outstanding Preferred Stock at the greater of (i) Original Offering Price, plus accrued dividends, or (ii) the fair market value as determined by an appraiser selected by Company who is reasonably acceptable to the holders of a majority of the outstanding Preferred Stock and paid for by the Company. Series D Preferred Stock On June 7, 2021, the Company filed a certificate of designation of preferences, rights, and limitations with the state of Delaware for up to 4,500 shares of Series D convertible preferred stock (“Series D”). Each share of Series D shall have a par value of $ 0.0001 per share and a stated value equal to $ 1,000 . Series D has no voting rights, and is convertible into 1,000 shares of Common Stock at $ 1.00 per share at any time following issuance. In connection with the IPO, on November 10, 2021, all of the Company’s outstanding Convertible Debentures automatically converted into 4,500 shares of Series D Preferred Stock. In November 2021, all Series D Preferred stock was converted into 4,500,000 shares of common stock. There were no Series D outstanding as of December 31, 2021. 9 . STOCK COMPENSATION In 2018, the Company adopted the 2018 Stock Incentive Plan (the “2018 Plan”) for employees, consultants, and directors. The 2018 Plan, which is administered by the Board of Directors, permits the Company to grant incentive and nonqualified stock options for the purchase of common stock, and restricted stock awards. The maximum number of shares reserved for issuance under the 2018 Plan is 629,440 . On July 6, 2021, the Company’s board of directors and stockholders approved and adopted the Bluejay Diagnostics, Inc. 2021 Stock Plan (the “2021 Plan”). A total of 1,960,000 shares of common stock were approved to be initially reserved for issuance under the 2021 Stock Plan. The Company can continue to issue shares under the 2018 Plan. At December 31, 2021, there were 1,681,000 and 262,269 shares available for grants under the 2021 and 2018 Plans, respectively. The Company calculated the grant-date fair value of share-based awards granted during the years ended December 31, 2021 and 2020 using the Black-Scholes model with the following assumptions: Year Ended December 31, 2021 2020 Risk-free interest rate 0.78 % – 1.27 % 0.27 % – 0.28 % Expected dividend yield 0.00 % 0.00 % Volatility factor 106.00 % – 114.76 % 88.60 % Expected life of option (in years) 5.00 – 6.00 5.00 F- 18 The following is a summary of stock option activity for the year ended December 31, 2021: Number of Stock Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Outstanding at December 31, 2020 375,826 $ 0.59 8.0 $ 194,950 Granted 279,000 3.25 Exercised ( 56,385 ) 0.40 Cancelled and forfeited ( 8,655 ) 0.95 Outstanding at December 31, 2021 589,786 $ 1.86 8.3 $ 605,187 Exercisable at December 31, 2021 259,104 $ 1.02 7.5 $ 444,049 The weighted average grant date fair value of options granted during the years ended December 31, 2021 and 2020 was $ 1.16 per share and $ 0.65 per share, respectively For the years ended December 31, 2021 and 2020, the Company recorded stock-based compensation expense as follows: Year ended December 31, 2021 2020 Research and development $ 29,543 $ - General and administrative 17,315 7,370 Marketing and business development 21,600 - Total stock-based compensation $ 68,458 $ 7,370 At December 31, 2021, there was approximately $ 222,307 of unrecognized compensation expense related to non-vested stock option awards that are expected to be recognized over a weighted-average period of 3.0 years. 10. RELATED PARTY TRANSACTIONS Lana Management and Business Research International, LLC LMBRI has board members in common with the Company. Funds were advanced to the Company by LMBRI for operational and Food and Drug Administration (“FDA”) pre-submission funding purposes since inception. The outstanding balance due to LMBRI is payable upon demand. The Company and LMBRI have entered into an Expense Sharing Agreement, whereby the Company will reimburse LMBRI monthly for certain shared expenses including insurance, rent, salaries, telephone, and other miscellaneous expenses. The Company is billed $ 4,000 monthly for these expenses. Such amounts are included in general and administrative expenses on the accompanying consolidated statements of operations. The Company also issued Subordinated Notes and Common Stock Warrants to LMBRI in October 2020 as described in Note 5. The table below summarizes the amounts incurred, paid, and balances due to LMBRI as of and for year’s ended December 31, 2021 and 2020. 