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, 2022. As of December 31, 2022, 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 Report on Internal Controls Over Financial Reporting As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal controls over financial reporting were effective as of December 31, 2022. This Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company and a smaller reporting company. 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, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 47 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Executive Officers and Directors The following table provides information regarding our key employees and directors: Name Age Position(s) Executive Officers Daniel Jones 42 President, Chief Executive Officer and Chairman Frances Scally 55 Chief Financial Officer and Secretary Non-Employee Directors Patrice M. Milos, Ph.D. 64 Director Douglas Miscoll 62 Director David Pfeffer 63 Director Executive Officers Daniel Jones is our Chief Executive Officer and Chairman of the Board. He has been our co-founder, President, and a member of our board of directors since our inception. He has served as Chief Executive Officer since May 2018 and was elected Chairman of the Board in March 2021. Prior to becoming our CEO, he was President from inception to May 2018. Mr. Jones has over 15 years of biotechnology industry experience, including 12 plus years in single molecule sequencing research. Prior to founding our company, Mr. Jones held various positions at Helicos Biosciences, a publicly-traded biotechnology tools company. During his career at Helicos Biosciences, his responsibilities included applications development, instrument prototyping and validation, customer support and bioinformatics analysis, as well as sales and operations. In 2008, Mr. Jones ran the first ever direct RNA sequencing experiments while at Helicos. From December 2003 to March 2007, Mr. Jones worked at U.S. Genomics in the Methods Development group and on development of its Trilogy 2020 Single Molecule Analyzer and Direct miRNA assays. From December 2002 to December 2003, Mr. Jones worked at EXACT Sciences on its ColoGuard assay, a non-invasive, now FDA-approved molecular diagnostic for colorectal cancer. Mr. Jones has authored or co-authored four publications and is named on multiple patents or patent applications. He holds a B.S. degree from Trinity College and has studied biotechnology and bioinformatics at Brandeis University and the University of Massachusetts. We believe Mr. Jones’ experience in the pharmaceutical industry as well as his extensive understanding of our business, operations and strategy qualifies him to serve on our board of directors. Frances Scally has served as our Chief Financial Officer and Secretary since August 2022. Ms. Scally has over 30 years’ experience in strategic accounting and financial leadership, including serving as chief financial officer, chief accounting officer and in other senior financial executive roles at both domestic and multi-national public and private companies. Since October 2021, Ms. Scally has been a Managing Director at DLA LLC, an Advisory firm, in which capacity she provides accounting advisory services. Prior to joining DLA LLC, Ms. Scally was the Chief Accounting Officer and Acting Chief Financial Officer of Aceto Holdings, L.P. from April 2019 to April 2020, as well as the Chief Accounting Officer of Aceto Corporation from March 2007 to April 2019. Aceto Corporation is an international company engaged in the development, marketing, sale and distribution of human health products, pharmaceutical ingredients and performance chemicals. Prior to joining Aceto, Ms. Scally was the Director of Financial Reporting and Compliance at Veeco Instruments Inc., a manufacturer of semiconductor process equipment, from 1998-2007. From 1989-1998, Ms. Scally was employed by Ernst & Young LLP. Ms. Scally received a bachelor’s degree in accounting from LIU Post and is a Certified Public Accountant. She is a member of New York State Society of CPAs and American Institute of Certified Public Accountants. Ms. Scally also is a Trustee and a member of the Finance Committee for St. Edward the Confessor Church and School. Ms. Scally’s services as our Chief Financial Officer are being secured pursuant to the terms of our Master Services Agreement with DLA LLC, where Ms. Scally is an employee. 48 Non-Employee Directors Patrice M. Milos, Ph.D. has served as a member of our board of directors since August 2021. Since September 2020, Dr. Milos has been Vice President, Scientific Operations of Proof Diagnostics, Inc., a company that is developing a low-cost, rapid diagnostic, point-of-care testing platform for the detection of COVID-19. From October 2016 to September 2020, Dr. Milos was a co-founder, President and Chief Executive Officer of Medley-Genomics Inc., a company focused on using advanced data analytics to support better diagnosis and treatment of complex diseases. From May 2013 to January 2016, Dr. Milos was President and Chief Executive Officer of Claritas Genomics Inc., a subsidiary of Boston Children’s Hospital that provided commercial next-generation pediatric molecular diagnostic testing. Additional experience included executive roles at Helicos BioSciences and Pfizer, Inc. Dr. Milos is also a member of the board of directors of 54Gene Inc., a U.S. and Nigeria-based startup that collects African genetic code for use in health research and drug development, Slater Technology Fund, a seed-stage venture investor in early-stage technology ventures, ProThera Biologics, a life-sciences company developing a fundamentally new paradigm for treating severe inflammation and RI Bio, a bioscience, biotech, health and life sciences industry network group dedicated to galvanizing collaboration among industry participants. Dr. Milos has received numerous awards and honors within the life sciences industry and has authored or co-authored over 60 biotech or life sciences publications. She earned a B.A. in biology and chemistry from The College of Saint Rose, a M.S. and Ph.D. in plant molecular genetics and biology from Rensselaer Polytechnic Institute and has completed Post-Doctoral work at Harvard University and Brown University in plant and mouse molecular genetics. We believe Dr. Milos’ management experience and her extensive background and experience in molecular genetics and biology qualifies her to serve on our board of directors. Douglas Miscoll has served as a member of our board of directors since October 2015. Mr. Miscoll founded Ravello Precision Partners in 2015, which operated as a hedge fund focused on genomic biology companies. Mr. Miscoll founded Ravello Partners LLC in 2010, which manages discretionary portfolios for families and small institutions and is active in the biotechnology sector. From 1999 until 2009, Mr. Miscoll was a Managing Director at Newlight Management, where he was responsible for managing all aspects of two private equity funds and a hedgefund focused on technology, media and communications companies. He originated and directed the firm’s public market investment activities. Previously, from 1994 to 1995, he was a Managing Director of Northgate Ventures, a venture capital fund focused on early stage technology companies. Mr. Miscoll was a founding member of the management team that created K-III Communications, a leveraged build-up in the publishing and information services industries sponsored by Kohlberg Kravis Roberts & Co. Mr. Miscoll received an M.B.A. from Georgetown University, a Graduate Certificate from Templeton College, Oxford University, and a B.A. from Santa Clara University. We believe Mr. Miscoll’s executive management experience qualifies him to serve on our board of directors. David Pfeffer has served as a member of our board of directors since September 2018 and is currently our Audit Committee Chairman. Mr. Pfeffer has over 30 years of experience in diverse roles in financial services; leading companies, developing and executing strategy, building businesses up from the ground floor and driving innovation to grow in today’s ultra-competitive and dynamic global economy. Mr. Pfeffer is currently CEO of Brick Citi Capital, LLC, an investment services and business advisory firm founded in 2019. Previously, he was Executive Vice President and Chief Financial Officer of Oppenheimer Funds, a global asset manager, from 2004 to 2019. He was a Management Director on the Oppenheimer Funds, Inc. board and President of Oppenheimer Funds Harbourview Asset Management. From 2009 to 2019, Mr. Pfeffer served as an Independent Director at ICI Mutual Insurance Co., including a role as Audit Committee Chairman. From 2000 to 2004, Mr. Pfeffer worked as Institutional Chief Financial Officer and Director at Citigroup Asset Management. Mr. Pfeffer was at J.P. Morgan from 1984 to 2000, where he gained significant international experience serving as Chief Financial Officer and Director of JPM Brazil for five years in São Paulo and supported JPM’s international businesses during his 16 year tenure there. Mr. Pfeffer worked as a public accountant at Ernst & Whinney from 1981 to 1984. Mr. Pfeffer is a Certified Public Accountant, a Chartered Global Management Accountant and has his FINRA Series 99 Operations Professional license. He graduated Cum Laude from the University of Delaware with a B.S. in Accounting. We believe Mr. Pfeffer’s experience in corporate governance and capital markets qualifies him to serve on our board of directors. Family Relationships There are no family relationships between or among any of our directors or executive officers. There are no family relationships among our officers and directors and those of our subsidiaries and affiliated companies. Board Composition and Classified Board Structure In accordance with the terms of our restated certificate of incorporation and amended and restated bylaws, our Board is currently divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successor to each director whose term then expires will be elected to serve from the time of election and qualification until the third annual meeting of stockholders following election or such director’s death, resignation or removal, whichever is earliest to occur. The current class structure is as follows: Class I (consisting of Mr. Jones and Dr. Milos), whose term currently expires at the 2025 Annual Meeting of Stockholders; Class II (consisting of Mr. Miscoll), whose term will expire at the 2023 Annual Meeting of Stockholders; and Class III (consisting of Mr. Pfeffer), whose term will expire at the 2024 Annual Meeting of Stockholders. 