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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-23 · 313 added, 301 removed, 63 unchanged (91% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion of

our financial condition and results of operations in conjunction with our audited consolidated financial statements for the year ended

December 31, 2021, and related notes included elsewhere in this report.

This discussion and analysis and other parts of this report contain

forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions.

results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result

of several factors, including those set forth under “Risk Factors” and elsewhere in this report.

You should carefully read

the “Risk Factors” section of this report to gain an understanding of the important factors that could cause actual results

to differ materially from our forward-looking statements.

Please also see the section entitled “Cautionary Note Regarding Forward-Looking

Statements and Industry and Market Data” in this report.

This overview and outlook provide a high-level

discussion of our operating results and significant known trends that affect our business.

We believe that an understanding of these trends

is important to understanding our financial results for the periods being reported herein as well as our future financial performance.

This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided

elsewhere in this report.

We are a development-stage life sciences instrumentation

and research services company engaged in the development of scientific assets and novel intellectual property across multiple “omics”

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion of our financial condition

and results of operations in conjunction with our audited consolidated financial statements for the year ended December 31, 2022, and

related notes included elsewhere in this report.

This discussion and analysis and other parts of this report contain forward-looking statements

based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions.

Our actual results and the timing

of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors,

including those set forth under “Risk Factors” and elsewhere in this report.

You should carefully read the “Risk Factors”

section of this report to gain an understanding of the important factors that could cause actual results to differ materially from our

forward-looking statements.

Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry

and Market Data” in this report.

This overview and outlook provide a high-level discussion of our operating

results and significant known trends that affect our business.

We believe that an understanding of these trends is important to understanding

our financial results for the periods being reported herein as well as our future financial performance.

This summary is not intended

to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report.

We are an early commercial-stage life sciences instrumentation and

research services company engaged in the development of scientific assets and novel intellectual property across multiple “omics”

We leverage our expertise with True Single Molecule Sequencing (tSMS) technology enabling researchers and clinicians to contribute

major advancements to scientific research and development.

Our customers are primarily the early adopters

of genomics technology and tSMS in academic research, biomarker discovery, and molecular diagnostic product development.

Our financial results have been, and will continue

to be, impacted by several significant trends, which are described below.

While these trends are important to understanding and evaluating

our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto

within the Consolidated Financial Statements section of this report, and trends discussed in “Risk Factors” within the Business

& Market Information section of this report.

Financial Overview

Beginning in 2020, the COVID-19 pandemic and international

efforts to control its spread have significantly curtailed the movement of people, goods, services and research worldwide, including in

the areas in which we conduct our business and collaborations.

We expect the COVID-19 pandemic to continue to impact our business and

collaborations in 2022, the size and duration of which is significantly uncertain.

Consolidated financial highlights for 2021 included

the following:

● Revenue decreased 36% in 2021 from 2020 primarily due to the

reduction in research services and business activities due to the COVID-19 pandemic.

We expect our revenue to increase in 2022.

● Gross profit as a percentage of revenue (gross margin) was

72% in 2021 compared to 48% in 2020.

The increase in gross margin was driven primarily by the reduction in salaries due to the Covid-19

● Net Loss increased by $2,658,205, or 254%, to $3,703,558 as compared

to $1,045,353 for the year ended December 31, 2020, due to transactions resulting from our initial public offering, including an extinguishment

loss of $934,257 for the conversion of $2.1 million in promissory notes and a significant increase in professional fees.

We expect our

operating expenses to increase in 2022, primarily due to our increased funds for research and development.

● We ended 2021 with cash, cash equivalents, and short-term investments totaling

$9.9 million, enough to fund our operations as currently planned until the first quarter of 2024.

Our customers are primarily the early adopters of genomics technology

and tSMS in academic research, biomarker discovery, and molecular diagnostic product development.

Our financial results have been, and will continue to be, impacted

by several significant trends, which are described below.

While these trends are important to understanding and evaluating our financial

results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated

Financial Statements section of this report, and trends discussed in “Risk Factors” within the Business& Market Information

section of this report.

We incurred net losses of $4,094,833 and $3,703,558 for the year ended

December 31, 2022 and 2021, respectively.