2021 2020 Expenses from LMBRI $ 48,000 $ 55,097 Expense Sharing Agreement payments to LMBRI $ 171,102 $ 16,000 Amounts payable to LMBRI $ 2,000 $ 125,102 Interest Incurred and Payments on Subordinated Notes to LMBRI (Note 5) $ 3,303 $ - Portion of Subordinated Notes payable to LMBRI (Note 5) $ - $ 995 F- 19 NanoHybrids, LLC In December 2021, the Company entered into an agreement with NanoHybids, LLC (“NanoHybrids) to utilize the Company’s research and development staff and laboratory facility when available to perform work for NanoHybrids. Any hours worked by Company employees for NanoHybrids is billed to NanoHyrids at a bill rate of the respective employee’s fully burdened personnel cost plus 10 %. NanoHybrids is wholly owned by the Company’s Chief Technology Officer. There were no amounts incurred, paid or balances due related to this agreement for the year ended and as of December 31, 2021. 11. SUPPLEMENTAL BALANCE SHEET INFORMATION Prepaid expenses and other current assets consist of the following: December 31, 2021 December 31, 2020 Prepaid insurance $ 1,127,062 $ - Prepaid clinical trial expenses 160,467 - Prepaid other 325,179 61,071 Total prepaid expenses and other current assets $ 1,612,708 $ 61,071 Accrued expenses and other current liabilities consist of the following: December 31, 2021 December 31, 2020 Accrued personnel costs $ 157,938 $ - Accrued other 181,446 133,820 Total accrued expenses and other current liabilities $ 339,384 $ 133,820 12. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2021 and 2020: December 31, Depreciable lives 2021 2020 Construction in process $ 15,078 $ - Furniture, fixtures, and equipment 5 years 24,915 16,046 Website 5 years 4,619 4,619 Lab equipment 5 years 741,591 741,591 786,203 762,256 Less: accumulated depreciation ( 448,837 ) ( 303,118 ) Property and equipment, net $ 337,366 $ 459,138 13. COMMITMENTS AND CONTINGENCIES Purchase Commitments As of December 31, 2021, the Company has entered into non-cancelable purchase commitments primarily for inventory and key advisory services. The purchase commitments covered by these agreements are for less than one year and aggregate to approximately $ 1.5 million. F- 20 Lease Commitments In October 2021, the Company entered into a lease for laboratory space that expires on October 31, 2024. Additionally in 2021, we signed a lease for office space that is expected to commence in April 2022 when the buildout of the space is expected to be completed. The office space lease expires on March 30, 2027. A summary of the Company’s estimated lease payments are as follows: Year 2022 $ 144,402 2023 172,954 2024 160,803 2025 100,000 2026 100,000 Thereafter 16,667 Total future lease payments 694,826 Minimum Royalties As required under the Toray Agreement (see Note 3), following the first sale of Toray Chips, the Company will also make royalty payments to Toray equal to 15% of the net sales of the Toray Chips for the period that any underlying patents exist or for 5 years after the first sale. Following the first sale, the Company will pay a one-time minimum royalty of $60,000, which shall be creditable against any royalties owed to Toray in such calendar year. The Company will pay a minimum royalty of $100,000 in each year thereafter, which are creditable against any royalties owed to Toray in such calendar year. There were no sales of or revenues from the Toray Chips through December 31, 2021. Indemnification The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented. 14. INCOME TAX No provision for federal income taxes has been recorded for the years ended December 31, 2021 and 2020 due to net losses and the valuation allowance established. Significant components of the Company’s deferred tax assets are as follows: As of December 31, 2021 2020 Deferred tax assets: Net operating losses $ 1,791,043 $ 957,902 Tax credits 3,659 31,017 Intangible assets 68,564 73,815 Other 97,945 7,432 Total deferred tax assets 1,961,211 1,070,166 Valuation allowance ( 1,934,351 ) ( 996,934 ) Net deferred tax assets $ 26,860 $ 73,232 Deferred tax liabilities: Note premium amortization $ - $ ( 46,583 ) Fixed assets ( 26,860 ) ( 26,649 ) Net deferred tax assets $ ( 26,860 ) $ ( 73,232 ) F- 21 A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 2021 and 2020 is as follows: Year Ended December 31, 2021 2020 Federal statutory rate 21.00 % 21.00 % State income taxes, net of federal benefit and tax credits 5.41 % 6.77 % Change in valuation allowance ( 25.88 )% ( 28.49 )% Permanent differences ( 0.53 )% 0.72 % Effective tax rate 0.00 % 0.00 % The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, the Company considers taxable income in prior carryback years, as permitted under the tax law, forecasted taxable earnings, tax planning strategies, and the expected timing of the reversal of temporary differences. This determination requires significant judgment, including assumptions about future