49 The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis. Upon completion of this offering, our bylaws will be amended and restated to provide that the authorized number of directors may be changed only by resolution of the board of directors. We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape. Director Independence The Nasdaq Marketplace Rules require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2) of the Nasdaq Marketplace Rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 of the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. Our board of directors has reviewed the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that each of Patrice Milos, Doug Miscoll and David Pfeffer is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Our board of directors also determined that the directors who serve on our audit committee, our compensation committee and our nominating and corporate governance committee satisfy the independence standards for such committees established by the SEC and the Nasdaq Marketplace Rules, as applicable. In making such determinations, our board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director. Board Diversity In August 2021, the SEC approved a Nasdaq Stock Market proposal to adopt new listing rules relating to board diversity and disclosure. As approved by the SEC, the new Nasdaq listing rules require all Nasdaq listed companies to disclose consistent, transparent diversity statistics regarding their boards of directors. The Board Diversity Matrix below presents the Board’s diversity statistics in the format prescribed by the Nasdaq rules. Board Diversity Matrix (As of March 7, 2023) Total Number of Directors 4 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 2 1 Part II: Demographic Background African American or Black Alaskan Native or Native American Asian Hispanic or Latin Native Hawaiian or Pacific Islander White 1 2 Two or More Races or Ethnicities LGBTQ+ Did Not Disclose Demographic Background 1 Board Meetings and Committees During the year ended December 31, 2022, our board of directors held ten meetings (including regularly scheduled and special meetings), and no director attended fewer than 75% of the total number of meetings of the board of directors and the committees of which he or she was a member. In addition, during the year ended December 31, 2022, our board of directors acted by unanimous written consent on two occasions. Although we do not have a formal policy regarding attendance by members of our board of directors at annual meetings of stockholders, we encourage, but do not require, directors to attend. Our board of directors has established three standing committees — audit, compensation, and nominating and corporate governance — each of which operates under a charter approved by our board of directors. Copies of each committee’s charter has been posted on the Investor Relations section of our website, which is located at www.seqll.com . Each committee has the composition and responsibilities described below. Our board of directors may from time to time establish other committees. 50 Audit Committee Our audit committee consists of David Pfeffer, who is the chair of the committee, Douglas Miscoll and Patrice Milos. Our board of directors has determined that each of the members of our audit committee satisfies the Nasdaq Marketplace Rules and SEC independence requirements. The functions of this committee include, among other things: ● evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors; ● reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services; ● reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management; ● reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls; ● reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and ● reviewing and evaluating on an annual basis the performance of the audit committee, including compliance of the audit committee with its charter. Our board of directors has determined that David Pfeffer qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of the Nasdaq Marketplace Rules. In making this determination, our board of directors has considered Mr. Pfeffer’s extensive financial experience and business background. Both our independent registered public accounting firm and management periodically meets privately with our audit committee. The audit committee had ten meetings in 2022. The audit committee operates under a written charter that was adopted by our board of directors and satisfies the applicable rules of the SEC and the listing standards of the NASDAQ Stock Market. A copy of the audit committee charter is available on our website at www.seqll. com . Compensation Committee Our compensation committee consists of Douglas Miscoll, who is the chair of the committee, and David Pfeffer and Patrice Milos. Our Board has determined that each of the members of our compensation committee satisfies the Nasdaq Marketplace Rules independence requirements. The functions of this committee include, among other things: ● reviewing, modifying and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) our overall compensation strategy and policies; ● reviewing and approving the compensation, the performance goals and objectives relevant to the compensation, and other terms of employment of our executive officers; ● reviewing and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs; ● reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers; ● reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC; and ● preparing the report that the SEC requires in our annual proxy statement. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of another entity that had one or more of its executive officers serving as a member of our board of directors or compensation committee. None of the members of our compensation committee has been at any time one of our officers or employees. Our compensation committee had two meetings in 2022. The compensation committee operates under a written charter that was adopted by our board of directors and satisfies the applicable rules of the SEC and the listing standards of the NASDAQ Stock Market. A copy of the compensation committee charter is available on our website at www.seqll.com . 51 Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Douglas Miscoll, who is the chair of the committee, and Patrice Milos and David Pfeffer. Our board of directors has determined that each of the members of this committee satisfies the Nasdaq Marketplace Rules independence requirements. The functions of this committee include, among other things: ● identifying, reviewing and evaluating candidates to serve on our board of directors consistent with criteria approved by our board of directors; ● evaluating director performance on our board of directors and applicable committees of our board of directors and determining whether continued service on our board of directors is appropriate; ● evaluating, nominating and recommending individuals for membership on our board of directors; and ● evaluating nominations by stockholders of candidates for election to our board of directors. During 2022, our nominating and corporate governance committee met one time . The nominating and corporate governance committee operates under a written charter that was adopted by our board of directors and satisfies the applicable rules of the SEC and the listing standards of the NASDAQ Stock Market. A copy of the nominating and corporate governance committee charter is available on our website at www.seqll.com . Scientific Advisors Our executive team is supported by our Scientific Advisors. The Scientific Advisors provide scientific advice regarding our tSMS technology to our executive team. Each our Scientific Advisors was selected based on experience with our tSMS technology and familiarity with our tSMS sequencers. The Scientific Advisors are not required to provide any particular services to us and are not currently compensated, except for periodic awards of stock options. Efrat Shema, Ph.D. — Principal Investigator and Assistant Professor at the Weizmann Institute of Science. Dr. Shema completed her M.Sc. and Ph.D. at the Weizmann Institute in 2007 and 2012 in molecular cell biology, after earning her B.Sc. in life sciences at the Hebrew University in Jerusalem in 2005. She moved to Boston in 2012 as a Fulbright Scholar, conducting post-doctoral work under Dr. Bradley Bernstein at Massachusetts General Hospital, Harvard Medical School, and the Broad Institute of MIT and Harvard. During her Ph.D. studies at the Weizmann Institute, Dr. Shema received a prestigious Adams Fellowship from the Israel Academy of Sciences and Humanities, as well as the Otto Schwartz Prize for Excellence and a UNESCO-L’OREAL national award for young women in life sciences. Dr. Shema collaborates with us to study epigenetic events that contribute to cellular differentiation, early development and cancer using innovative single-molecule technologies. Claes Wahlestedt, M.D., Ph.D. — Director, Center for Therapeutic Innovation, Leonard M. Miller Professor and Associate Dean for therapeutic innovation at the University of Miami. From 2005 to 2011, he was a professor and director of neuroscience at The Scripps Research Institute. The author of over 300 papers in scientific journals, with over 43,000 citations, Dr. Wahlestedt has a long-standing interest in genomics and epigenetics and has pioneered various translational efforts in these fields. At Scripps in 2008, he co-founded CuRNA (now part of Opko Health), a spin-off company based on his patent for targeting regulatory noncoding RNAs to up-regulate therapeutic proteins. In 2011, he co-founded Epigenetix Inc., a University of Miami spin-off focusing on small molecule drugs for a variety of drug targets in cancer and neuroscience. Dr. Wahlestedt advises us on applications development and scientific strategy. Philipp Kapranov, Ph.D. — Professor and Director, Institute of Genomics at HuaQiao University, Xiamen, China. Dr. Kapranov’s primary research interest includes systems biology and genomics in the context of gene expression and discovery of new RNA species (both protein-coding and non-coding) and their functions, especially in the context of human disease particularly cancer. Dr. Kapranov received his B.Sc. in microbial biotechnology, from Kiev Institute of Food Industry, Ukraine, and his Ph.D. in genetics from Michigan State University. Previously, he was a Senior Scientist at Affymetrix where his research first demonstrated an order of magnitude increase in transcriptional activity on human chromosomes 21 and 22 over that accounted for by previously characterized and predicted exons. Dr. Kapranov is a long-time collaborator of ours who purchased and deployed the first HeliScope in China, which his lab uses for researching non-coding RNA and basic science. 