We had negative cash flow from operating activities of $3,662,568 and $1,989,877 for the year

ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of $18,508,684 as of December 31, 2022.

Results of operations may be adversely affected by various factors

that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control.

Our business could

be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates,

the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such

as the military conflict in the Ukraine.

We cannot at this time fully predict the likelihood of one or more of the above events, their

duration or magnitude or the extent to which they may negatively impact our business.

Our financial results have been, and will continue to be, impacted

by several significant trends, which are described below.

While these trends are important to understanding and evaluating our financial

results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated

Financial Statements section of this report, and trends discussed in “Risk Factors” in Item 1-A of Part I of this report.

Results of Operations

2 unchanged sentences

ended December 31, 2022 and 2021:

Consolidated Statements of Operations and Comprehensive

Grant revenue

7 unchanged sentences

Other (income) and expenses

Investment income

Unrealized loss on marketable securities

Interest and dividend income

Unrealized (gain)/loss on marketable equity securities

Realized loss on marketable equity securities

Change in fair value of convertible notes

Loss on extinguishment of notes

Loss on extinguishment of convertible notes

Interest expense

$ (3,703,558 )

Other comprehensive income

Unrealized gain on marketable debt securities

Total comprehensive loss

$ (4,072,382 )

$ (3,703,558 )

Our revenues during the year ended December 31,

2021, were $209,995 as compared to revenues of $329,495 during the year ended December 31, 2020, representing a decrease of $119,500,

During 2021, revenue included product sales of $31,537, grants of $161,974 and $16,484 from research services as compared to revenue

in the same period of 2020 from product sales of $0, grants of $278,907 and $50,588 in research services.

The change in revenue was primarily

a result of the reduction in research services and business activities due to the COVID-19 pandemic, as well as the reduction of the NIH

grant revenue.

Gross profit for the year ended December 31, 2021, was $152,305, as

compared to gross profit of $158,692 for the year ended December 31, 2020, resulting in a decrease of $6,387, or 4%.

The gross profit

as the percentage of revenues was 72% as compared to 48% in 2020 as a result of the reduction in cost of sales attributed to the decrease

in the sales of products and services, including significantly reduced salaries, due to the COVID-19 pandemic.

Net loss per share - basic and diluted

Weighted average common shares - basic and diluted

Our revenues during the year ended December 31, 2022, were $78,659

as compared to revenues of $209,995 during the year ended December 31, 2021, representing a decrease of $131,336, or 63%.

During the year

ended December 31, 2022, revenue included grant revenue of $77,482 and $1,177 from product sales, and no sales from research services

as compared to the revenue during the year ended December 31, 2021 from product sales of $31,537, grants of $161,974 and $16,484 in sequencing

The decrease in revenue was due to the reduction in research services and revenue generating activities due to our relocation

to Billerica, Massachusetts.

This relocation, which was finalized in September of 2022, resulted in the Company temporarily not having

facilities that were sufficient to perform our research services and business activities.

We expect to resume normal operations in 2023.

Gross profit for the year ended December 31, 2022 was $77,969, as compared

to gross profit of $152,305 for the year ended December 31, 2021, which represented a decrease of $74,336, or 49%, primarily due to the

fact that we had lower product and services sales in 2022 due to our relocation to Billerica, Massachusetts as well as there was a decrease

in grant revenue for the year ended December 31, 2022.

Research and Development Expenses

Research and development expenses increased by $199,097, or 60%, for

the year ended December 31, 2021, as compared to the prior year.

The increase in expenses was a result of the ramp up in our research

and development activities to levels of pre-COVID-19 pandemic.

We expect these expenditures to increase over the

first half of 2022 and beyond as we grow our research and development efforts to advance certain projects that were on hold during the

COVID-19 pandemic.

Research and development expenses increased by $1,038,190, or 196%,

from $530,076 for the year ended December 31, 2021 compared to $1,568,266 for the year ended December 31, 2022.

The increase in expenses

was a result of our progressive return to research and development activities to levels of pre-COVID-19 pandemic.

We expect these expenditures

to increase in 2023 and beyond as we increase our research and development efforts to pre-pandemic levels.

