CIRCLE8 GROUP 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 Chief Financial Officer (who is our principal financial officer), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of December 31, 2021. As of December 31, 2021, based upon the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. 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 due to a transition period established by the rules of the SEC for newly public companies. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 46 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by Item 10 is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2021 fiscal year. ITEM 11. EXECUTIVE COMPENSATION . The information required by Item 11 is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2021 fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by Item 12 is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2021 fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. The information required by Item 13 is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2021 fiscal year. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required by Item 14 is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2021 fiscal year. 47 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . Incorporation by Reference Exhibit Number Description of Exhibits Form Filing Date Exhibit Number 3.1 Amended and Restated Certificate of Incorporation 8-K 8/31/21 3.1 3.2 Amended and Restated Bylaws 8-K 8/31/21 3.2 4.1* Description of Securities 4.2 Specimen common stock certificate S-1/A 5/22/19 4.1 4.3 Warrant Agency Agreement dated as of August 31, 2021 between SeqLL Inc. and VSTOCK Transfer LLC 8-K 8/31/21 10.1 4.4 Form of Common Stock Purchase Warrant S-1/A 8/16/21 4.6 10.1# Amended and Restated 2014 Equity Incentive Plan S-1 3/31/21 10.1 10.2 License Agreement dated March 15, 2013 between SeqLL, LLC and Helicos Biosciences Corporation S-1 4/23/19 10.2 10.3 Sub-License Agreement dated March 15, 2013 between SeqLL, LLC and Helicos Biosciences Corporation S-1 4/23/19 10.3 10.13 Investor Rights Agreement dated as of September 30, 2018 S-1/A 5/28/21 10.13 22* Subsidiaries of the Registrant 23* Consent of Wolf & Company, P.C. 31.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officer pursuant to 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 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. 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 as Inline XBRL and contained in Exhibit 101). * Filed herewith. # Indicates a management contract or compensatory plan. 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 23rd day of March, 2022. SEQLL INC. By: /s/ Daniel Jones Daniel Jones Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Daniel Jones Chief Executive Officer and Chairman March 23, 2022 Daniel Jones (Principal Executive Officer) /s/ John W. Kennedy Chief Financial Officer and Secretary March 23, 2022 John W. Kennedy (Principal Financial and Accounting Officer) /s/ Douglas Miscoll Director March 23, 2022 Douglas Miscoll /s/ David Pfeffer Director March 23, 2022 David Pfeffer /s/ Dr. Patrice Milos Dr. Patrice Milos Director March 23, 2022 49 SEQLL INC. CONSOLIDATED FINANCIAL STATEMENTS Index to Consolidated Financial Statements 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 of Changes in Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to the Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and the Stockholders of SeqLL Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SeqLL Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as 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 2018. Boston, Massachusetts March 23, 2022 F- 2 SeqLL Inc. Consolidated Balance Sheets December 31, Assets 2021 2020 Current assets Cash and cash equivalents $ 4,015,128 $ - Marketable securities, at fair value 5,933,364 - Accounts receivable, net 30,714 30,714 Other receivables 34,965 108,815 Inventory 224,155 203,011 Prepaid expenses 186,056 - Total current assets 10,424,382 342,540 Other assets Property and equipment, net 265,267 337,241 Other assets 50,488 14,262 Total assets $ 10,740,137 $ 694,043 Liabilities and Stockholders’ Equity (Deficit) Current liabilities Accounts payable $ 871,364 $ 861,840 Accrued expenses 311,405 123,639 Loan payable - related party - 26,000 Non-convertible promissory notes – current portion 1,375,000 - Total current liabilities 2,557,769 1,011,479 Non-current liabilities Convertible notes - 1,105,000 Non-convertible promissory notes – net of current portion - 2,431,730 Total non-current liabilities - 3,536,730 Total liabilities 2,557,769 4,548,209 Commitments and contingencies (Note 14) Stockholders’ equity (deficit) Preferred stock, $ 0.00001 par value; 20,000,000 shares authorized; 0 and 5,791,665 shares issued and outstanding as of December 31, 2021 and 2020, respectively - 58 Common stock, $ 0.00001 par value; 80,000,000 shares authorized; 11,886,379 and 4,864,862 shares issued and outstanding as of December 31, 2021 and 2020, respectively 119 49 Additional paid-in capital 22,596,100 6,856,020 Accumulated deficit ( 14,413,851 ) ( 10,710,293 ) Total stockholders’ equity (deficit) 8,182,368 ( 3,854,166 ) Total liabilities and stockholders’ equity (deficit) $ 10,740,137 $ 694,043 The accompanying notes are an integral part of these consolidated financial statements. F- 3 SeqLL Inc. Consolidated Statements of Operations December 31, 2021 2020 Revenue Sales $ 48,021 $ 50,588 Grant revenue 161,974 278,907 Total revenue 209,995 329,495 Cost of sales 57,690 170,803 Gross profit 152,305 158,692 Operating expenses Research and development 530,076 330,979 General and administrative 2,170,857 777,435 Total operating expenses 2,700,933 1,108,414 Operating loss ( 2,548,628 ) ( 949,722 ) Other (income) and expenses Other income ( 190,193 ) ( 191,566 ) Investment income ( 36,463 ) - Unrealized loss on marketable securities 43,078 - Change in fair value of convertible notes 195,962 - Loss on extinguishment of convertible notes 934,257 - Interest expense 208,289 287,197 Net loss $ ( 3,703,558 ) $ ( 1,045,353 ) Net loss per share - basic and diluted $ ( 0.51 ) $ ( 0.21 ) Weighted average common shares - basic and diluted 7,216,001 4,864,862 The accompanying notes are an integral part of these consolidated financial statements. F- 4 SeqLL Inc. Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the years ended December 31, 2021 and 2020 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance as of December 31, 2019 5,791,665 $ 58 4,864,862 $ 49 $ 6,835,810 $ ( 9,664,940 ) $ ( 2,829,023 ) Stock-based compensation expense - - - - 20,210 - 20,210 Net loss - - - - - ( 1,045,353 ) ( 1,045,353 ) Balance as of December 31, 2020 5,791,665 $ 58 4,864,862 $ 49 $ 6,856,020 $ ( 10,710,293 ) $ ( 3,854,166 ) Conversion of preferred stock into common stock ( 5,791,665 ) $ ( 58 ) 3,130,622 $ 31 $ 27 $ - $ - Stock-based compensation expense - - - - 333,978 - 333,978 Conversion of convertible notes into common stock - - 641,895 6 3,222,300 - 3,222,306 Issuance of Units and warrants in initial public offering, net of issuance costs of $ 1,555,976 - - 3,060,000 31 11,453,614 - 11,453,645 Issuance of common stock to underwriters in initial public offering, net of issuance costs of $ 71,199 - - 189,000 2 730,161 - 730,163 Net loss - - - - - ( 3,703,558 ) ( 3,703,558 ) Balance as of December 31, 2021 - $ - 11,886,379 $ 119 $ 22,596,100 $ ( 14,413,851 ) $ 8,182,368 The accompanying notes are an integral part of these consolidated financial statements. F- 5 SeqLL Inc. Consolidated Statements of Cash Flows December 31, 2021 2020 Cash Flows from Operating Activities Net loss $ ( 3,703,558 ) $ ( 1,045,353 ) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation 86,444 108,759 Unrealized loss on marketable securities 43,078 - Loss on extinguishment of notes 934,257 - Stock-based compensation 333,978 20,210 Change in fair value of convertible notes 195,962 286,972 Changes in operating assets and liabilities: Accounts receivable, net - 23,986 Other receivables 73,850 ( 27,846 ) Prepaid expenses ( 186,056 ) 2,354 Inventory ( 21,144 ) 81,246 Other assets ( 36,226 ) - Accounts payable 9,524 ( 35,818 ) Accrued expenses 280,014 ( 147,421 ) Deferred revenue - ( 25,000 ) Net cash used in operating activities ( 1,989,877 ) ( 757,911 ) Cash Flows from Investing Activities Purchases of lab equipment ( 14,470 ) - Purchases of marketable securities ( 5,976,442 ) - Net cash used in investing activities ( 5,990,912 ) - Cash Flows from Financing Activities Proceeds from issuance of units and common stock warrants, gross 13,009,621 - Payment for issuance costs of units and common stock warrants ( 1,627,175 ) - Proceeds from issuance of non-convertible promissory notes - 554,048 Payment of non-convertible promissory notes ( 270,000 ) Proceeds from issuance of convertible notes 250,000 200,000 Proceeds from issuance of common stock to underwriters 801,362 - Settlement of convertible notes ( 141,891 ) - Proceeds from loan payable - related party 140,000 33,000 Payment of loan payable - related party ( 166,000 ) ( 35,000 ) Net cash provided by financing activities 11,995,917 752,048 Net increase (decrease) in cash and cash equivalents 4,015,128 ( 5,863 ) Cash and cash equivalents, beginning of year - 5,863 Cash and cash equivalents, end of year $ 4,015,128 $ - Supplemental disclosure of cash flow information and non-cash financing transactions Conversion of notes at initial public offering into common stock $ 3,222,206 - Conversion of preferred stock par value to common stock and additional paid-in capital $ 58 - Fair value of warrants of common stock issued to underwriters $ 1,647,076 - Conversion of 2020 accrued interest into promissory notes $ - 426,020 The accompanying notes are an integral part of these consolidated financial statements. F- 6 SeqLL Inc. Notes to Consolidated Financial Statements Years Ended December 31, 2021 and 2020 Note 1 – Nature of Operations and Basis of Presentation SeqLL Inc. was incorporated as a Delaware corporation on April 3, 2014. On April 8, 2014, SeqLL Inc. acquired a 100 % ownership interest in SeqLL, LLC (“Subsidiary”), a domestic limited liability company formed on March 11, 2013 in the State of Massachusetts. SeqLL Inc. is a holding company of the Subsidiary (together the “Company” or SeqLL”) and is a life sciences company focused on the development and application of innovative genetic analysis technologies and the monetization of that technology and related intellectual property. The Subsidiary purchased technology to enable the analysis of large volumes of genetic material by directly sequencing single molecules of DNA or RNA. The Subsidiary’s principal office is located in Woburn, Massachusetts. Initial Public Offering On August 31, 2021, the Company completed its initial public offering (“IPO”) whereby it sold 3,060,000 units, each unit consisting of one share of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $ 4.25 per share (the “Warrants”), at a price to the public of $ 4.25 per unit. The gross proceeds from the IPO were approximately $ 13 million and were offset by $ 3.2 million in offering costs, of which $ 1.6 million was paid in cash and $ 1.6 million was issued in warrants issued to Maxim Group LLC (“Underwriter”) (see Note 10). In connection with the IPO, all of the outstanding shares of the Company’s convertible preferred stock automatically converted into 3,130,622 shares of common stock (see Note 9). Additionally, the outstanding convertible notes converted into 641,895 shares of common stock (see Note 8). Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to 459,000 additional shares of common stock, and/or 459,000 additional Warrants, to cover over-allotments in connection with the Offering. The Underwriter partially exercised this option and purchased 459,000 Warrants on August 31, 2021, at $ 0.01 per Warrant. On September 29, 2021, the Company issued 189,000 shares of common stock to the underwriters at a price of $ 4.24 per share from the exercise of the overallotment option, raising the net proceeds of approximately $ 730,000 , net of offering costs. On August 31, 2021, and September 29, 2021, the Company also issued to the Underwriter warrants to purchase up to a total of 162,450 shares of common stock at an exercise price of $ 4.675 per share (“Underwriter Warrants”) (Note 10). 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 pharmaceutical and 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 magnitude and overall effectiveness of these actions remain uncertain. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s service providers, suppliers, contract research organizations and the Company’s clinical trials, all of which are uncertain and cannot be predicted. During 2021 and 2020, the COVID-19 pandemic has adversely affected the Company’s sales and results of operations and may continue to adversely affect its business. 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 Basis of Presentation The accompanying consolidated financial statements include the accounts of SeqLL Inc. and its wholly-owned subsidiary, SeqLL, LLC. All intercompany accounts and transactions have been eliminated in consolidation. Note 2 – Significant Accounting Policies A summary of significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements are as follows: Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include but are not limited to stock-based compensation expense, research and development accruals, fair value of warrants and loss on extinguishment of notes. Actual results could differ from those estimates and changes in estimates may occur. Cash and Cash Equivalents The Company considers all highly liquid securities readily convertible to cash that mature within three months or less from the original date of purchase to be cash equivalents. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held by financial institutions and are federally insured up to certain limits. At times, the Company’s cash and cash equivalents balance exceeds the federally insured limits. As of December 31, 2021, the Company has not experienced a loss on its accounts for which it exceeds federally insured deposit limits, and does not expect a loss to occur. On December 31, 2021, the cash equivalents include $ 60,021 of investments in money market funds. Accounts Receivable In the normal course of business, the Company provides credit to its customers and performs credit evaluations of these customers. The Company periodically reviews accounts receivables for doubtful accounts on a customer-by-customer basis and established an allowance to reserve for balances that are deemed uncollectible. The allowance for doubtful accounts was $6,016 as of December 31, 2021, and 2020. Investments in marketable securities The Company accounts for its investments in equity securities in accordance with ASC 321, Investments — Equity Securities (“ASC 321”). Equity investments, which are comprised of investments in mutual funds shares, are measured at fair value, based on quoted market prices, with all gains and losses reported in the Company’s statement of operations. We may sell our equity securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. Inventory Inventory consists of finished goods, work-in-process and raw materials and is valued at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”) method. As the Company manufactures the finished goods and work-in-process materials, overhead costs are included in inventory. The Company evaluates the carrying cost of finished goods, work-in-process and raw materials items. To the extent that such costs exceed future demand estimates and /or exhibit historical turnover at rates less than current inventory levels, the Company reduces the carrying value of the applicable inventories. Inventory consisted of the following: December 31, December 31, 2021 2020 Raw materials $ 91,995 $ 59,416 Work in process 132,160 143,595 Total inventory $ 224,155 $ 203,011 Property and Equipment Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Lab equipment is depreciated over a five-year period. Leasehold improvements are depreciated over the shorter of the useful life and the term of the lease. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the balance sheet and any resulting gains or losses are included in the statement of operations in the period of disposals. F- 8 Long-lived Assets The Company assesses, on an annual basis, the recoverability of the carrying amount of long-lived assets used in continuing operations. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flow expected to be generated by the asset. A loss is recognized when expected future cash flow (undiscounted and without interest) are less than the carrying amount of the asset. The impairment loss is determined as the difference by which the carrying amount of the asset exceeds its fair value. No impairments were recognized in the years ended December 31, 2021, and 2020. Revenue Recognition The Company’s revenue is generated primarily from the sale of products and research services. Product revenue primarily consists of sales of genetic sequencing equipment and sequencing reagent kits. Research service revenue primarily consists of revenue generated from gene sequencing services and grants. The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs a five-step process. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when (or as) the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company only applies the five-step process to contracts when it is probable that the entity will collect consideration it expects to be entitled to in exchange for the goods or services it transfers to the customer. The Company evaluates contingent payments to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Future payments that are not within the control of the Company, are not considered probable of being achieved until the contingencies are resolved. Revenue from product sales, including customized sequencing instruments and sequencing reagent kits and off-the-shelf consumables, is recognized generally upon delivery, which is when control of the product is deemed to be transferred. Revenue from gene sequencing services, using the tSMS platform, is recognized generally as the services are provided to the customer. The components of the sequencing process, including reagent kits and off-the-shelf consumables, sample loader and sequencer, are not distinct within the context of the gene sequencing service contract. This is because in a gene sequencing service contract the reagent kits and other components, such as off-the-shelf consumables, used in the sequencing process, become required inputs to achieve the specified gene sequencing analysis, and the components in the sequencing process are sequential in nature and highly interrelated as they work together to generate sample-specific data. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company has elected to exclude sales tax from revenue. The Company generally has no obligations for returns, refunds and other similar obligations and does not provide separate equipment warranties. The Company recognized $ 16,484 and $ 50,588 in revenue from gene sequencing services for the years ended December 31, 2021, and 2020, respectively. The Company recognized $ 31,537 , and $ 0 in revenue from product sales for the years ended December 31, 2021, and 2020, respectively. Grant Revenue The Company’s grant revenues are derived from research programs by various departments of the National Institute of Health (NIH Grants). Grants awarded to the Company for research and development by government entities are outside the scope of ASC 606 guidance. This is because these granting entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to the Company. These grants provide the Company with payments for certain types of expenditures in return for research and development activities over a contractually defined period. F- 9 The Company recognizes NIH Grants revenue as reimbursable grant costs are incurred up to pre-approved award limits within the budget period. The costs associated with these reimbursements are reflected as a component of research and development expense in the accompanying consolidated statements of operations. In the years ended December 31, 2021, and 2020, the Company earned grant revenue of $ 161,974 and $ 278,907 , respectively. Income Taxes The Company utilizes the liability method of accounting for income taxes as required by ASC 740, Income Taxes . Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities as well as net operating loss carryforwards and tax credits and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized. Currently, there is no provision for income taxes, as the Company has incurred operating losses to date, and a full valuation allowance has been provided on the net deferred tax assets. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50 % likely of being realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. The Company has no accruals for interest or penalties related to income tax matters. Tax years subsequent to 2017 remain open to examination by federal and state tax authorities. Stock-based Compensation The Company’s share-based compensation program grants awards include stock options and restricted stock awards. The fair value of stock option grants is estimated as of the date of the grant using the Black-Scholes option pricing model. The fair value of restricted stock awards is based on the fair value of the Company’s common stock on the date of the grant. The fair value of the stock-based awards are then expensed over the requisite service period, generally the vesting period, for each award. The Company’s expected stock price volatility assumption is based on the volatility of comparable public companies. The expected term of a stock option granted to employees and directors (including non-employee directors) is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent with the life of the option. No dividend yield was assumed as the Company does not pay dividends on its common stock. The Company recognizes forfeitures related to stock-based awards as they occur. The Company has periodically granted stock options and restricted stock awards to consultants for services, pursuant to the Company’s stock plans at the fair market value on the respective dates of grant. Should the Company terminate any of its consulting agreements, the unvested options underlying the agreements would be cancelled. For awards granted to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally the period services are rendered by such consultants and non-employees. The Company did not grant any stock options during the year ended December 31, 2020. The assumptions used in determining the fair value of share-based awards granted in 2021 are as follows: 2021 Risk-free interest rate 1.21 % Expected option life 5 years Expected dividend yield 0 % Expected stock price volatility 52 % F- 10 Research and Development Expenses The Company expenses all research and development costs as incurred. Included in research and development costs are wages, stock-based compensation and benefits of employees and other operational costs related to the Company’s research and development activities, including facility-related expenses and external costs of outside contractors engaged by the Company. Segments The Company operates in a single business segment that includes the design, development and manufacturing of genetic analysis technologies. Derivative Instruments The Company from time-to-time will issue warrants to its investors and accounts for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 718, Compensation – Stock Compensation (“ASC 718”) and ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. At the IPO date, the Warrants and Underwriter Warrants (see Note 9) were accounted for as equity as these instruments meet all of the requirements for equity classification under ASC 815 and ASC 718. 