taxable income that are based on historical and projected information and is performed on a jurisdiction-by-jurisdiction basis. The Company continues to maintain a full valuation allowance against its net deferred tax assets. During the years ended December 31, 2021 and 2020, management assessed the positive and negative evidence in its operations, and concluded that it is more likely than not that its deferred tax assets as of December 31, 2020 and 2019 will not be realized given the Company’s history of operating losses. The valuation allowance against deferred tax assets increased by approximately $ 937,000 and $ 335,000 and during 2021 and 2020, respectively, related mainly to a full valuation allowance recorded against additional net operating losses and tax credits generated in the year. At December 31, 2021, the Company had federal net operating loss carryforwards of approximately $ 6.6 million. The Company’s federal net operating losses incurred prior to 2018 totaling $ 713,000 expire through 2037, while its federal net operating losses incurred in 2018 to 2021 totaling $ 5.9 million have no expiration date as a result of the December 22, 2017 Tax Cuts and Jobs Act tax reform legislation. As of December 31, 2021, the Company had post-apportioned state net operating losses of $ 6.3 million that can generally be carried forward 20 years and will expire at various dates through 2041. As of December 31, 2020, the Company had post-apportioned Massachusetts net operating losses of $ 3.2 million that can generally be carried forward 20 years and will expire at various dates through 2040. F- 22 INDEX TO EXHIBITS Exhibit No. Description of Document 3.1 Amended and Restated Certificate of Incorporation. (incorporated by reference to exhibit 3.1 to the Company’s Form S-1 file no. 333-260029) 3.2 Amended and Restated Bylaws. (incorporated by reference to exhibit 3.2 to the Company’s Form S-1 file no. 333-260029) 4.1 Specimen Common Stock Certificate. (incorporated by reference to exhibit 4.1 to the Company’s Form S-1 file no. 333-260029) 4.2 Form of Class A Warrant. (incorporated by reference to exhibit 4.1 to the Company’s Form 8-K filed November 16, 2021) 4.3 Form of Class B Warrant. (incorporated by reference to exhibit 4.3 to the Company’s Form S-1 file no. 333-260029) 4.4 Form of Warrant Agency Agreement. (incorporated by reference to exhibit 4.4 to the Company’s Form S-1 file no. 333-260029) 4.5 Form of IPO Underwriters’ Warrant. (incorporated by reference to exhibit 4.5 to the Company’s Form S-1 file no. 333-260029) 4.6 * Description of Securities of Bluejay Diagnostics, Inc. 10.1 ** 2021 Stock Plan. (incorporated by reference to exhibit 10.1 to the Company’s Form S-1 file no. 333-260029) 10.2 License and Supply Agreement dated October 6, 2020 by and between Toray Industries, Inc. and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.2 to the Company’s Form S-1 file no. 333-260029) 10.3 ** Employment Agreement dated July 1, 2021 between Neil Dey and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.3 to the Company’s Form S-1 file no. 333-260029) 10.4 ** Employment Agreement dated July 1, 2021 between Gordon Kinder and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.4 to the Company’s Form S-1 file no. 333-260029) 10.5 ** Employment Agreement dated July 1, 2021 between Jason Cook and Bluejay Diagnostics, Inc.* (incorporated by reference to exhibit 10.5 to the Company’s Form S-1 file no. 333-260029) 10.6 ** Employment Agreement dated July 1, 2021 between Kevin Vance and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.6 to the Company’s Form S-1 file no. 333-260029) 10.7 Securities Purchase Agreement dated June 7, 2021 between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.7 to the Company’s Form S-1 file no. 333-260029) 10.8 Registration Rights Agreement dated June 7, 2021 between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.8 to the Company’s Form S-1 file no. 333-260029) 10.9 Amendment to License and Supply Agreement dated July 21, 2021 by and between Toray Industries, Inc. and Bluejay Diagnostics, Inc. (incorporated by reference to exhibit 10.9 to the Company’s Form S-1 file no. 333-260029) 14.1 Code of Ethics. (incorporated by reference to exhibit 14.1 to the Company’s Form S-1 file no. 333-260029) 21.1 List of Subsidiaries. (incorporated by reference to exhibit 21.1 to the Company’s Form S-1 file no. 333-260029) 31.1 * Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 31.2 * Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 32.1 * Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 * Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). * Filed herewith. ** Management contract or compensatory plan, contract or arrangement. F-23