General and Administrative Expenses

General and administrative expenses increased $1,393,422, or 179%, for

the year ended December 31, 2021 as compared to the prior year.

The increase was primarily attributable to increased operating expenses

related to the preparation for our initial public offering in August 2021, including professional fees for accounting and legal of approximately

$870,000, increased personnel expenses of approximately $275,000 (inclusive of $215,000 of one-time bonuses), increase rent expense of

approximately $55,000 due to higher rent prices, as well as increase of approximately $90,000 in Directors and Officers pro-rated insurance

General and administrative expenditures should not increase, and possibly

decrease, during 2022, in comparison to 2021.

This is due to no recurrence of the one-time professional fees related to the IPO.

this reduction will be mitigated somewhat due to the additional costs to support ongoing financial reporting and compliance activities.

General and administrative expenses increased by $335,994, or 15%,

from $2,170,857 for the year ended December 31, 2021 compared to $2,506,851 for the year ended December 31, 2022.

The increase was primarily

attributable to increased operating expenses as a public company, including the addition of accounting, legal, insurance and audit related

General and administrative expenditures will continue to increase to support ongoing financial reporting and compliance activities.

Interest and Other Income/Loss

We recognized interest expense of $208,289 and $287,197 in the years

ended December 31, 2021, and 2020, respectively, representing a decrease of $78,908, or 27%, in 2021 over 2020.

The decrease in interest

expense was due to a decrease in our outstanding indebtedness as a result of the conversion of $2.1 million in notes to equity concurrently

with the consumption of our initial public offering on August 31, 2021.

We recognized Other Income of $190,193 and $191,566 related to the

PPP loan forgiveness in the years ended December 31, 2021, and 2020, respectively, resulting in a decrease of $1,373, or 1%.

We recognized $36,463 and $43,078 of investment

income and unrealized losses on marketable securities for the year ended December 31, 2021, which was attributable to our

short-term investments held in mutual funds.

We did not hold such investments during the year ended December 31, 2020.

We recognized a loss on extinguishment of

debt totaling $934,257 and a change of $195,962 in the fair value of convertible notes for the year ended December 31, 2021.

The loss on the extinguishment of debt represented the excess of the fair value of certain

convertible notes totaling $3,075,987 over their carrying value of $2,141,730 at their amendment date in the first quarter of 2021.

The accounting loss of $195,962 was due to the change in fair value of the convertible notes carried at fair value between the

amendment date and their conversion at the IPO date.

Our net loss for the year ended December 31, 2021, increased by $2,658,205,

or 254%, to $3,703,558 as compared to $1,045,353 for the year ended December 31, 2020 due primarily to the extinguishment loss of $934,257

for the conversion features added to $2.1 million aggregate principal amount of promissory notes, and the increase in general and administrative

expenses as a result of our becoming a public company.

We recognized $44,879 of interest and dividend income in the year ended

December 31, 2022 as compared to $36,463 for the year ended December 31, 2021.

This primarily relates to the dividend income earned on

the Company’s investments in equity securities.

The Company expects to see increases in interest income over the next twelve months

based on the current interest rates and market conditions.

We recognized zero other income in the year ended December 31, 2022

as compared to $190,193 of other income in the year ended December 31, 2021 related to forgiveness of Paycheck Protection Program loans.

We recognized $51,816 in net realized and unrealized losses on the

marketable equity securities during the year ended December 31, 2022 as compared to $43,078 for the year ended December 31, 2021.

We recognized $195,962 related to the change in fair value of our convertible

notes in the year ended December 31, 2021.

No such convertible notes were in existence for the year ended December 31, 2022.

Additionally,

we recognized a loss on extinguishment of debt totaling $934,257 in the year ended December 31, 2021 related to certain convertible notes.

The loss on the extinguishment of debt represented the excess of the fair value of these convertible notes totaling $3,075,987 over their

carrying value of $2,141,730 at their amendment date in the first quarter of 2021.

We did not incur such losses during the year ended

December 31, 2022.

We recognized interest expense of $90,748 and $208,289 in the year

ended December 31, 2022 and 2021, respectively, representing a decrease of $117,541, or 56%.