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 if their effect is antidilutive. 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 promissory 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. The following potential shares of common stock were not considered in the computation of diluted net loss per share as their effect would have been antidilutive: December 31, 2021 2020 Convertible preferred stock - 5,791,556 Convertible promissory notes - 345,266 Stock options 918,915 818,915 Warrants for common stock 4,393,396 658,262 F- 11 Recently Issued Accounting Standards In August 2020, 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, which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in this ASU are effective for the public companies for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements. The Company adopted this standard on January 1, 2022, for which, there was no material impact to the Company’s consolidated financial statements. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”) which establishes new accounting and disclosure requirements for leases. ASU No. 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are required to provide the amount, timing and uncertainty of cash flows arising from leases. The Company will adopt the provisions of ASU 2016-02 in the quarter beginning January 1, 2022, using the modified retrospective approach and will record right of use assets and lease liabilities on its consolidated balance sheet for the leases with terms in excess of one year. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company adopted this standard on January 1, 2022, for which, there was no material impact to the Company’s consolidated financial statements. The Company does not believe that any other recently issued but not yet effective accounting pronouncements will have a material effect on the accompanying consolidated financial statements. Note 3 – Property and Equipment, net Property and equipment are recorded at historical cost and consist of the following: December 31, December 31, 2021 2020 Lab equipment $ 740,963 $ 735,714 Leasehold improvements 74,390 74,390 Office equipment 5,896 - Other 3,325 - 824,574 810,104 Less: accumulated depreciation ( 559,307 ) ( 472,863 ) $ 265,267 $ 337,241 Depreciation expense amounted to $ 86,444 and $ 108,759 for the years ended December 31, 2021, and 2020, respectively. Note 4 – Accrued Expenses Accrued expenses consist of the following: December 31, December 31, 2021 2020 Accrued interest 216,073 100,031 Other 95,332 23,608 $ 311,405 $ 123,639 F- 12 Note 5 – Fair Value Measurements The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The following table summarizes fair value measurements by level on December 31, 2021 of the Company’s assets measured at fair value on a recurring basis: Fair Value Measurements Using Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 60,021 $ 60,021 $ - $ - Marketable securities 5,933,364 5,933,364 - - Total financial assets $ 5,993,385 $ 5,993,385 $ - $ - The Company determines fair value for cash equivalents and marketable securities with Level 1 inputs through the reference to the quoted market prices. There were no assets or liabilities measured at fair value on December 31, 2020. The table below presents the changes in Level 3 liabilities measured at fair value on a recurring basis (See Note 8). Convertible Notes Balance at December 31, 2020 $ - Issuance of Amended Notes (Note 8) 3,168,236 Change in fair value of convertible notes 195,962 Fair value of convertible notes at IPO date ( 3,364,198 ) Balance at December 31, 2021 $ - At the IPO date, the Amended Notes were converted into 641,895 shares of common stock (see Note 8). The interest expense of $ 89,239 for the period between the date of the Conversion Agreements related to the Amended Notes (see Note 7) and December 31, 2021, is included in the change in fair value of the Amended Notes. There are no assets or liabilities measured at fair value on a non-recurring basis during the years ended December 31, 2021, and 2020. F- 13 Note 6 – Stock Option Plan The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) permits the grant of options for its common stock and shares of common stock to its employees, board members and consultants for up to 3,500,000 shares. As of December 31, 2021, there were 2,581,085 shares available for future issuance under the Plan. Generally, option awards are granted with an exercise price equal to the fair value of the Company’s stock at the date of grant and vest over a period of four years. No option may have a term in excess of ten years from the option grant date. Share awards generally vest over a period of four years. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined by the 2014 Plan). The weighted average grant date fair value of options granted in 2021 was $ 1.15 per share. No option awards were granted in 2020. The stock option activity for the year ended December 31, 2021 is as follows: Number of Options Weighted- Average Exercise Price per Share Weighted Average Remaining Contractual Term (in Years) Outstanding as of December 31, 2020 818,915 $ 1.77 6.52 Granted 100,000 $ 2.52 Exercised - - Cancelled/Forfeited - - Outstanding of December 31, 2021 918,915 $ 2.09 5.79 Exercisable at December 31, 2021 918,288 $ 2.09 5.79 During the years ended December 31, 2021 and 2020, the Company recorded $ 333,978 and $ 20,210 of stock-based compensation associated with granted and vested stock options, respectively. As of December 31, 2021, there was $ 2,772 of unrecognized compensation expense related to unvested share-based compensation awards, which will be recognized over approximately 1.3 years . Note 7 – Related Party Transactions As of December 31, 2021, and 2020, the outstanding