52 Code of Business Conduct and Ethics Our board of directors has adopted a written code of conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of the code and all disclosures that are required by law or Nasdaq Marketplace Rules concerning any amendments to, or waivers from, any provision of the code is posted on our website, which is located at www.seqll.com . Board Leadership Structure Our board of directors is free to select the Chairman of the board of directors and a Chief Executive Officer in a manner that it considers to be in the best interests of our company at the time of selection. Currently, Daniel Jones serves as our Chief Executive Officer and Chairman of the board of directors. We currently believe that this leadership structure is in our best interests. As Chairman of the Board, Mr. Jones’ key responsibilities include facilitating communication between our board of directors and management, assessing management’s performance, managing board members, preparation of the agenda for each board meeting, acting as chair of board meetings and meetings of our company’s stockholders and managing relations with stockholders, other stakeholders and the public. We will take steps to ensure that adequate structures and processes are in place to permit our board of directors to function independently of management. The directors will be able to request at any time a meeting restricted to independent directors for the purposes of discussing matters independently of management and are encouraged to do so should they feel that such a meeting is required. Our board of directors, as a whole and also at the committee level, plays an active role overseeing the overall management of our risks. Our Audit Committee reviews risks related to financial and operational items with our management and our independent registered public accounting firm. Our board of directors is in regular contact with our Chief Executive Officer and Chief Financial Officer, who report directly to our board of directors and who supervise day-to-day risk management. Role of Board in Risk Oversight Process We face a number of risks, including those described herein under the caption “Risk Factors.” Our board of directors believes that risk management is an important part of establishing, updating and executing on our business strategy. Our board of directors has oversight responsibility relating to risks that could affect our corporate strategy, business objectives, compliance, operations, and the financial condition and performance. Our board of directors focuses its oversight on the most significant risks facing us and, on our processes, to identify, prioritize, assess, manage and mitigate those risks. Our board of directors receives regular reports from members of our senior management on areas of material risk to us, including strategic, operational, financial, legal and regulatory risks. While our board of directors has an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes and controls to mitigate their effects on us. 53 ITEM 11. EXECUTIVE COMPENSATION . The following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2022 and 2021 . Individuals we refer to as our “named executive officers” include our Chief Executive Officers and our Chief Financial Officer whose salary and bonus for services rendered in all capacities exceeded $100,000 during the fiscal year ended December 31, 2022. Currently, we do not have employment agreements with any of our executive officers, although we may enter into employment agreements with our officers in the future. Name and Principal Position Year Salary Bonus Option Awards (1) Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All Other Compensation Total Daniel Jones 2022 $ 225,000 $ 50,000 (4) $ 178,179 $ 453,179 Chief Executive Officer 2021 106,667 150,000 (2) — — — — 256,667 John W. Kennedy (3) 2022 115,000 — 133,634 — — — 248,634 Chief Financial Officer 2021 67,275 100,000 114,530 — — — 281,805 Frances Scally (5) 2022 78,250 — — — — — 78,250 (1) The amounts reported in the “Option Awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC 718. See Note 2 to our consolidated financial statements for the year ended December 31, 2022 included in this report regarding assumptions underlying the valuation of equity awards. These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options. (2) Of this bonus, $75,000 was deferred to, and paid in, 2022. (3) Mr. Kennedy resigned his position as our Chief Financial Officer on August 9, 2022. (4) The $50,000 bonus was paid in 2023. (5) Ms. Scally was appointed our Chief Financial Officer on August 8, 2022. Ms. Scally is a consultant to our company and all compensation for her services is paid to DLA, LLC, a financial consulting firm with which Ms. Scally is employed. Equity Compensation Plan Information The following table provides information as of December 31, 2022, regarding our compensation plans under which equity securities are authorized for issuance: Plan category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) 2014 Equity Incentive Plan – Equity compensation plan approved by security holders 2,003,919 $ 1.88 1,496,081 Equity compensation plans not approved by security holders -- -- — Total 2,003,919 $ 1.88 1,496,081 SeqLL Inc. 2014 Equity Incentive Plan Our board of directors and our stockholders originally approved our 2014 Equity Incentive Plan, or the 2014 Plan, in April 2014. Our 2014 Plan allows for the grant of equity-based awards to our and our affiliates’ officers, employees, directors and key persons. On March 18, 2021, our board of directors and stockholders approved an amendment and restatement of our 2014 Plan to increase the number of shares of common stock available for equity awards under the 2014 plan to 3.5 million shares. The description below is of our 2014 Plan as amended and restated, except as otherwise noted. 54 Purpose. The purpose of our 2014 Plan, as amended and restated, is to encourage and enable our and our affiliates’ officers, employees, directors and other key persons (including consultants and prospective employees) upon whose judgment, initiative and efforts we largely depend for the successful conduct of our business to acquire a proprietary interest in our company. Eligibility. Participants in our 2014 Plan may include full or part-time officers, employees, directors and key persons (including advisors and consultants) of our company or our affiliates who are selected to receive awards from time to time by the administrator in its sole discretion. Administration. Our 2014 Plan is administered by our compensation committee, or, if at any time our compensation committee is not in existence, our board of directors. In addition, to the extent applicable law permits, our board of directors may delegate any of its authority under our 2014 Plan to another committee or one or more officers, and our compensation committee may delegate any of its authority hereunder to a sub-committee or to one or more officers, except that no such delegation is permitted with respect to awards made to individuals who are subject to Section 16 of the Exchange Act unless the delegation is to another committee consisting entirely of “nonemployee directors” within the meaning of Rule 16b-3 of the Exchange Act. Subject to the provisions of our 2014 Plan, the administrator has the power to administer the plan, including but not limited to, the power to select the eligible officers, employees, directors, and key employees to whom awards are granted; to determine the number of shares to be covered by each award; to determine the terms and conditions of any award and to amend any outstanding award. Authorized Shares. As of December 31, 2022, a total of 3,500,000 shares of our common stock were authorized for issuance under our 2014 Plan, and at such date, stock grants of an aggregate of 2,003,919 shares had been made under the 2014 Plan, and 1,496,081 shares authorized under the 2014 Plan remained available for award purposes. All of the authorized shares may be issued pursuant to incentive stock options. The shares available for issuance may be authorized but unissued shares or shares reacquired by us and held in its treasury. The share reserve under our 2014 Plan is depleted by the maximum number of shares, if any, that may be issuable under an award as determined at the time of grant. However, awards that may only be settled in cash (determined at the time of grant) do not deplete the share reserve. If (1) an award lapses, expires, terminates or is cancelled without the issuance of shares, (2) it is determined during or at the conclusion of the term of an award that all or some portion of the shares with respect to which the award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (3) shares are forfeited under an award, (4) shares are issued under any award and we subsequently reacquire them pursuant to rights reserved upon the issuance, (5) an award or a portion thereof is settled in cash, or shares are withheld by us in payment of the exercise price or withholding taxes of an award, then such shares will be recredited to the reserve and may again be used for new awards. However, shares recredited to reserve pursuant to clause (4) in the preceding sentence may not be issued pursuant to incentive stock options. Adjustments to Shares. If, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in our capital stock, the outstanding shares are increased or decreased or are exchanged for a different number or kind of shares or other securities of our company, or additional shares or new or different shares or other securities of our company or other non-cash assets are distributed with respect to such shares or other securities, or, if, as a result of any merger, consolidation or sale of all or substantially all of our assets, the outstanding shares are converted into or exchanged for a different number or kind of securities of our company or any successor entity (or a parent or subsidiary thereof), the administrator will make an appropriate or proportionate adjustment in (1) the maximum number of shares reserved for issuance under our 2014 Plan; (2) the number and kind of shares or other securities subject to any then outstanding awards under our 2014 Plan; and (3) the exercise price for each share subject to any then outstanding stock options. The administrator also may adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the administrator that such adjustment is appropriate to avoid distortion in the operation of our 2014 Plan, subject to the limitations described in our 2014 Plan. Effect of a Sale Event. Unless otherwise provided in an award or other agreement, upon a “sale event,” if the successor or surviving corporation (or parent thereof) so agrees, then, without the consent of any holder of an award (or other person with rights in an award), some or all outstanding awards may be assumed, or replaced with the same type of award with similar terms and conditions, subject to adjustments described in our 2014 Plan, by the successor or surviving corporation (or parent thereof) in the sale event. A “sale event” is generally defined for this purpose as (1) any person becoming the beneficial owner of 50% or more of the combined voting power of our then-outstanding securities (subject to exceptions and other limitations scribed in our 2014 Plan), (2) our stockholders approving a plan of complete liquidation or dissolution of our company, (3) the consummation of (a) an agreement for the sale or disposition of all or substantially all of our assets (other than to certain excluded persons), (b) a merger, consolidation or reorganization of our company with or involving any other corporation (subject to specified exceptions), or (4) a change in the majority of our board of directors that is not approved by a supermajority of the existing board. More detailed descriptions and additional information on limitations relating to each of these sale events are in our 2014 Plan. If, after a sale event in which the awards are assumed or replaced, the award holder experiences a termination event as a result of a termination of service without cause, due to death or disability, or as a result of a resignation for good reason, in each case within 24 months after a sale event, then the award holder’s awards will be vested in full or deemed earned in full (assuming target performance, if applicable). To the extent the awards are not assumed or replaced in the sale event, then, (1) each option will become immediately and fully vested and, unless the administrator determines otherwise, will be canceled on the sale event in exchange for a cash payment equal to the excess of the price paid in the sale event over the exercise price of the option, and all options with an exercise price lower than the price paid in the sale event will be canceled for no consideration, (2) restricted stock and restricted stock units (not subject to performance goals) will be vested in full and settled, along with any accompanying dividend equivalent units, and (3) all awards subject to performance goals with outstanding performance periods will be canceled in exchange for a cash payment equal to the amount that would have been due under the award if performance had been satisfied at the better of target or the performance trend through the sale event. 55 Solely with respect to awards granted on and after the completion of this offering, and except as otherwise expressly provided in any agreement with an award holder, if the receipt of any payment by an award holder under the circumstances described above would result in the payment by the award holder of any excise tax provided for in Section 280G and Section 4999 of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax. Limit on Director Awards. The maximum value of awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid during the fiscal year to the non-employee director in respect of the director’s service as a member of our board of directors during such year (including service as a member or chair of any committees of the board), shall not exceed $800,000 in total value for the first year of service and $400,000 for future years of service (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes). Types of Awards. Awards under our 2014 Plan may consist of incentive stock options, non-qualified stock options, restricted stock awards, unrestricted stock awards, restricted stock units, or any combination of those awards. Some provisions of our 2014 Plan relating to these award types are summarized below. Stock Options. A stock option is an award entitling the recipient to acquire shares, at such exercise price as determined by the administrator (which may not be lower than the fair market value of the underlying shares on the date of grant) and subject to such restrictions and conditions as the administrator may determine at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. Stock options granted under our 2014 Plan may be either non-qualified stock options or incentive stock options. Incentive stock options may be granted only to our employees or employees of our subsidiaries, and must certain requirements specified in our 2014 Plan and the Code. Stock options will become exercisable at such time or times as determined by the administrator at or after the grant date and set forth in the stock option agreement. The administrator may at any time accelerate the exercisability of all or any portion of any stock option. Restricted Stock. A restricted stock award is a grant (or sale, at such purchase price as determined by the administrator) of shares that are subject to such restrictions and conditions as the administrator may determine at the time of grant. Conditions may be based on continuing employment (or other service relationship) or achievement of pre-established performance goals and objectives. The terms and conditions of each such agreement shall be determined by the administrator. Unrestricted Stock. The administrator may grant (or sell at par value or such higher purchase price determined by the administrator) unrestricted shares, in respect of past services, in exchange for cancellation of a compensation right, as a bonus, or any other valid consideration, or in lieu of any cash compensation due to such individual. Restricted Stock Units and Dividend Equivalent Units. The administrator may grant restricted stock units representing the right to receive a future payment of cash, the amount of which is determined by reference to our shares, shares or a combination of cash and shares. The administrator will determine all terms and conditions of an award of restricted stock units, including but not limited to the number granted, in what form they will be settled, whether performance goals must be achieved for the restricted stock units to be earned, the length of any vesting or performance period and the date of payment, and whether the grant will include dividend equivalent units. The administrator will determine all terms and conditions of an award of dividend equivalent units, including whether payment will be made in cash or shares. However, no dividend equivalent units may be paid with respect to restricted stock units that are not earned or that do not become vested. Termination of Employment or Service. Except as otherwise provided in any award agreement or an award holder’s employment offer letter, severance letter or services agreement, or as determined by administrator at the time of the award holder’s termination of employment or service: ● If the termination is for cause, the award holder will forfeit all outstanding awards immediately upon termination and will not be permitted to exercise any stock options following termination. ● If the termination is due to the award holder’s death or disability (when the award holder could not have been terminated for cause), the award holder will forfeit the unvested portion of any award, and any vested stock options will remain exercisable until the earlier of the original stock option expiration date or 12 months from the date of termination. ● If the termination was for any reason other than cause, death or disability (when the award holder could not have been terminated for cause), the award holder will forfeit the unvested portion of any award, and any vested stock options will remain exercisable until the earlier of the original stock option expiration date or three months from the date of termination. Term of Plan and Plan Amendments. Our 2014 Plan will continue until all shares reserved for issuance under our 2014 Plan have been issued, or, if earlier, until such time as the administrator terminates our 2014 Plan as described below. No incentive stock options may be granted after the ten (10) year anniversary of the date of stockholder approval of the amendment and restatement of our 2014 Plan unless the stockholders have approved an extension. 