The decrease in interest expense was due

to a decrease in our outstanding indebtedness as a result of the conversion of $2.1 million in notes to equity concurrently with the consummation

of our initial public offering on August 31, 2021.

Overall, the net loss increased by $391,275, or 11%, to $4,094,833

as compared to $3,703,558 for the year ended December 31, 2022.

This increase in net loss is primarily attributable to increased operating

expenses as a public company and our progressive return to research and development activities to levels of pre-COVID-19 pandemic.

increase in operating expenses was partially offset by the decrease in the interest expense for the year ended December 31, 2022 as compared

to the year ended December 31, 2021 and the loss on extinguishment of the convertible notes in the year ended December 31, 2021 in the

amount of $934,257.

Liquidity and Capital Resources

As of December 31, 2021, we had approximately $9.9 million in cash

and cash equivalents and marketable securities.

Cash and cash equivalents increased significantly from prior year due to the “Financing

Activities” described in the “Cash Flow Summary” below.

Since inception, we have funded our operations primarily through

equity and debt financings, as well as from modest sales of products and research services.

As of December 31, 2021, we had an accumulated

The accompanying consolidated financial statements have been prepared

on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Even though we experienced negative cash flows from operations of $3,662,568 for the year ended December 31, 2022, we had cash and cash

equivalents of $2,180,525 and short-term investments in marketable securities of $4,036,014 at December 31, 2022.

Cash and cash equivalents decreased $1,834,603 at December 31, 2022

as compared to December 31, 2021 due to cash spending for operating activities for the year period ended December 31, 2022, partially

offset by the net sale of $1,867,985 in marketable securities.

Since inception, we have funded our operations primarily through equity

and debt financings, as well as from modest sales of products and research services.

As of December 31, 2022, and we had an accumulated

deficit of $18,508,684.

From January to March 2021, we issued senior secured

convertible promissory notes to investors totaling $250,000 which were converted into shares of common stock upon our initial public offering

in August 2021.

In July and August of 2021, Daniel Jones our CEO

loaned us $90,000 and $50,000, respectively, of which both loans were repaid in full with proceeds from the IPO.

In August 2021, we issued 3,060,000 shares of common stock to investors

in our initial public offering.

The gross proceeds from our initial public offering was $13.0 million.

We incurred offering expenses of

$1.6 million in cash.

We also converted $2.1 million of debt into 641,895 shares of common stock at our initial public offering.

On September 29, 2021, we issued 189,000 shares of common stock to

the underwriters at a price of $4.24 per share from the partial exercise of the overallotment option, increasing the net proceeds by approximately

$730,000, net of offering costs.

believe the net proceeds from our initial public offering, together with our cash generated from commercial sales and research

activity, will enable us to fund our operations for at least one year from the date this Annual Report on Form 10-K is

filed with the SEC.

However, our forecast of the period of time through which our financial resources will be adequate to support

our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we

On February 15, 2023, we sold

to institutional investors, in a registered direct offering, an aggregate of 2,000,000 shares of common stock for aggregate gross proceeds

of $1,800,000 before deducting placement agent fees and other offering expenses payable by the Company.

We believe our cash on hand, together with our cash generated

from commercial sales and research activity, will enable us to fund our operations for at least one year from the date of this

However, our forecast of the period of time through which our financial resources will be adequate to support our operations

is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

We have based this

estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

Our future capital requirements will depend on many factors, including:

● our ability to successfully and further develop our technologies

and create innovative products in our markets, including the costs associated with the development of our tSMS platform across multiple

market segments, for which we have budgeted approximately $1 million in 2022 and $2 million in 2023 in support of our collaborative efforts

in detection tools for heart disease and cancer, and chromatin mapping in genome biology,

● scientific progress in research and development of our collaborative

programs, including the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights, as well as the

costs associated with any product or technology that we may in-license or acquire;

● the terms and timing of establishing and maintaining collaborations,

licenses and other similar arrangements;

including the need to enter into other collaborations to enhance or complement our product and

service offerings.

We plan to continue seeking additional

financing sources from time to time to meet our working capital requirements, make continued investment in research and development

and make capital expenditures needed for us to maintain and expand our business.