amount due to Daniel Jones, the Company’s Chief Executive Officer, was $ 0 and $ 26,000 , respectively, relating to a series of non-interest-bearing demand loans to us. The loans were repaid in the year ended December 31, 2021, with a portion of the net proceeds from the IPO. Daniel Jones also made non-interest-bearing demand loans to the Company in the amounts of $ 90,000 and $ 50,000 on July 30, 2021 and August 20, 2021, respectively. Both loans were repaid in full with proceeds from the IPO. At December 31, 2021 and 2020, the Company had the following outstanding payables, which are included within the Company’s accounts payable above, to its preferred shareholders for past services: December 31, 2021 December 31, 2020 Floral Finance $ - $ 9,849 Genomic Diagnostic Technologies 23,725 16,675 St. Laurent Institute 313,679 113,954 St. Laurent Realty, Inc. 27,913 27,913 Stonemill Center - 16,627 William St. Laurent - 15,415 Total related party payables $ 365,317 $ 200,433 William C. St. Laurent, a former member of the Company’s board of directors, relatives of Mr. St. Laurent and entities controlled by the St. Laurent family are controlling shareholders of the Company. These entities are all St. Laurent family-owned entities and are therefore related parties: St. Laurent Realty, Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting support; St. Laurent Institute, a 501C-3 company, provided bioinformatics specialist support for certain sequencing services; Stonemill Center assisted the Company by paying for certain out of pocket expenses incurred by William C. St. Laurent in his former role as Chairman of the Board for the Company; and William C. St. Laurent as the former Chairman of the Board accrued Director’s compensation was paid by the Company prior to December 31 ,2021. The Company issued convertible notes and promissory notes to the related parties (see Note 8). F- 14 Note 8 – Notes Payable The Company entered into a series of convertible promissory notes (the “Convertible Notes”) through April 8, 2019, with certain preferred stockholders amounting to $ 905,000 . The Convertible Notes had a one-year term and accrued interest at 10 % per annum. The Convertible Notes were convertible at the lower of $ 3.10 per share or a 20 % discount to the share price paid by the purchasers of equity securities in the Company’s next Qualified Financing, as defined in the convertible note agreement. From April 29, 2019, to April 29, 2020, the Company entered into a series of non-convertible promissory notes (the “Promissory Notes”) with a certain preferred stockholder amounting to $ 1,375,000 . The Promissory Notes had a one-year term with interest accruing at 10 % per annum. In November and December 2020, the Company issued senior secured convertible promissory notes (included in the Convertible Notes) to a third-party investor amounting to $ 200,000 . These notes accrued interest at 10 % per annum, were to be repaid at the earlier of December 31, 2022, or the Company’s next qualified financing of a minimum of $ 7.5 million (as defined in the notes agreement), or convertible at $ 3.75 per share. On December 31, 2020, the Company issued a non-convertible promissory note to St. Laurent Investments LLC amounting to $ 426,020 due July 31, 2022, bearing 10 % interest per annum in exchange for the accrued interest on all their notes outstanding. From January to March 2021, the Company issued senior secured convertible promissory notes to investors for total proceeds of $ 250,000 . The Convertible Notes accrued interest at 10 % per annum, matured at the earlier of December 31, 2022, or the Company’s next qualified equity offering of a minimum of $ 7.5 million, and were convertible at $ 3.75 per share. On February 3, 2021, the preferred stockholder and the holder of $ 2,910,710 in the Convertible Notes and Promissory Notes of the Company granted the Company an extension on all their notes to be repaid on or before July 31, 2022. This amendment was accounted for on a prospective basis under the troubled debt restructuring guidance. In March 2021, the Company entered into a series of agreements with the noteholders to automatically convert $ 786,730 in outstanding Promissory Notes and $ 1,305,000 in Convertible Notes (together, “Amended Notes”), to common stock upon the closing of the IPO (“Conversion Agreements”), of which $ 1,552,683 is held by St. Laurent Investments, LLC and its affiliates. Under the terms of the conversion agreements, $ 826,020 and $ 1,265,710 in Amended Notes were to be converted at the closing of the IPO based on the $ 3.75 and $ 3.10 conversion prices, respectively. Since the automatic conversion could result in a material benefit to the noteholders, this amendment was deemed substantive and was accounted for as an extinguishment of debt. Accordingly, the Company recognized a loss on extinguishment of debt totaling $ 934,257 in the consolidated statement of operations in March 2021, which represents the excess of the fair value of the Amended Notes totaling $ 3,118,235 over their carrying value of $ 2,183,978 . The Company elected the option to account for the Amended Notes at fair value, with the changes in fair value recognized in the statement of operations. The fair value of the Amended Notes was estimated using probability weighted expected payouts under various settlement scenarios, discounted to their present value based on the estimated effective rate of return. On April 29, 2021, the Company entered into an agreement with a noteholder to automatically convert an additional $ 50,000 in outstanding Amended Notes, including any accrued interest, to common stock upon the closing of the IPO at the conversion price of $ 3.75 per share. At the IPO date, the Amended Notes automatically converted based on their original terms into 641,895 shares of common stock. The fair value of the Amended Notes of $ 3,364,198 immediately prior to the conversion, less $ 141,884 cash payment related to the accrued interest, was reclassified into the additional paid in capital on the condensed consolidated balance sheet. The fair value of the Amended Notes at the conversion date was estimated based on the fair value of the common stock issued upon the conversion. The Company recognized $ 195,962 loss due to the change in fair value of the Amended Notes between the amendment date and their conversion at the IPO date. In October 2021, the Company entered into an agreement with St. Laurent Investments LLC to reduce the interest on $ 1,375,000 in the Promissory Note from 10 % to 5 % per year starting on October 1, 2021. The Company accounted for this transaction as a modification on a prospective basis. In October 2021, the Company repaid $ 270,000 of the Promissory Notes to William C. St Laurent in cash. In connection with all the Convertible Notes and Promissory Notes issued during 2021 and 2020, the Company issued warrants to noteholders to purchase the total of 66,665 and 53,333 shares of the Company’s common stock, including 11,466 to the placement agent (see Note 10). The grant-date fair values of these warrants were immaterial. For the years ended December 31, 2021, and 2020, interest expense related to both convertible and non-convertible promissory notes was $ 208,289 and $ 287,197 , respectively. F- 15 Note 9 – Preferred Stock The Company had outstanding preferred stock as of December 31, 2020: Shares authorized Shares issued Issuance price per share Series A-1 Convertible Preferred Stock 3,125,000 $ 0.32 Series A-2 Convertible Preferred Stock 2,666,665 $ 1.68 Series A Preferred stock 20,000,000 5,791,665 The Series A-1 Preferred Stock (“Series A-1”) and Series A-2 Preferred Stock (“Series A-2”) collectively the “Preferred Stock”, could be converted at any time at the election of the holder into common stock at an initial conversion price determined by dividing the Series A-1 original issue price of $ 0.59 , as amended, by the Series A-1 conversion price of $ 0.59 ; and the Series A-2 original issue price of $ 3.10 , as amended, by the Series A-2 conversion price of $ 3.10 ; both were subject to adjustment for stock splits, stock combinations and the like, and to a weighted-average adjustment for future issuances of common stock, warrants or rights to purchase common stock or securities convertible into common stock for a consideration per share that is less than the then-applicable conversion price, subject to certain exceptions listed in the Charter. The Preferred Stock was subject to automatic conversion upon (i) the closing of an initial public offering of the common stock at a price per share equal to at least $9.25 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalization or the like) in an underwritten public offering in which the Company raised gross proceeds of at least $10 million or (ii) the consent of holders of at least a majority of the then-outstanding shares of Preferred Stock voting together as a single class. In connection with the IPO, all of the outstanding shares of the Company’s convertible preferred stock automatically converted into 3,130,622 shares of common stock. Note 10 – Common Stock Warrants On March 16, 2021, the Company made a down payment to ShareIntel-Shareholder Intelligence Services, LLC for anticipated services connected to the Company’s planned offering, which was in the form of issuing 9,865 warrants to purchase common stock at $ 4.10 per share, with an expiration date of June 30, 2024. The warrants are exercisable starting at their issuance dates. On August 31, 2021, the Company sold an aggregate of 3,060,000 units at a price to the public of $ 4.25 per unit, each unit consisting of one share of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price of $ 4.25 per share. In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to 459,000 additional shares of common stock, and/or 459,000 additional warrants, to cover over-allotments in connection with the Offering. The Underwriter partially exercised this option and purchased 459,000 warrants on the closing date at $0.01 per Warrant, for the total proceeds of $4,590. These warrants are exercisable at any time from the issuance date at $ 4.25 for common stock shares and have a five-year term. The warrants may be exercised for cash or through cashless exercise. The Company may redeem the outstanding warrants, in whole and not in part, at $0.001 per warrant if, after thirteen months from the issuance date, (i) the daily volume weighted average price of the Common Stock for each of 10 consecutive trading days (Measurement Period) exceeds $12.75 (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like after the issuance date), (ii) the average daily volume for such Measurement Period exceeds $1,000,000 per Trading Day and (iii) the holders of warrants are not in possession of any information that constitutes, or might constitute, material non-public information which was provided by the Company, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates. Pursuant to the Underwriting Agreement, on August 31, 2021, and September 29, 2021, the Company also issued to the Underwriter warrants to purchase up to a total of 162,450 shares of common stock as a compensation for their services. These warrants are exercisable at any time from the issuance date at $ 4.675 per share of common stock and have a term of five years through August 26, 2026. The total fair value of the warrants granted to the Underwriter was $ 1,642,486 at the issuance date. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model based on the following assumptions: Risk-free interest rate 0.77 % - 1.01  % Expected life 5 years Dividend yield 0 % Volatility 67 % F- 16 The following table summarizes information with regard to outstanding warrants to purchase common stock as of December 31, 2021. Issuance Date Number of Shares Issuable Upon Exercise of Outstanding Warrants Exercise Price Expiration Date 5/4/2017 3,860 $ 3.10 5/3/2022 6/14/2017 1,351 $ 3.10 6/13/2022 8/30/2018 3,088 $ 3.10 8/29/2023 9/30/2018 60,506 $ 3.10 9/29/2023 9/30/2018 486,486 $ 2.16 9/29/2023 10/17/2018 1,157 $ 3.10 10/16/2023 11/2/2018 964 $ 3.10 11/1/2023 11/9/2018 964 $ 3.10 11/8/2023 11/16/2018 964 $ 3.10 11/15/2023 11/29/2018 964 $ 3.10 11/28/2023 12/21/2018 964 $ 3.10 12/20/2023 12/27/2018 964 $ 3.10 12/26/2023 1/31/2019 1,930 $ 3.10 1/30/2024 2/7/2019 1,640 $ 3.10 2/6/2024 2/21/2019 1,640 $ 3.10 2/20/2024 3/20/2019 3,378 $ 3.10 3/18/2024 4/8/2019 1,930 $ 3.10 4/6/2024 11/19/2020 53,333 $ 4.10 6/30/2024 11/19/2020 8,533 $ 4.10 6/30/2024 1/8/2021 13,333 $ 4.10 6/30/2024 1/11/2021 26,666 $ 4.10 6/30/2024 2/13/2021 13,333 $ 4.10 6/30/2024 3/16/2021 10,665 $ 4.10 6/30/2024 3/16/2021 13,333 $ 4.10 6/30/2024 8/31/2021 3,519,000 $ 4.25 8/31/2026 8/31/2021 153,000 $ 4.675 8/26/2026 9/29/2021 9,450 $ 4.675 8/26/2026 4,393,396 Note 11 – Marketable Securities The cost and fair value of marketable securities were $ 5,976,442 and $ 5,933,364 as of December 31, 2021, respectively, resulting in $ 43,078 unrealized loss. The Company’s investment income amounted to $ 36,463 and $ 0 for the years ended December 31, 2021, and 2020, respectively, included in the investment income on the consolidated statement of operations. Note 12 – PPP Loan On May 5, 2021, and May 7, 2020, the Company applied for and received a loan for $ 190,100 in each year in connection with the Paycheck Protection Program (“PPP”) pursuant to the CARES Act that was signed into law on March 27, 2020. The loans have a term of 5 years, are unsecured, and are guaranteed by the Small Business Administration. The loans bear interest at one percent per annum, with the first six months of interest and principal deferred. Some or all of the loans may be forgiven if at least 60 % of the loans’ proceeds are used by the Company to cover payroll costs, including benefits, and if the Company maintains its employment and compensation within certain parameters during the period following the loans’ origination dates and comply with other relevant conditions. The Company elected to account for the PPP loans as in-substance government grants by applying the guidance in IAS 20 by analogy based on the assessment that it is probable that it will meet both (a) the eligibility criteria for a PPP loans, and (b) the loan forgiveness criteria for all or substantially all of the PPP loans. Under this guidance, the Company recorded the loan proceeds in Other income in the consolidated statement of operations for the years ended December 31, 2021 and 2020. As of December 31, 2021, the Company has been forgiven for its PPP loan that was incurred on May 7, 2020. F- 17 Note 13 - Income Taxes The Company is subject to United States federal and Massachusetts state income taxes at an approximate combined rate of 29 % in 2021. During the years ended December 31, 2021 and 2020, there was no provision for income taxes as the Company incurred losses during both periods. The primary component of the Company’s deferred tax assets are its net operating loss carryforwards. At December 31, 2021, the Company has a federal and state net operating loss carryforward of approximately $ 14,701,000 and $ 14,749,000 , respectively, which begins expiring in 2034. The Company’s 2018 and after federal net operating losses can be carried forward indefinitely. The valuation allowance against deferred tax assets was approximately $ 4.3 million and $ 3.2 million as of December 31, 2021, and 2020, respectively. During the years ended December 31, 2021, and 2020, the valuation allowance increased by approximately $ 1.2 million and $ 0.4 million, respectively. As of December 31, 2021, the Company did not maintain any foreign subsidiaries and did not have previously deferred foreign earnings subject to the transition tax. The income tax benefit differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2021 and 2020 due to the following: 2021 2020 Computed “expected” tax benefit ( 21.0 )% ( 21.0 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit ( 8.0 )% ( 8.0 )% Permanent differences 0 % 0 % Increase in valuation reserve 29.0 % 29.0 % 0 % 0 % Note 14 – Commitments and Contingencies In November 2014, the Company entered an office space lease in Woburn, Massachusetts (the “Lease”), which is considered the Company’s corporate headquarters, which was extended through November 30, 2020, and then subsequently further on a month-to-month basis until a notice by either of the parties. This lease is accounted for as a short-term lease with the expense recognized on a monthly basis when incurred. The rent expense for this lease was $ 216,860 and $ 180,732 for the years ended December 31, 2021 and 2020, respectively. On September 15, 2018, the Company executed an agreement to guarantee of the obligations of John W. Kennedy, our Chief Financial Officer, on a lease for Mr. Kennedy’s housing. The annual rental amount due on the lease is $ 32,400 and was paid by Mr. Kennedy for each of the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, the Company had no obligations either anticipated or currently payable under the guarantee. Note 15 – Subsequent Events On January 11, 2022, the Company converted its marketable securities with a cost basis of $ 5,988,462 to cash equivalents. The Company realized a loss associated with this conversion of its marketable securities in the amount of $ 106,294 . On January 13, 2022, the Company issued 1,085,000 stock options. These stock options expire five years from the grant date, vest over a period of three to four years, and have an exercise price of $1.73. On February 2, 2022, the Company entered into a new lease agreement for approximately 15,538 square feet of corporate office space in Billerica, Massachusetts. The lease has a term of 86 months, with the first two months of rent being $0, and subsequently escalating from $14,317 per month to $26,453 per month over the lease term. F-18