56 Our board of directors may, at any time, amend, terminate or discontinue our 2014 Plan, except that our stockholders must approve any amendment to the extent approval is required by Section 16 of the Exchange Act, the Code, the listing requirements of any principal securities exchange or market on which our shares are then traded or any other applicable law. In addition, stockholders must approve any amendment to our 2014 Plan that would materially increase the number of shares reserved (except as permitted by the adjustment provisions of our 2014 Plan) or that would diminish the protections afforded by the anti-repricing provisions of our 2014 Plan. Any termination of our 2014 Plan will not affect the authority of our board of directors and the administrator to administer outstanding awards or affect the rights of award holders with respect to awards previously granted to them. Award Amendments, Cancellation and Disgorgement. Subject to the anti-repricing and other requirements of our 2014 Plan, the administrator may modify, amend or cancel any award. However, except as otherwise provided in our 2014 Plan or an award agreement, the consent of the award holder is required to any amendment that materially diminishes the holder’s rights under the award. Our 2014 Plan includes exceptions to the consent requirement for actions necessary to comply with applicable law or the listing requirements of securities exchanges, to preserve favorable accounting or tax treatment of any award for our company or to the extent the administrator determines that an action does not materially and adversely affect the value of the award or is in the best interest of the affected award holder or any other person who has an interest in the award. The administrator has full power and authority to terminate or cause an award holder to forfeit an award, and require an award holder to disgorge to us, any gains attributable to the award, if the award holder engages in any action constituting, as determined by the administrator in its discretion, cause for termination, or a breach of any award agreement or any other agreement between the award holder and us or one of our affiliates concerning noncompetition, non-solicitation, confidentiality, trade secrets, intellectual property, non-disparagement or similar obligations. In addition, any awards granted pursuant to our 2014 Plan, and any shares issued or cash paid pursuant to an award, will be subject to any recoupment or claw-back policy that is adopted by us from time to time, or any recoupment or similar requirement otherwise made applicable to us by law, regulation or listing standards. Repricing and Backdating Prohibited. Notwithstanding anything in our 2014 Plan to the contrary, and except for the adjustments provided for in our 2014 Plan, neither the administrator nor any other person may (1) amend the terms of outstanding stock options to reduce the exercise or grant price of such outstanding stock options; (2) cancel outstanding stock options in exchange for stock options with an exercise or grant price that is less than the exercise or grant price of the original stock options; or (3) cancel outstanding stock options with an exercise or grant price above the current fair market value of a share in exchange for cash or other securities. In addition, the administrator may not make a grant of a stock option with a grant date that is effective prior to the date the administrator takes action to approve the award. Incentive Plan Awards The following table sets forth information relating to stock option grants made to our named executive officers during the fiscal year ended December 31, 2022. Date of Option Grant # of Options Fair Value ($) (1) Daniel Jones January 13, 2022 200,000 $ 178,179 John W. Kennedy January 13, 2022 150,000 133,634 (1) Reflects the aggregate fair value computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC 718. See Note 2 to our consolidated financial statements for the year ended December 31, 2022 included in this report regarding assumptions underlying the valuation of equity awards. These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options. Outstanding Equity Awards at Fiscal Year-End The following table sets forth outstanding equity awards to our named executive officers as of December 31, 2022. Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable (1) Option Exercise Price Option Expiration Date Number of Shares or Units of Stock that have not Vested Market Value of Shares or Units of Stock that have not Vested Daniel Jones 178,378 — $ 2.46 9/5/2028 — $ — Daniel Jones 200,000 200,000 1.73 1/13/2032 — — John W. Kennedy 135,136 — 2.46 9/5/2028 — — John W. Kennedy 100,000 — 2.52 12/6/2031 — — John W. Kennedy 150,000 150,000 1.73 1/13/2032 — — 57 Director Compensation General. The following discussion describes the significant elements of the expected compensation program for members of our board of directors and its committees. The compensation of our directors is designed to attract and retain committed and qualified directors and to align their compensation with the long-term interests of our shareholders. Directors who are also executive officers (each, an “Excluded Director”) will not be entitled to receive any compensation for his or her service as a director, committee member or Chair of our board of directors or of any committee of our board of directors. Director Compensation Arrangements. Our non-employee director compensation program is designed to attract and retain qualified individuals to serve on our board of directors. Our board of directors, on the recommendation of our compensation committee, will be responsible for reviewing and approving any changes to the directors’ compensation arrangements. In consideration for serving on our board of directors, each director (other than Excluded Directors) will be paid an annual retainer. All directors will be reimbursed for their reasonable out-of-pocket expenses incurred while serving as directors. Our board of directors has approved the following compensation program for the non-employee members of our board of directors. Cash Compensation. Under such program, we will pay each non-employee director a cash fee, payable quarterly, of $4,167 per month for service on our board of directors. Equity Awards. Each non-employee director will receive a one-time initial stock option award for 16,216 shares of our common stock, which options shall vest in arrears in two equal tranches on the first and second anniversaries of service on our Board. Each non-employee director shall also be eligible to receive grants of stock options, each in an amount designated by the Compensation Committee of our board of directors, from any equity compensation plan approved by the Compensation Committee of our Board. In addition to such compensation, we will reimburse each non-employee director for all pre-approved expenses within 30 days of receiving satisfactory written documentation setting out the expense actually incurred by such director. These include reasonable transportation and lodging costs incurred for attendance at any meeting of our board of directors. The following table sets forth the director compensation we accrued in the year ended December 31, 2022 (excluding compensation to our executive officers set forth in the summary compensation table above). Name Fees Earned or Paid in Cash Option Awards (2) Total ($) Douglas Miscoll $ 50,000 $ 66,441 $ 116,441 David Pfeffer 60,000 (1) 66,441 126,441 Patrice M. Milos, Ph.D. 50,000 66,441 116,441 — — — Total: $ 160,000 $ 199,323 $ 359,323 (1) Of the amount reported in the “Fees or Paid in Cash” column, $10,000 was deferred to and paid in 2023. (2) Reflects the aggregate fair value computed in accordance with the provisions of the Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC 718. See Note 2 to our consolidated financial statements for the year ended December 31, 2022 included in this report regarding assumptions underlying the valuation of equity awards. These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the named director upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 1, 2023 by: ● each person known by us to be a beneficial owner of more than 5% of our outstanding common stock; ● each of our directors; ● each of our named executive officers; and ● all directors and executive officers as a group. 58 The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after March 1, 2023. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest. Except as indicated by footnote, to our knowledge, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The applicable percentage ownership prior to this offering is based on 13,886,379 shares of common stock outstanding as of March 1, 2023. Unless otherwise noted below, the address of the persons listed on the table is c/o SeqLL Inc., 3 Federal Street, Billerica, Massachusetts 01821. Name and Address of Beneficial Owner Number of Shares Percentage Executive Officers and Directors Daniel Jones (1) 2,633,243 18.6 % John W. Kennedy (2) 282,010 2.0 Frances Scally - - Dr. Patrice M. Milos (3) 62,027 * Douglas Miscoll (4) 138,174 1.0 David Pfeffer (5) 61,216 * All directors and executive officers as a group (6 persons) 3,176,670 21.8 5% Stockholders William C. St. Laurent (6) 3,981,206 27.6 St. Laurent Investments, LLC (7) 2,054,403 14.3 Wendy St. Laurent (8) 744,243 5.4 * Represents beneficial ownership of less than 1%. (1) Includes (i) 2,392,365 shares of common stock and (ii) 240,878 shares of common stock issuable upon the exercise of currently exercisable stock options. (2) Represents shares of common stock issuable upon the exercise of currently exercisable stock options. (3) Includes (i) 10,000 shares of common stock and (ii) 52,027 shares of common stock issuable upon the exercise of currently exercisable stock options. (4) Includes (i) 54,729 shares of common stock and (ii) 83,445 shares of common stock issuable upon the exercise of currently exercisable stock options. (5) Includes (i) 20,000 shares of common stock and (ii) 41,216 shares of common stock issuable upon the exercise of currently exercisable stock options. (6) Includes (i) 16,216 shares of common stock issuable upon the exercise of currently exercisable stock options and (ii) 744,243 shares of common stock held by Mr. St. Laurent’s spouse, (iii) 2,054,403 shares of common stock beneficially owned by St. Laurent Investments LLC, (iv) 583,172 shares of common stock beneficially owned by the Georges C. St. Laurent III Descendants’ Trust and (v) 583,172 shares of common stock beneficially owned by the William C. St Laurent Descendant’s Trust. The address of Mr. St. Laurent is 120 NE 136 Avenue, Vancouver, WA 98684. (7) Includes (i) 1,530,583 shares of common stock, and (ii) 523,820 shares of common stock issuable upon the exercise of currently exercisable warrants. William C. St. Laurent is the managing member of St. Laurent Investments, LLC and, as a result, may be deemed to have voting and investment power with respect to the shares held by St. Laurent Investments, LLC. The address of St. Laurent Investments, LLC is 120 NE 136 Avenue, Vancouver, WA 98684. (8) The address of Wendy St. Laurent is 120 NE 136 Avenue, Vancouver, WA 98684. 59 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. Procedures for Approval of Related Party Transactions A “related party transaction” is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related party had or will have a direct or indirect material interest. A “related party” includes: ● any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors; ● any person who beneficially owns more than 5% of our common stock; ● any immediate family member of any of the foregoing; or ● any entity in which any of the foregoing is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest. In March 2021, our board of directors adopted a written related-party transactions policy. Pursuant to this policy, the Audit Committee of our board of directors will review all material facts of all related-party transactions and either approve or disapprove entry into the related-party transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a related-party transaction, our Audit Committee shall take into account, among other factors, the following: (i) whether the related-party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third party under the same or similar circumstances; (ii) the extent of the related party’s interest in the transaction; and (iii) whether the transaction would impair the independence of a non-employee director. Related Party Transactions At December 31, 2022, the Company had the following outstanding payables to affiliated parties for past services: December 31, 2022 Genomic Diagnostic Technologies $ 925 St. Laurent Institute 232,418 St. Laurent Realty, Inc. 7,558 Total related party payables $ 240,901 The above entities are affiliated with (1) William C. St. Laurent, a former member of the Company’s board of directors, (2) relatives of Mr. St. Laurent or (3) entities controlled by the St. Laurent family, who are controlling shareholders of the Company. St. Laurent Realty, Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting support; St. Laurent Institute, a non-for-profit company, provided bioinformatics specialist support for certain sequencing services. From April 29, 2019 to April 29, 2020, we entered into a series of non-convertible promissory notes (the “Promissory Notes”) with St. Laurent Investments LLC amounting to $1,375,000. The Promissory Notes had a one-year term with interest accruing at 10% per annum. In October 2021, we entered into an agreement with St. Laurent Investments LLC to reduce the interest on $1,375,000 principal amount of the Promissory Notes from 10% to 5% per year starting on October 1, 2021. In June 2022, we entered into an agreement with St. Laurent Investments LLC to extend the maturity date of the $1,375,000 Promissory Note to July 31, 2024. 60 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The following table sets forth the fees billed to us for professional services rendered by Wolf & Co. for the years ended December 31, 2022 and 2021: Services 2022 2021 Audit fees $ 147,800 $ 150,502 Audit-related fees 8,700 68,750 Total fees $ 156,500 $ 219,252 (1) Audit Fees — Audit fees consist of fees billed for the audit of our annual financial statements and the review of the interim consolidated financial statements. (2) Audit-Related Fees — These consisted principally of the aggregate fees related to audits that are not included Audit Fees. Pre-Approval Policies and Procedures The Audit Committee has the authority to appoint or replace our independent registered public accounting firm (subject, if applicable, to stockholder ratification). The Audit Committee is also responsible for the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent registered public accounting firm was engaged by, and reports directly to, the Audit Committee. The Audit Committee pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X, provided that all such excepted services are subsequently approved prior to the completion of the audit. We have complied with the procedures set forth above, and the Audit Committee has otherwise complied with the provisions of its charter. 61 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 10-K 3/23/22 4.1 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 10-K 3/23/22 22 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. 62 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 16th day of March, 2023. 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 16, 2023 Daniel Jones (Principal Executive Officer) /s/ Frances Scally Chief Financial Officer and Secretary March 16, 2023 Frances Scally (Principal Financial and Accounting Officer) /s/ Douglas Miscoll Director March 16, 2023 Douglas Miscoll /s/ David Pfeffer Director March 16, 2023 David Pfeffer /s/ Dr. Patrice Milos Director March 16, 2023 Dr. Patrice Milos 63 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 and Comprehensive Loss 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 Stockholders and the Board of Directors 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, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements and schedules (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, 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, MA March 16, 2023 F- 2 SeqLL Inc. Consolidated Balance Sheets December 31, 2022 2021 Assets Current assets Cash and cash equivalents $ 2,180,525 $ 4,015,128 Marketable securities 4,036,014 5,933,364 Accounts receivable, net of allowance for doubtful accounts of $ 6,016 21,214 30,714 Other receivables 60,000 34,965 Inventory 165,852 224,155 Prepaid expenses 171,859 186,056 Total current assets 6,635,464 10,424,382 Other assets Property and equipment, net 530,108 265,267 Operating lease right-of-use asset 1,129,715 - Other assets 118,954 50,488 Total assets $ 8,414,241 $ 10,740,137 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 622,436 $ 871,364 Accrued expenses 495,462 311,405 Non-convertible promissory notes - current - 1,375,000 Current portion of operating lease liability 110,114 - Total current liabilities 1,228,012 2,557,769 Non-current liabilities Operating lease liability, less current portion 1,444,343 - Non-convertible promissory notes - long-term 1,375,000 - Total non-current liabilities 2,819,343 - Total liabilities 4,047,355 2,557,769 Commitments and contingencies (Note 14) Stockholders’ equity Preferred stock, $ 0.00001 par value; 20,000,000 shares authorized; 0 shares issued and outstanding - - Common stock, $ 0.00001 par value; 80,000,000 shares authorized; 11,886,379 shares issued and outstanding 119 119 Additional paid-in capital 22,853,000 22,596,100 Accumulated deficit ( 18,508,684 ) ( 14,413,851 ) Accumulated other comprehensive income 22,451 - Total stockholders’ equity 4,366,886 8,182,368 Total liabilities and stockholders’ equity $ 8,414,241 $ 10,740,137 The accompanying notes are an integral part of these consolidated financial statements. F- 3 SeqLL Inc. Consolidated Statements of Operations and Comprehensive Loss December 31, 2022 2021 Revenue Sales $ 1,177 $ 48,021 Grant revenue 77,482 161,974 Total revenue 78,659 209,995 Cost of sales 690 57,690 Gross profit 77,969 152,305 Operating expenses Research and development 1,568,266 530,076 General and administrative 2,506,851 2,170,857 Total operating expenses 4,075,117 2,700,933 Operating loss ( 3,997,148 ) ( 2,548,628 ) Other (income) and expenses Interest and dividend income ( 44,879 ) ( 36,463 ) Other income - ( 190,193 ) Unrealized (gain)/loss on marketable equity securities ( 54,508 ) 43,078 Realized loss on marketable equity securities 106,324 - Change in fair value of convertible notes - 195,962 Loss on extinguishment of convertible notes - 934,257 Interest expense 90,748.00 208,289 Net loss ( 4,094,833 ) ( 3,703,558 ) Other comprehensive income Unrealized gain on marketable debt securities 22,451 - Total comprehensive loss $ ( 4,072,382 ) $ ( 3,703,558 ) Net loss per share - basic and diluted $ ( 0.34 ) $ ( 0.51 ) Weighted average common shares - basic and diluted 11,886,379 7,216,001 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, 2022 and 2021 Preferred Stock Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders ’ Equity Shares Amount Shares Amount Capital Income Deficit (Deficit) 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 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 Stock-based compensation expense - - - - 256,900 - - 256,900 Other comprehensive income - - - - - 22,451 - 22,451 Net loss - - - - - - ( 4,094,833 ) ( 4,094,833 ) Balance as of December 31, 2022 - $ - 11,886,379 $ 119 $ 22,853,000 $ 22,451 $ ( 18,508,684 ) $ 4,366,886 The accompanying notes are an integral part of these consolidated financial statements. F- 5 SeqLL Inc. Consolidated Statements of Cash Flows December 31, 2022 2021 Cash Flows from Operating Activities Net loss $ ( 4,094,833 ) $ ( 3,703,558 ) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation 87,937 86,444 Write-off of obsolete inventory 79,011 - Unrealized (gain)/loss on marketable securities ( 54,508 ) 43,078 Realized loss on marketable equity securities 106,324 - Loss on extinguishment of notes - 934,257 Stock-based compensation 256,900 333,978 Change in fair value of convertible notes - 195,962 Non-cash lease expense 111,984 - Changes in operating assets and liabilities: Accounts receivable, net 9,500 - Other receivables ( 25,035 ) 73,850 Prepaid expenses 14,197 ( 186,056 ) Inventory ( 20,708 ) ( 21,144 ) Other assets ( 68,466 ) ( 36,226 ) Accounts payable ( 248,928 ) 9,524 Accrued expenses 184,057 280,014 Net cash used in operating activities ( 3,662,568 ) ( 1,989,877 ) Cash Flows from Investing Activities Purchases of lab equipment ( 40,020 ) ( 14,470 ) Purchases of marketable equity securities - ( 5,976,442 ) Purchases of marketable debt securities ( 4,014,153 ) - Sales of marketable