We may not be able to obtain additional financing

on terms favorable to us, if at all.

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we

require it, or if we expend capital on projects that are not successful, our ability to continue to support our business growth and

to respond to business challenges could be significantly limited.

In addition, if we raise additional funds through further

issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities

we issue could have rights, preferences and privileges superior to those of holders of our common stock.

The following table sets forth the primary sources

and uses of cash and cash equivalents for each of the periods presented.

ability to successfully further develop our technologies and create innovative products in our markets, including the costs associated

with the development of our tSMS platform across multiple market segments, for which we have budgeted approximately $1.5 million in 2023

in support of our collaborative efforts in detection tools for heart disease and cancer, and chromatin mapping in genome biology;

progress in research and development of our collaborative programs, including the costs of obtaining, maintaining and enforcing our patents

and other intellectual property rights, as well as the costs associated with any product or technology that we may in-license or acquire;

terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

including the need to enter

into other collaborations to enhance or complement our product and service offerings.

We plan to continue seeking additional financing sources from time

to time to meet our working capital requirements, make continued investment in research and development and make capital expenditures

needed for us to maintain and expand our business.

We may not be able to obtain additional financing on terms favorable to us, if at all.

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, or if we expend capital on

projects that are not successful, our ability to continue to support our business growth and to respond to business challenges could be

significantly limited.

In addition, if we raise additional funds through further issuances of equity or debt securities, our existing

stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior

to those of holders of our common stock.

The following table sets forth the primary sources and uses of cash

and cash equivalents for each of the periods presented.

For the Years Ended

2 unchanged sentences

$ (3,662,568 )

$ (1,989,877 )

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

$ (1,834,603 )

Net cash used in operating activities

Net cash used in operating activities was approximately

$2.0 million and $0.8 million for the years ended December 31, 2021 and 2020, respectively.

The decreases in 2020 were primarily attributable

to reduced research and development and operating expenses as a result of the COVID-19 pandemic-related slowdown, including salary reductions,

furloughs and reduced spending.

The increase in 2021 was primarily attributable to the significant expenses related to our operating as

a public company starting in the third quarter of 2021.

We anticipate our research and development efforts

and on-going general and administrative costs will generate negative cash flows from operating activities for the foreseeable future.

Net cash used in investing activities

Net cash used in investing activities was $6.0 million for the year

ended December 31, 2021, and none in the year ended December 31, 2020.

The investing activities are related to the acquisition of highly

liquid short-term investments with the proceeds from our initial public offering.

Net cash used in operating activities was approximately $3.7 million

and $2.0 million for the year ended December 31, 2022 and 2021, respectively.

The increase in operating spending was a result of our progressive

return to research and development activities to levels of pre-COVID-19 pandemic.

In addition, we experienced an increase in our general

and administrative spending since we became a public company in August 2021.

We anticipate our research and development efforts and on-going general

and administrative costs will generate negative cash flows from operating activities for the foreseeable future.

Net cash used provided by/used in investing activities

Net cash provided by investing activities was approximately $1.8 million

for the year ended December 31, 2022 as compared to cash used in investing activities of approximately $6.0 million for the year ended

December 31, 2021.

The net inflow of funds is related to the disposition of the marketable securities during the year ended December 31,

2022 as compared to the investment of the proceeds from our initial public offering, which occurred in August 2021, into marketable securities

during the year ended December 31, 2021.

Net cash provided by financing activities

Net cash provided by financing activities was approximately

$12.0 million and $0.75 million for the years ended December 31, 2021 and 2020, respectively.

The increase was primarily attributable

to the proceeds raised in our initial public offering on August 31, 2021.

Net cash provided by financing activities was $0 and approximately

$12.0 million for the years ended December 31, 2022 and 2021, respectively.

This decrease was primarily attributable to the proceeds raised

in our initial public offering on August 31, 2021, with no equity or debt proceeds raised during the year ended December 31, 2022.

Recent Accounting Pronouncements

In August 2020, Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 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.

We adopted this standard on January 1, 2022, for which, there was

no material impact to our consolidated financial statements.

In June 2016, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 requires measurement and recognition of expected credit losses

for financial assets.