equity securities 5,882,138 - Net cash provided by (used in) investing activities 1,827,965 ( 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 ) Payment of non-convertible promissory notes - ( 270,000 ) Proceeds from issuance of convertible notes - 250,000 Proceeds from issuance of common stock to underwriters - 801,362 Settlement of convertible notes - ( 141,891 ) Proceeds from loan payable - related party - 140,000 Payment of loan payable - related party - ( 166,000 ) Net cash provided by financing activities - 11,995,917 Net increase (decrease) in cash and cash equivalents ( 1,834,603 ) 4,015,128 Cash and cash equivalents, beginning of period 4,015,128 - Cash and cash equivalents, end of period $ 2,180,525 $ 4,015,128 Supplemental disclosure of cash flow information and non-cash financing transactions Right-of-use asset acquired through operating lease $ 1,257,495 $ - Leasehold improvements financed through tenant improvement allowance $ 312,758 $ - Conversion of notes at initial public offering into common stock $ - $ 3,222,306 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 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, 2022 and 2021 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 these technologies and related intellectual property. The Subsidiary owns 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 Billerica, 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 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). Notice from the Nasdaq Stock Market On June 21, 2022, SeqLL received notice from The Nasdaq Stock Market (“Nasdaq”) indicating that, because the closing bid price for its common stock has fallen below $ 1.00 per share for 30 consecutive business days, the Company no longer complies with the $ 1.00 minimum bid price requirement for continued listing. Initially, the Company had approximately 180 days to regain its compliance with the Nasdaq. On December 20, 2022, the Company filed with, and received notice from, the Nasdaq that the Company is eligible for an additional 180 day period, in other words, until June 19, 2023, to regain its Nasdaq compliance. The notification of noncompliance has no immediate effect on the listing or trading of the Company’s common stock or its warrants to purchase common stock under the symbols “SQL” and “SQLLW,” respectively. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance by June 19, 2023, and it has been determined that the Company will not be able to cure the deficiency, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. The Company would have the right to appeal a determination to delist its common stock, and the common stock would remain listed on The Nasdaq Capital Market until the completion of the appeal process. F- 7 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. 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 the Company’s control. The Company’s 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. The Company 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 the Company’s business. 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, 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, 2022, 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. 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, 2022, and 2021. Investments in marketable securities The Company accounts for its 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 the Company has classified its investments in debt securities as available-for-sale, the Company recognizes all unrealized gains and losses in other comprehensive income, net of tax, and recognizes all realized gains and losses in net income/loss within the Company’s consolidated statement of operations and comprehensive loss. F- 8 The Company accounts for its 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 net income/loss within the Company’s consolidated statement of operations and comprehensive loss. The Company may sell its debt or 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, 2022 2021 Raw materials $ 114,175 $ 91,995 Work in process 51,677 132,160 Total inventory $ 165,852 $ 224,155 In December of 2022, the Company performed a detailed evaluation of its inventory and determined $ 79,011 was obsolete. As such, the Company has written off this inventory as of December 31, 2022. 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 and office equipment are 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 consolidated statement of operations and comprehensive loss in the period of disposals. 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, 2022, and 2021. 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. F- 9 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 $ 0 and $ 16,484 in revenue from gene sequencing services for the years ended December 31, 2022 and 2021, respectively. The Company recognized $ 1,177 and $ 31,537 in revenue from product sales for the years ended December 31, 2022 and 2021, respectively. Grant Revenue The Company’s grant revenues are derived from research programs by various departments of the National Institute of Health (“NIH”). Grants awarded to SeqLL 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 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. The Company recognizes NIH grant revenue as reimbursable grant costs that 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 and comprehensive loss. In the years ended December 31, 2022, and 2021, the Company recognized grant revenue of $ 77,482 and $ 161,974 , 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. F- 10 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 2019 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 assumptions used in determining the fair value of share-based awards granted in 2022 and 2021 are as follows: 2022 2021 Risk-free interest rate 1.64 % 1.21 % Expected option life 6 – 6.1 years 5 years Expected dividend yield 0 % 0 % Expected stock price volatility 54 % 52 % F- 11 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. Leases In the first quarter of 2022, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) which had no impact on the Company’s financial statements upon adoption. The Company assesses its contracts at inception to determine whether the contract contains a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly identified asset for a period of time. The Company recognizes right-of-use assets and lease liabilities that represent the net present value of future operating lease payments utilizing a discount rate corresponding to the Company’s incremental borrowing rate and amortizing over the remaining terms of the leases. The Company accounts for the leases of less than 12 months as short-term leases. 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 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, 2022 2021 Stock options 2,003,919 918,915 Warrants for common stock 4,388,185 4,393,396 F- 12 Recently Issued Accounting Standards 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 2016-13. The guidance is effective for fiscal years beginning after December 15, 2022. The Company has adopted ASU 2016-13 effective January 1, 2023, for which, there was an immaterial impact on the Company’s financial statements and financial statement disclosures. The Company does not believe that any other recently issued accounting pronouncements had or will have a material effect on its 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, 2022 2021 Lab equipment $ 767,010 $ 740,963 Leasehold improvements 312,758 74,390 Office equipment 23,193 5,896 Other - 3,325 1,102,961 824,574 Less: accumulated depreciation ( 572,853 ) ( 559,307 ) $ 530,108 $ 265,267 Depreciation expense amounted to $ 87,937 and $ 86,444 for the years ended December 31, 2022, and 2021, respectively. F- 13 Note 4 – Accrued Expenses Accrued expenses consist of the following: December 31, December 31, 2022 2021 Accrued interest 306,821 216,073 Accrued bonuses 135,000 - Other 53,641 95,332 $ 495,462 $ 311,405 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, 2022 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 U.S. government and agency obligations $ 4,036,014 $ 4,036,014 - - 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 $ - $ - Mutual funds 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. F- 14 The table below presents the 2021 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 8) 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, 2022, and 2021. The carrying values of financial instruments such as accounts receivable, net, other receivables, accounts payable, and accrued expenses approximated fair value as of December 31, 2022 and December 31, 2021 due to their short-term maturities. The carrying value of the Company’s Non-Convertible Promissory Note approximated its fair value as of December 31, 2022 and December 31, 2021. 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, 2022, there were 1,496,081 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 2022 and 2021 were $ 0.89 and $ 1.15 , respectively, per share. The stock option activity for the year ended December 31, 2022 is as follows: Number of Options Weighted- Average Exercise Price per Share Weighted Average Remaining Contractual Term (in Years) Outstanding as of December 31, 2021 918,919 $ 2.09 5.79 Granted 1,085,000 $ 1.71 10.00 Outstanding of December 31, 2022 2,003,919 $ 1.88 7.09 Exercisable at December 31, 2022 919,764 $ 2.09 4.79 During the years ended December 31, 2022 and 2021, the Company recorded $ 256,900 and $ 333,978 of stock-based compensation associated with granted and vested stock options, respectively. As of December 31, 2022, there was $ 710,812 of unrecognized compensation expense related to unvested share-based compensation awards, which will be recognized over approximately 1.5 years. F- 15 Note 7 – Related Party Transactions At December 31, 2022 and 2021, the Company had the following outstanding payables, which are included within the Company’s accounts payable above, to affiliated parties for past services: December 31, 2022 December 31, 2021 Genomic Diagnostic Technologies $ 925 $ 23,725 St. Laurent Institute 232,418 313,679 St. Laurent Realty, Inc. 7,558 27,913 Total related party payables $ 240,901 $ 365,317 The above entities are affiliated with (1) William C. St. Laurent, a former member of the Company’s board of directors, (2) relatives of Mr. St. Laurent or (3) entities controlled by the St. Laurent family, who are controlling shareholders of the Company. St. Laurent Realty, Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting support; St. Laurent Institute, a non-for-profit company, provided bioinformatics specialist support for certain sequencing services. During 2021, Daniel Jones, the Company’s Chief Executive Officer, made non-interest-bearing demand loans to the Company in the amounts of $ 90,000 and $ 50,000 . Both loans were repaid in full with proceeds from the IPO. 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 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) and were 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 its notes of the Company outstanding through that date. 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 its notes of the Company 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 was 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 and comprehensive loss for the three months ended March 2021, which represented 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 and comprehensive loss. 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. F- 16 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 a $ 141,884 cash payment related to the accrued interest, was reclassified into the additional paid in capital on the 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 principal amount of the Promissory Notes 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 fair values of these warrants were immaterial at issuance. In June 2022, the Company entered into an agreement with St. Laurent Investments LLC to extend the maturity date of the $ 1,375,000 Promissory Note to July 31, 2024 . The Company accounted for this transaction as a modification on a prospective basis. For the years ended December 31, 2022, and 2021, interest expense related to both convertible and non-convertible promissory notes was $ 90,748 and $ 208,289 , respectively. Note 9 – Preferred Stock 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. F- 17 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- 18 The following table summarizes information with regard to outstanding warrants to purchase common stock as of December 31, 2022: Issuance Date Number of Shares Issuable Upon Exercise of Outstanding Warrants Exercise Price Expiration Date 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 4,388,185 During the year ended December 31, 2022, warrants to purchase 5,211 shares of common stock with an exercise price of $ 3.10 expired. Note 11 – Marketable Securities The cost and fair value of marketable securities, which are available-for-sale debt securities, were $ 4,013,563 and $ 4,036,014 as of December 31, 2022, respectively, resulting in a $ 22,451 unrealized gain included in the other comprehensive income for the year ended December 31, 2022. As of December 31, 2022, the contractual maturities for all available-for-sale debt securities were less than one year . Additionally, the Company recognized a net realized loss of $ 51,816 on marketable equity securities for the year ended December 31, 2022. The cost and fair value of marketable equity securities were $ 5,976,442 and $ 5,933,364 as of December 31, 2021, respectively, resulting in $ 43,078 unrealized loss included in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2021. The Company’s interest and dividend income amounted to $ 44,879 and $ 36,463 for the years ended December 31, 2022, and 2021, respectively. The Company has not recognized any impairment in its financial statements related to its marketable securities. F- 19 Note 12 – Paycheck Protection Program On May 5, 2021, and May 7, 2020, the Company applied for and received loans 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 had terms of 5 years, were unsecured and were guaranteed by the Small Business Administration (“SBA”). The loans bore interest at one percent per annum. Loan payments were to be deferred for borrowers who apply for loan forgiveness until the SBA remits the borrower’s loan forgiveness amount to the lender. If a borrower did not apply for loan forgiveness, payments were to be deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (between 8 and 24 weeks). Some or all of the loans could be forgiven if at least 75 % of the loans’ proceeds were used by the Company to cover payroll costs, including benefits, and if the Company maintained its employment and compensation within certain parameters during the period following the loans’ origination date and complied with other relevant conditions. The Company elected to account for the PPP loans as an in-substance government grants by applying the guidance in International Accounting Standards 20 by analogy based on the assessment that it is probable that it will meet both (a) the eligibility criteria for a PPP loan, and (b) the loan forgiveness criteria for all or substantially all of the PPP loan. Under this guidance, the Company recorded the loans’ proceeds in other income in the consolidated statement of operations and comprehensive loss for the years in which the Company received a PPP Loan. As of December 31, 2022, both of the PPP Loans referenced above were forgiven. Note 13 - Income Taxes The Tax Cuts and Jobs Act (the “TCJA”) resulted in significant changes to the treatment of research or experimental (“R&E”) expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&E expenditures that are paid or incurred in connection with their trade or business which represent costs in the experimental or laboratory sense. Specifically, costs for U.S. based R&E activities must be amortized over five years and costs for foreign R&E activities must be amortized over 15 years; both using a midyear convention. The Company has implemented this standard on January 1, 2022, noting that the impact on the Company’s consolidated financial statements was immaterial. The Company is subject to United States federal and Massachusetts state income taxes at an approximate combined rate of 29 % in 2022. During the years ended December 31, 2022 and 2021, 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, 2022, the Company has a federal and state net, operating loss carryforward of approximately $ 17,368,019 and $ 17,090,960 , 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 $ 5.5 million and $ 4.3 million as of December 31, 2022, and 2021, respectively. During the years ended December 31, 2022 and 2021, the valuation allowance increased by approximately $ 1.2 million in both years. As of December 31, 2022, 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, 2022 and 2021 due to the following: 2022 2021 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 Leases The Company’s office space lease in Woburn, Massachusetts (the “Woburn Lease”) for the Company’s corporate headquarters was on a month-to-month basis since November 2020 and was terminated in February 2022. The rent expense for this lease was $ 14,239 and $ 216,860 for the years ended December 31, 2022 and 2021, respectively. F- 20 On February 2, 2022, the Company entered into a lease agreement for approximately 15,638 square feet of its new corporate office space in Billerica, Massachusetts (the “Billerica Lease”). The Billerica Lease has a term of 92 months from its effective date and included access to certain additional office space until August 1, 2022. In addition, the Company is required to share in certain taxes and operating expenses of the Billerica Lease. The Billerica Lease is classified as an operating lease. At the inception date of the Billerica Lease, the Company recorded a right-of-use asset of $ 1,481,646 in operating lease right-of-use asset, as well as a lease liability of $ 12,222 in current liabilities and $ 1,547,614 in long-term liabilities. The operating lease right-of use asset is less than that of the Company’s lease liabilities as of the lease inception date. This is due to the fact that the Company as part of the Billerica Lease was allowed certain tenant improvement allowances, which amounted to $ 78,190 at lease inception. This lease liability represented the net present value of future lease payments for the lease utilizing a discount rate of 5.98 %, which corresponded to the Company’s incremental borrowing rate. In August 2022, the Company received the tenant improvement allowance from the landlord, which totaled approximately $ 312,758 . This allowance covered the leasehold improvements to the Billerica space and was accounted for as a reduction to the right-of-use asset. As of December 31, 2022, the remaining lease term was 6.8 years. The Company recorded expense related to the Billerica Lease in the amount of $ 200,350 year ended December 31, 2022. Variable lease expenses recorded by the Company were immaterial for the year ended December 31, 2022. During the years ended December 31, 2022, the Company made cash payments of $ 88,366 , for amounts included in the measurement of lease liabilities. The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the consolidated balance sheet as of December 31, 2022: 2023 $ 197,305 2024 275,875 2025 284,151 2026 292,676 2027 301,456 Thereafter 548,576 Total undiscounted lease liabilities $ 1,900,039 Less effects of discounting ( 345,582 ) Total lease liabilities $ 1,554,457 Reported as of December 31, 2022: Current portion of operating lease liability $ 110,114 Operating lease liability, less current portion 1,444,343 Total lease liabilities $ 1,554,457 Note 15 – Subsequent Events On February 13, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers, in a registered direct offering, an aggregate of 2,000,000 shares of common stock, par value $ 0.00001 per share (the “Common Stock”), of the Company, at a purchase price of $ 0.90 per share of Common Stock (the “Offering”). On February 15, 2023, the Company closed the Offering, raising gross proceeds of $ 1,800,000 before deducting placement agent fees and other offering expenses payable by the Company. The Company intends to use the net proceeds of the offering for working capital and general corporate purposes. F-21