In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to

Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU

The guidance is effective for fiscal years beginning after December 15, 2022.

The Company is currently assessing the

potential impact of adopting ASU 2016-13 on its financial statements and financial statement disclosures.

In February 2016, the FASB issued ASU No.

11 unchanged sentences

in the financial statements, with certain practical expedients available.

We adopted this standard on January 1, 2022.

We do not believe that any other recently

issued but not yet effective accounting pronouncements will have a material effect on the accompanying consolidated financial statements.

At the date of adoption on January 1, 2022, this guidance had

no impact to our consolidated financial statements.

We do not believe that any other recently issued but not yet effective

accounting pronouncements are expected to have a material effect on our consolidated financial statements.

Critical Accounting Policies and Estimates

Stock-based Compensation

Our share-based compensation program grants awards

including 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 our common stock on the

date of the grant.

The fair value of the stock-based awards are expensed over the requisite service period, generally the vesting period,

for each award.

Our 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.

Our share-based compensation program grant awards include stock options

and restricted stock awards to employees, directors and consultants.

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 our

common stock on the date of the grant.

The fair value of the stock-based awards is then expensed over the requisite service period, generally

the vesting period, for each award.

Our 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 we do not pay dividends on common stock.

We recognize forfeitures related

to stock-based awards as they occur.

We have periodically granted stock options and

restricted stock awards to consultants for services, pursuant to our stock plans at the fair market value on the respective dates of grant.

Should we terminate any of our 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.

We granted stock options to purchase an aggregate of 100,000 shares

of common stock in the year ended December 31, 2021, and did not grant any stock options during the year ended December 31, 2020.

Treasury securities consistent with the life of the

No dividend yield was assumed as we do not pay dividends on our common stock.

We recognize forfeitures related to stock-based

awards as they occur.

We have periodically granted stock options and restricted stock awards

to consultants for services, pursuant to our stock plans at the fair market value on the respective dates of grant.

Should we terminate

any of our 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.

We granted stock options to purchase an aggregate of 1,085,000 and

100,000 shares of common stock in the years ended December 31, 2022 and 2021, respectively.

Revenue Recognition

Our 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

Research service revenue primarily consists of revenue generated from gene sequencing services and grants.

We recognize revenue in accordance with Accounting

Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Under ASC 606, we

recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration

we expect to receive from our 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, we perform 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.

We only apply the five-step process to contracts when it is probable that we will collect consideration we expect to

be entitled to in exchange for the goods or services we transfer to the customer.

We evaluate 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 our control and 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.

Our revenue is generated primarily from the sale of products and gene

sequencing services.

Product revenue primarily consists of sales of genetic sequencing equipment and sequencing reagent kits.

We recognize revenue in accordance with Accounting Standards Codification

(“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Under ASC 606, we recognize revenue when

control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive

from our 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, we follow the 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.

We only apply the

five-step process to contracts when it is probable that we will collect consideration we expect to be entitled to in exchange for the

goods or services we transfer to the customer.

We evaluate 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 our control and 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

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process are sequential in nature and highly interrelated as they work together to generate sample-specific data.

As our standard payment terms are less than one

year, we have elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

As our standard payment terms are less than one year, we have elected

the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

We have elected to exclude sales tax from revenue.

We generally have no obligations for returns, refunds and other similar obligations and do not provide separate equipment warranties.

We recognized $16,484 and $50,588 in revenue from gene sequencing services for the years ended December 31, 2021 and 2020, respectively.

We recognized $31,537 and $0 in revenue from product sales for the years ended December 31, 2021 and 2020, respectively.

We generally have

no obligations for returns, refunds and other similar obligations and do not provide separate equipment warranties.

We recognized $0 and

$16,484 in revenue from gene sequencing services for the years ended December 31, 2022 and 2021, respectively.

We recognized $1,177 and

$31,537 in revenue from product sales for the years ended December 31, 2022 and 2021, respectively.

Grant Revenue

Our grant revenues are derived from research programs

by various departments of the National Institute of Health (“NIH”).

Grants awarded to us for research and development

by government entities are outside the scope of the contracts with customers and contributions 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 us.

provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined

Our grant revenues are derived from research programs by various departments

of the National Institute of Health (“NIH”).

Grants awarded to us for research and development by government entities

are outside the scope of the contracts with customers and contributions 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 us.

These grants provide us with payments for

certain types of expenditures in return for research and development activities over a contractually defined period.

We recognize NIH grant revenue as reimbursable grant costs that are

1 unchanged sentence

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, we recognized grant revenue of $161,974 and $278,907, respectively.

Section 107 of the JOBS Act provides that

an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the

Securities Act for complying with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption

of new or revised accounting standards until those standards would otherwise apply to private companies.

We have irrevocably elected to

avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised

accounting standards as other public companies that are not emerging growth companies.

For as long as we remain an emerging growth

company under the recently-enacted JOBS Act, we will, among other things:

● be permitted to have only two years of

audited financial statements and only two years of related selected financial data and management’s discussion and analysis

of financial condition and results of operations disclosure;

● be entitled to rely on an exemption from compliance

with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley

● be entitled to reduced disclosure obligations

about executive compensation arrangements in our periodic reports, registration statements and proxy statements;

● be exempt from the requirements to seek non-binding

advisory votes on executive compensation or golden parachute arrangements.

Although we are still evaluating the JOBS Act,

we currently intend to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us

so long as we qualify as an “emerging growth company.” Among other things, this means that our independent registered public

accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting

so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control

over financial reporting go undetected.

Likewise, so long as we qualify as an emerging

growth company, we may elect not to provide certain information, including certain financial information and certain information regarding

compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may

make it more difficult for investors and securities analysts to evaluate our company.

As a result, investor confidence in our company

and the market price of our common stock may be materially and adversely affected.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a Smaller Reporting Company

as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations

and therefore are not required to provide the information requested by this Item 7A.

Our Consolidated Financial

Statements are on pages F-1 through F-18

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

of research and development expense in the accompanying consolidated statements of operations and comprehensive loss.

In the years ended

December 31, 2022, and 2021, we recognized grant revenue of $77,482 and $161,974, respectively.

Investments in marketable securities

We account for our investments in debt securities in accordance with

Accounting Standards Codification (“ASC”) 320, Investments — Debt Securities (“ASC 320”).

Debt securities, which are comprised of investments in U.S.

Treasury Securities, are measured at fair value, based on quoted market prices.

As we have classified our investments in debt securities as available-for-sale, we recognize all unrealized gains and losses in other

comprehensive income, net of tax, and recognize all realized gains and losses in our consolidated statement of operations and comprehensive

We account for our investments in equity securities in accordance with

ASC 321, Investments — Equity Securities (“ASC 321”).

Equity securities, 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 our consolidated

statement of operations and comprehensive loss.

We may sell our debt or equity securities in response to changes in

interest rates, risk/reward characteristics, liquidity needs or other factors.

Section 107 of the JOBS Act provides that an “emerging growth

company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying

with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption of new or revised accounting

standards until those standards would otherwise apply to private companies.

We have irrevocably elected to avail ourselves of this exemption

from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other

public companies that are not emerging growth companies.

For as long as we remain an emerging growth company under the recently-enacted

JOBS Act, we will, among other things:

permitted to have only two years of audited financial statements and only two years of related selected financial data and management’s

discussion and analysis of financial condition and results of operations disclosure;

entitled to rely on an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over

financial reporting pursuant to the Sarbanes-Oxley Act;

entitled to reduced disclosure obligations about executive compensation arrangements in our periodic reports, registration statements

and proxy statements;

exempt from the requirements to seek non-binding advisory votes on executive compensation or golden parachute arrangements.

We currently intend to take advantage of some or all of the reduced

regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company.”

Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report

on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase

the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

Likewise, so long as we qualify as an emerging growth company, we may

elect not to provide certain information, including certain financial information and certain information regarding compensation of our

executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult

for investors and securities analysts to evaluate our company.

As a result, investor confidence in our company and the market price of

our common stock may be materially and adversely affected.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange

Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to

provide the information requested by this Item 7A.

FINANCIAL STATEMENTS .

Our Consolidated Financial Statements are on pages F-1 through F-21

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURES.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis