UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended ~~September~~March 3031, ~~2021~~2022

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from ______________ to ______________

Commission file number: 001-38362

PROLUNG, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-1922768

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

350 W. 800 N., Suite 214
Salt Lake City, Utah		84103
(Address of principal executive offices)		(Zip Code)

(801) ~~7360729~~736–0729

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common		None		None

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~November~~May 1217, ~~2021~~2022 the issuer had 4,~~122~~610,~~130~~317 shares of common stock, $0.001 par value, outstanding.

PROLUNG, INC.

TABLE OF CONTENTS

	Part I – Financial Information	3	3
Item 1	Financial Statements	3	3
	Condensed Balance Sheets (Unaudited), September 30, 2021 and December 31, 2020	3
	Condensed Balance Sheets (Unaudited), March 31, 2022 and December 31, 2021		3
	Condensed Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Condensed Statements of Operations (Unaudited) for the Three Months Ended March 31, 2022 and 2021		4
	Condensed Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2021 and 2020	5
	Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021		5
	Condensed Statement of Stockholders’ Deficit (Unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020	6
	Condensed Statement of Stockholders’ Deficit (Unaudited) for the Three Months Ended March 31, 2021 and 2022		6
	Notes to the Unaudited Financial Statements	7	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13	12
Item 3	Quantitative and Qualitative Disclosures about Market Risk	19	17
Item 4	Controls and Procedures	19	17
	Part II – Other Information	19	18
Item 1	Legal Proceedings	19	18
Item 1A	Risk Factors	19	18
Item 2	Unregistered Sales of Equity Securities And Use Of Proceeds	20	18
Item 3	Defaults Upon Senior Securities	20	19
Item 4	Mine Safety Disclosures	20	19
Item 5	Other Information	20	19
Item 6	Exhibits	20	19
Signatures		21	20

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ProLung, Inc.

Condensed Balance Sheets

(Unaudited)

	September 30,			December 31,
		March 31,			December 31,
	2021			2020
	March 31,			December 31,
	(unaudited)
	2022			2021
Assets
Current Assets
Cash	$	1,~~145~~252,~~782~~156		$	~~185~~745,~~126~~003
Prepaid expenses		-			5,427
Total Current Assets		1,252,156			745,003
Total Current Assets		1,145,782			190,553
Property and equipment, net		8,110			21,183
Property and equipment, net		34,256			71,160
Intangible assets, net		115,538			117,929
Intangible assets, net		120,319			127,491
Total Assets	$	1,375,804		$	884,115
Total Assets	$	1,300,357		$	389,204
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable	$	236,~~293~~856		$	~~206~~13,~~658~~733
Accrued liabilities		1,~~566~~980,~~839~~126			1,~~078~~775,~~755~~849
Short term loans payable		-			105,000
Payable for research and development - current		315,000			315,000
Payable for research and development - current		315,000			340,000
Convertible notes payable, related party, net - current		-			434,687
Convertible notes payable, related party - current, net		375,187			-
Convertible notes payable - current, net		-			9,895,742
Convertible notes payable - current, net		9,825,726			-
Total Current Liabilities		2,301,982			12,435,011
Total Current Liabilities		12,106,045			1,730,413
Long-Term Liabilities
Payable for research and development agreement - long term		-			25,000
Convertible notes payable, related party, net - long-term		439,000			-
Convertible notes payable, long-term, related party		-			364,967
Convertible notes payable, net, long-term		10,018,022			-
Notes and convertible notes payable, long-term, net		-			7,113,962
Total Long-Term Liabilities		10,457,022			-
Total Long-Term Liabilities		-			7,503,929
Total Liabilities		12,759,004			12,435,011
Total Liabilities		12,106,045			9,234,342
Stockholders’ Deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.001 par value; 120,000,000 shares authorized; 4,122,130 and 4,084,916 shares issued and outstanding, respectively		4,122			4,085
Common stock, $0.001 par value; 120,000,000 shares authorized; 4,610,316 and 4,122,130 shares issued and outstanding		4,609			4,122
Additional paid-in capital		2831,~~354~~170,~~662~~608			2728,~~662~~571,~~507~~741
Accumulated deficit		(39,164,472	)		(36,511,730	)
Subscription receivable		(670,234	)
Total Stockholders’ Deficit		(10,805,688	)		(8,845,138	)
Accumulated deficit		(41,888,183	)		(40,126,759	)
Total Liabilities and Stockholders’ Deficit	$	1,300,357		$	389,204
Total Stockholders’ Deficit		(11,383,200	)		(11,550,896	)
Total Liabilities and Stockholders’ Deficit	$	1,375,804		$	884,115

The accompanying notes are an integral part of these unaudited condensed financial statements

ProLung, Inc.

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
		-
	September 30,						September 30,
	For the Three Months Ended
	2021			2020			2021			2020
	March 31,
Revenues:
	2022			2021
Revenue	$	-		$	-		$	-		$	-
Revenues:
Total revenue		-			-			-			-
Revenue	$	-		$	-
Cost of revenue:		-			-			-			-
Total revenue		-			-
Gross margin		-			-			-			-
Cost of revenue:		-			-
Operating expenses:
Gross margin		-			-
Research and development expense		161,569			165,891			554,933			555,830
Operating expenses:
Selling, general and administrative expense		557,896			291,182			1,304,217			1,101,350
Research and development expense		726,711			179,309
Total operating expenses		719,465			457,073			1,859,150			1,657,180
Selling, general and administrative expense		703,810			290,077
Loss from operations		(719,465	)		(457,073	)		(1,859,150	)		(1,657,180	)
Total operating expenses		1,430,521			469,386
Other income (expense):
Loss from operations		(1,430,521	)		(469,386	)
Gain on settlement of liabilities		2,752			-			136,891			-
Other income (expense):
Interest expense		(~~338~~330,~~267~~903	)		(~~208~~256,~~668~~163	)		~~(930,483~~	)		~~(528,177~~	)
Total other expense		(~~335~~330,~~515~~903	)		(~~208~~256,~~668~~163	)		~~(793,592~~	)		~~(528,177~~	)
Net loss	$	(1,~~054~~761,~~980~~424	)	$	(~~665~~725,~~741~~549	)	$	~~(2,652,742~~	)	$	~~(2,185,357~~	)
Basic and diluted loss per share	$	(0.2642	)	$	(0.1618	)	$	~~(0.65~~	)	$	~~(0.54~~	)
Weighted-average common shares outstanding, basic and diluted		4,~~122~~157,~~130~~158			4,~~083~~081,~~557~~241			~~4,105,215~~			~~4,075,783~~

The accompanying notes are an integral part of these unaudited condensed financial statements

ProLung, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended
	For the Three Months Ended
	September 30,
	March 31,
	2021			2020
	2022			2021
Cash flows from operating activities:
Net loss	$	(21,~~652~~761,~~742~~424	)	$	(2725,~~185,357~~549	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization		4615,~~213~~464			6015,~~515~~357
Stock-based compensation		513,816			355,756
Shares issued for acquired research and development		172,961			-
Amortization of loan discount		329,709			109,384
Stock-based compensation		437,437			50,803
Gain on settlement of liabilities		(136,891	)		-
Amortization of loan discount		126,593			73,654
Change in assets and liabilities:
Prepaid expenses		5,427			-
Accounts payable		(6,877	)		(67,620	)
Accounts payable		(74,498	)		(202,746	)
Accrued liabilities		204,277			152,016
Accrued liabilities		570,350			267,197
Net cash flows used in operating activities		(811,569	)		(501,339	)
Net cash flows used in operating activities		(1,398,616	)		(1,595,251	)
Cash flows from investing activities:
Purchase of equipment		(2,137	)		(3,588	)
Net cash flows used in investing activities		-			-
Net cash flows provided by investing activities		(2,137	)		(3,588	)
Cash flows from financing activities:
Payment for placement of convertible notes payable		~~(259,086~~-	)		(~~223~~123,~~575~~684	)
Payment on convertible notes payable		~~(864,284~~-	)		-(864,199	)
Proceeds from exercise of warrants		361,~~000~~318,722			36,000
Payment for research and development payable		-			(45,000	)
Proceeds from convertible notes payable		-			3,330,900
Proceeds from convertible notes payable - related party		-			82,000
Net cash flows provided by financing activities		1,318,722			2,379,017
Proceeds from convertible notes payable		3,448,779			1,838,500
Net increase in cash		507,153			1,877,678
Net cash flows provided by financing activities		2,361,409			1,651,925
Cash at beginning of period		745,003			185,126
Net increase (decrease) in cash		960,656			53,086
Cash at end of period	$	1,252,156		$	2,062,804
Cash at beginning of period		185,126			207,421
Cash at end of period	$	1,145,782		$	260,507
Supplemental disclosure of cash flow information:
Cash paid for interest	$	~~30,514~~-		$	~~120~~30,~~919~~504
Supplemental disclosure of non-cash investing and financing activities:
Discount recorded on convertible debt issuance	$	292,401		$	329,099
Cashless exercise of warrants	$	52		$	-
Transfer of accrued interest to convertible notes payable	$	43,931		$	-
Exercise of warrants for subscription receivable	$	670,234		$	-
Conversion of debt to equity	$	87,085		$	-
Transfer of short term loans payable to convertible note payabe	$	-		$	105,000
Transfer of short term loans payable to convertible note payable	$	100,181		$	-
Discount recorded on convertible debt issuance	$	-		$	278,106
Non-cash partial settlement of payable for research and development	$	50,000		$	-

The accompanying notes are an integral part of these unaudited condensed financial statements

ProLung, Inc.

Condensed Statement of Stockholders’ Deficit

For the Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2020~~2022 and 2021

(Unaudited)

		Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
		Shares		Amount		Capital			Receivable			Deficit			Deficit
		Shares		Amount		Capital			Deficit			Deficit
	Common Stock				Additional Paid-in			Subscription			Accumulated			Total Stockholders’
Balance, December 31, 2019		4,068,557	$	4,069	$	27,083,391		$	(33,784,114	)	$	(6,696,654	)
	Shares		Amount		Capital			Receivable			Deficit			Deficit
Shares issued for services
Balance, December 31, 2020		4,084,916	$	4,085	$	27,662,507		$	-		$	(36,511,730	)	$	(8,845,138	)
Shares issued for services, shares
Exercise of warrants for common stock		10,000		10		35,990			-			-			36,000
Exercise of warrants for common stock
Warrants issued to convertible debt placement agent		-		-		49,879			-			-			49,879
Exercise of warrants for common stock, shares
Stock-based compensation		-		-		50,803			-			-			50,803
Conversion of notes payable to commom stock
Net loss		-		-		-			-			(725,549	)		(725,549	)
Conversion of notes payable to commom stock, shares
Balance, March 31, 2021		4,094,916		4,095		27,799,179			-			(37,237,279	)		(9,434,005	)
Warrants issued to convertible debt placement agent		-		-		71,489			-			71,489
Balance, December 31, 2021		4,122,130	$	4,122	$	28,571,741		$	-		$	(40,126,759	)	$	(11,550,896	)
Stock-based compensation		-		-		162,320			-			162,320
Exercise of warrants for cash		253,601		254		1,318,468			-			-			1,318,722
Net loss		-		-		-			(712,876	)		(712,876	)
Cashless exercise of warrants		52,174		52		(52	)		-			-			-
Balance, March 31, 2020		4,068,557		4,069		27,317,200			(34,496,990	)		(7,175,721	)
Exercise of warrants for acquired research and development		19,414		20		113,730			-			-			113,750
Shares issued for services		15,000		15		37,035			-			37,050
Additional shares of common stock issued to warrant holders		27,671		28		254,546			-			-			254,574
Warrants issued to convertible debt placement agent		-		-		70,635			-			70,635
Exercise of warrants for subscription receivable		128,890		127		670,107			(670,234	)		-			-
Stock-based compensation		-		-		114,940			-			114,940
Issuance of common stock for acquired research and development		6,436		6		59,205			-			-			59,211
Net loss		-		-		-			(806,740	)		(806,740	)
Stock-based compensation		-		-		182,863			-			-			182,863
Balance, June 30, 2020		4,083,557		4,084		27,539,810			(35,303,730	)		(7,759,836	)
Net loss		-		-		-			-			(1,761,424	)		(1,761,424	)
Warrants issued to convertible debt placement agent		-		-		7,525			-			7,525
Balance, March 31, 2022		4,610,316	$	4,609	$	31,170,608		$	(670,234	)	$	(41,888,183	)	$	(11,383,200	)
Stock-based compensation		-		-		41,446			-			41,446
Net loss		-		-		-			(665,741	)		(665,741	)
Balance, September 30 2020		4,083,557	$	4,084	$	27,588,781		$	(35,969,471	)	$	(8,376,606	)

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance, December 31, 2020	4,084,916	$	4,085	$	27,662,507	$	(36,511,730	)	$	(8,845,138	)
Exercise of warrants for common stock	10,000		10		35,990		-			36,000
Warrants issued to convertible debt placement agent	-		-		49,871		-			49,871
Stock-based compensation	-		-		50,803		-			50,803
Net loss	-		-		-		(725,549	)		(725,549	)
Balance, March 31, 2021	4,094,916		4,095		27,799,171		(37,237,279	)		(9,434,013	)
Conversion of notes payable to commom stock	27,214		27		87,058		-			87,085
Warrants issued to convertible debt placement agent	-		-		5,420		-			5,420
Stock-based compensation	-		-		144,173		-			144,173
Net loss	-		-		-		(872,213	)		(872,213	)
Balance, June 30, 2021	4,122,130		4,122		28,035,822		(38,109,492	)		(10,069,548	)
Stock-based compensation	-		-		318,840		-			318,840
Net loss	-		-		-		(1,054,980	)		(1,054,980	)
Balance, September 30 2021	4,122,130	$	4,122	$	28,354,662	$	(39,164,472	)	$	(10,805,688	)

The accompanying notes are an integral part of these unaudited condensed financial statements

ProLung, Inc. and Subsidiary

Notes to Condensed Financial Statements

(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies

Organization

ProLung, Inc. (the “Company”), is a Delaware corporation that was incorporated on November 22, 2004 and is doing business as (dba) “IONIQ Sciences” and “ProLung.” The Company’s headquarters are located in Salt Lake City, Utah. The Company’s business is the development of a modern solution for the early detection of multiple cancers thereby expanding the therapeutic window, ~~marketing~~significantly improving survivability, and ~~sales~~reducing the cost of ~~precision~~healthcare. ~~predictive~~One ~~analytical~~in ~~medical~~two ~~devices~~Americans ~~specializing~~will inbe ~~early~~diagnosed with cancer during their lifetime and one in five will die. Clinical literature shows that early detection can save lives and money. IONIQ Sciences operates at the confluence of its Electrical ~~with~~Impedance ~~initial~~Analytics ~~focus~~(EIA) ontechnology ~~commercialization~~or inbioimpedance ~~lung~~and ~~cancer~~artificial intelligence (AI). The Company’s ~~principal~~has ~~activities~~active ~~are~~projects ~~primarily~~in ~~developing~~lung, breast and ~~testing~~gastro-intestinal (GI) cancers. The first planned product utilizing its proprietary analytic platform, the IONIQ ProLung Test™ offor ~~products~~lung cancer, ~~seeking~~has been designated a Breakthrough Device by the U.S. FDA ~~clearance~~in ~~for~~February 2020. The Company submitted its ~~products,~~de ~~developing~~novo application ~~markets~~to ~~and~~the ~~securing~~U.S. ~~strategic~~FDA ~~alliances~~in February 2022. IONIQ Sciences remains fully committed to gaining U.S. FDA regulatory de novo clearance and ~~obtaining~~subsequently ~~financing~~commercializing the IONIQ ProLung Test for lung cancer.

Basis of Presentation

The accompanying condensed financial statements have been prepared by management in accordance with rules and regulations promulgated by the U.S. Securities and Exchange Commission and therefore certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed financial statements contain all adjustments necessary for them to be presented fairly, with those adjustments consisting only of normal recurring adjustments. These interim financial statements should be read in conjunction with the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021. The results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~ 2022 may not be indicative of the results to be expected for the year ending December 31, ~~2021~~2022.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has generated minimal revenues thus far from its operations and no revenue during the current period. Until the Company receives Food and Drug Administration (“FDA”) ~~approval~~clearance, the Company will not achieve its planned level of operations in the United States. The Company does have a Conformité Européene or CE mark for Europe and has licensed a portion of its technology to an entity located in China. The Company has incurred substantial and recurring losses to date from operations, continues to have a stockholders’ deficit and is currently dependent on debt and equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The accompanying condensed financial ~~statements~~ statements do not include any adjustments that might result relating to the recoverability and classification of the asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this risk and uncertainty.

The ability of the Company to continue as a going concern is dependent on the Company successfully obtaining additional funding, developing products that can be sold profitably, and generating cash through operating activities. Management’s plans include issuing equity or debt securities to fund capital requirements and developing ongoing operations.

Basic and Diluted Loss Per Share

The Company computes basic loss per share by dividing net loss by the weighted-average number of common shares outstanding during the period. The Company computes diluted loss per share by dividing net loss by the sum of the weighted-average number of common shares outstanding and the weighted-average dilutive common share equivalents outstanding. The computation of diluted loss per share does not assume exercise or conversion of securities that would have an anti-dilutive effect. As of September 30, 2021 and 2020, the following items were excluded from the computation of diluted net loss per common share as their effect is anti-dilutive:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	September 30,
	2021		2020
Warrants to purchase shares		1,344,985		1,288,896
Stock options		747,988		644,022
Convertible notes		3,097,478		2,432,336
		5,190,451		4,365,254

ProLung, Inc. and Subsidiary

Notes to Condensed Financial Statements

(Unaudited)

Basic and Diluted Loss Per Share

The Company computes basic loss per share by dividing net loss by the weighted-average number of common shares outstanding during the period. The Company computes diluted loss per share by dividing net loss by the sum of the weighted-average number of common shares outstanding and the weighted-average dilutive common share equivalents outstanding. The computation of diluted loss per share does not assume exercise or conversion of securities that would have an anti-dilutive effect. As of March 31, 2022, and 2021, the following items were excluded from the computation of diluted net loss per common share as their effect is anti-dilutive:


	For the Three Months Ended
	March 31,
	2022		2021
Warrants to purchase shares		316,181		1,314,165
Stock options		791,588		679,616
Convertible notes		3,202,149		3,000,889

		4,309,918		4,994,670

Convertible Debt

The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued. The BCF for the convertible instruments is recognized equal to the intrinsic value of the conversion features which is credited to additional paid-in capital.

Recent Accounting Pronouncements

Emerging Growth Company – We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Leases – In February 2016, the FASB issued ASU No. 2016-02 (ASC 842): Leases. ~~ASU~~ASC ~~2016-02~~842 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. ~~ASU~~The ~~2016-02 would be effective for the~~ Company’s ~~2019~~formally ~~fiscal~~adopted ~~year; however, since the Company is an Emerging Growth Company and has made the election to adopt~~ASC ~~certain~~842 ~~accounting~~on ~~standards when they would be applicable for private companies which is the fiscal year beginning~~ January 1, 2022. The Company will use the modified retrospective basis. The Company entered into a three-year lease agreement in May 2019 ~~and~~which ~~management is~~expires ~~evaluating~~in ~~how~~April ~~the~~2022. ~~implementation~~The Company has yet to renegotiate a new long term lease agreement. As a result, the effect of implementing this standard ~~will~~for ~~affect~~the ~~its~~remaining ~~balance~~two ~~sheet~~months ~~and~~of ~~statement~~the ~~operations~~current lease is inconsequential.

Convertible Notes Payable – In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners and improves the decision usefulness and relevance of the information provided to financial statement users. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company has not yet determined the impact of adoption this standard on our financial position, results of operations or cash flows.

The Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the Company’s results of operations or financial position.

Note 2 – Accrued Liabilities

Accrued liabilities consisted of the following at September 30, 2021 and December 31, 2020:

Schedule of Accrued Liabilities

	September 30,		December 31,
	2021		2020
Accrued interest	$	1,505,621	$	1,017,537
Accrued royalties		17,873		17,873
Accrued payroll and payroll taxes		43,345		43,345
Accrued liabilities	$	1,566,839	$	1,078,755

ProLung, Inc. and Subsidiary

Notes to Condensed Financial Statements

(Unaudited)

Note 32 – ~~Notes~~Accrued ~~Payable~~Liabilities

~~Convertible~~Accrued ~~Notes~~liabilities ~~Payable~~consisted of the following at March 31, 2022 and December 31, 2021:

~~The $105,000~~ Schedule short-term debt terms from October 2019 were amended in March 2021 to accrue 8% simple interest per annum, convertible at $3.20 per share. The note is convertible at any time with 75-day notice required if paid in cash. During the nine months ended September 30, 2021, principal of ~~$87,085~~Accrued ~~was converted into 27,214 shares of common stock. Concurrent with the conversion, $43,931 of accrued interest was combined with the principal of the convertible notes.~~Liabilities

2015 Convertible Notes (Ensign Note)

	March 31,		December 31,
	2022		2021

Accrued interest	$	1,918,756	$	1,714,446
Accrued royalties		17,873		17,873
Accrued payroll and payroll taxes		43,497		43,530

Accrued liabilities	$	1,980,126	$	1,775,849

In 2015, the Company issued a convertible promissory note in the amount of $864,199. The note was convertible at any time prior to maturity at the option of the holders at a conversion rate of $6.00 per share. The note was unsecured and accrues interest at the rate of 8% per annum, with interest payable on the last day of each calendar quarter. The principal amount was due in November 2020. In November 2020, as part of the settlement of the Ensign Note~~, the maturity date was extended to March 2022, the conversion price was lowered to $3.20~~ ~~per~~3 ~~share~~– ~~and~~Convertible ~~the~~Notes note was temporarily securitized. The securitized position has since been removed. During the three months ended March 31, 2021, the company paid $864,199 in principal and $30,504 in interest to completely pay off the original note holder of the Ensign note and transferred it to a new set of note holders.Payable

~~2021~~In ~~Other~~March ~~Convertible~~2022, ~~Note~~all ~~Issuances~~of the Company’s convertible notes were amended with the following new terms: (1) the maturity date was extended to September 30, 2023, (2) there is an expanded automatic contingent conversion to include a qualified financing of at least $10M and (3) added a three-month bonus interest payment in the event an automatic contingent conversion is triggered.

During the nine months ended September 30, 2021, the Company issued $3,448,779 of new convertible notes. These new convertible notes pay interest at 8% and are due March 31, 2022. The notes are convertible as follows: $851,848 at $3.20 per share and $2,596,931 at $10.53 per share. The notes are due March 2022. Interest accruing from the date of issuance to the conversion date shall be paid on the maturity date.

Since these convertible notes had a conversion price that was not “in the money” upon issuance there was no beneficial conversion feature recorded. On the date of issuance, the Company also assessed the conversion feature for possible derivative treatment (under ASC 815) and determined the conversion feature was indexed to the Company’s common stock and thus not a derivative.

The Company incurred $237,110 of cash loan costs related to the issuance of the convertible notes during the nine months ended September 30, 2021. Also, during the nine months ended September 30, 2021, in conjunction with the issuance of these convertible notes, the Company issued 22,515 warrants to a broker. These warrants are exercisable at $10.53 per share and expire in ten years. The initial fair value of these warrants on the date of grant was $55,291 ($2.45 per warrant). The fair value was derived utilizing the Black-Scholes Pricing Model with the following weighted average assumptions:

Schedule of Weighted Average Assumptions

Expected life	5 years
Exercise price	$	10.53
Expected volatility		185% - 191	%
Weighted Average Volatility		188	%
Expected dividends		n/a
Risk-free interest rate		0.76	%

The total loan costs incurred of $292,401 were included with other loan costs incurred and will be amortized as a component of interest expense over the term of the convertible notes. During the three and nine months ended September 30, 2021, the Company recognized interest expense of $129,423 and $329,709 related to the amortization of the loan costs, respectively. During the three and nine months ended September 30, 2020, the Company recognized interest expense of $53,324 and $109,384 related to the amortization of the loan costs, respectively. As of September 30, 2021, the unamortized balance loan costs is $256,109.

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Notes payable are summarized as follows:

Schedule of Convertible Notes Payable

	September 30,			December 31,
		March 31,			December 31,
	2021			2020
	March 31,			December 31,
	$	7,640,324		$	7,552,498
	2022			2021
Convertible notes payable; unsecured; interest at 8%; due March 2022 (includes related party amount of $347,282)	$	7,640,324		$	7,552,498
Convertible notes payable; unsecured; interest at 8%; due September 2023 (includes related party amount of $439,000)	$	10,457,022		$	10,457,022
$10.53 Convertible notes payable; unsecured; interest at 8%; due March 2022 (includes related party amount of $34,718)		2,816,698			219,767
Unamortized discount and loan costs (includes related party amounts of $ - and $4,313 respectively)		-			(126,593	)
Unamortized discount and loan costs		(256,109	)		(293,336	)
Notes payable, net	$	10,457,022		$	10,330,429
Notes payable, net	$	10,200,913		$	7,478,929
Less: current portion, net		-			(10,330,429	)
Less: current portion, net		(10,200,913	)		-
Convertible notes payable – long term, net	$	10,457,022		$	-
Convertible notes payable - long term, net	$	-		$	7,478,929

Note 4 – Common Stock Options

Equity Incentive Plan

In April 2017, the Board, contingent on shareholder approval, approved the ProLung, Inc. Stock Incentive Plan (the “Plan”). The shareholders approved the Plan in July 2017. The Plan authorizes the Board compensation Committee to grant incentive stock options, non-incentive stock options, stock bonuses, restricted stock, and performance-based awards to directors, officers and employees and non-employee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary of the Company.

As part of an agreement for their service during the nine months ended September 30, 2021 current Board members and advisors accepted the issuance of 49,800 options to Board members at exercise prices of $2.47 (16,600 options) and $6.73 (33,200 options) per option. These options vested upon issuance. The fair value of these options was $4.89 per option or $243,382 and was expensed upon grant. The fair value was computed using the Black Scholes method.9

~~In May 2021~~ProLung, ~~the Board’s approved the issuance of 40,678 options to employees of the Company at an exercise price of $6~~Inc.~~73 per~~ ~~option. These options vest quarterly over four years. The fair value of these options was $6.37 per option or $259,104~~ and ~~will be expensed over the relative vesting period.~~Subsidiary

The above fair values were computed using the Black Scholes method using the following assumptions:

Schedule of Fair Value of Options Grants Using Black Scholes Method

Expected life	5.4 years
Exercise price	$	5.95
Expected volatility		140% - 188	%
Weighted average volatility		181	%
Expected dividends		n/a
Risk-free interest rate		0.36% to 1.29%

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

AAs ~~summary~~part of ~~option~~an ~~activity~~agreement for their service during the ~~nine~~three months ended ~~September~~March 3031, 2021 iscurrent ~~presented~~Board ~~below~~members and advisors accepted the issuance of 19,800 options at an exercise price of $9.20 per option. These options vested upon issuance. The fair value of these options was $7.98 per option or $158,066 and was expensed upon grant. The fair value was computed using the Black Scholes method using the following weighted-average assumptions:

Schedule of ~~Option~~Fair ~~Activity~~Value of Options Grants Using Black Scholes Method

						Weighted		Aggregate
	2022
				Weighted		Average		Intrinsic
Expected life		4.4 years
	Shares			Average		Remaining		Value of
Exercise price	$	9.20
	Under			Exercise		Contractual		Vested
Expected volatility		143% to 147	%
	Options			Price		Life		Options
Weighted average volatility		146	%
Outstanding at December 31, 2020		663,016		$	5.16		8.1 years
Expected dividends		n/a
Issued		90,478		$	5.95
Risk-free interest rate		2.41	%
Forfeited/Expired		(5,506	)	$	2.47
Outstanding at September 30, 2021		747,988		$	5.27		7.3 years	$	1,401,398
Vested at September 30, 2021		672,740		$	5.38		7.1 years	$	1,219,335

~~The~~A ~~above~~summary ~~intrinsic value is based on an assumed fair value~~ of ~~the~~option ~~Company’s~~activity ~~stock of $6.73 per share. The Company recorded an expense of $126,679 and $41,446~~ for the three months ended ~~September~~March 3031, ~~2021~~2022 ~~and~~is ~~2020~~presented related to the amortization of options issued under the plan. The Company recorded an expense of $321,647 and $298,467 for the nine months ended September 30, 2021 and 2020 related to the amortization of options issued under the plan. The remaining unrecognized expense of $323,203 will be recognized through June 2025 with a weighted average term of 3.6 years.below:

~~Total stock-based~~ Summary ~~compensation expense from amortization~~ of ~~options,~~Option ~~warrants (Note 5) and common stock issuances have been included in the statements of operations as follows:~~ Activity

					Weighted	Aggregate
			Weighted		Average	Intrinsic
	Shares		Average		Remaining	Value of
	Under		Exercise		Contractual	Vested
	Options		Price		Life	Options
Outstanding at December 31, 2021		771,788	$	5.39	6.8 years
Issued		19,800	$	9.20
Exercised		-	$	-
Forfeited/Expired		-	$	-
Outstanding at March 31, 2022		791,588	$	5.49	7.1 years	$	2,936,971
Vested at March 31, 2022		726,374	$	5.60	6.9 years	$	2,618,108

The Company recorded an expense of $182,863 and $50,803 for the Three Months Ended March 31, 2022 and 2021 related to the amortization of options issued under the plan. The remaining unrecognized expense of $273,609 will be recognized through June 2025.

Total stock-based compensation expense from options, warrants (Note 5) and common stock issuances (Note 5 and Note 6) have been included in the statements of operations as follows:

	For the Three Months Ended				~~For the Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2021		2020		2021		2020
	2022		2021
Research and development expense	$	4177,~~999~~952	$	3,113	$	~~40,288~~	$	~~26,654~~
Selling, general and administrative expense		~~313~~432,~~841~~446		3847,~~333~~690		~~473,528~~		~~329,102~~
Total share-based compensation	$	~~318~~610,~~840~~398	$	4150,~~446~~803	$	~~513,816~~	$	~~355,756~~

Note 5 – Common Stock Warrants

~~The~~During ~~Company has issued warrants to purchase its common stock for equity, debt and compensation reasons. See Note 3 for 22,515 warrants issued as part of loan issuance costs during~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2021.~~2022, ~~Certain~~ warrant holders exercised 10521,~~000~~907 warrants ~~for cash~~as ~~proceeds of $36,000.~~follows:

~~On September~~- 30253,602 ~~2021~~warrants ~~the~~were ~~Company~~exercised ~~issued~~for a$1,318,722 ~~consultant~~in 30cash proceeds. - 19,~~000~~414 warrants ~~for~~were ~~financial~~exercised ~~advisory~~as ~~services~~partial ~~rendered~~settlement ($113,750) related to the Company.’s ~~These~~acquisition ~~warrants vested~~of ~~upon~~research ~~grant~~and development. - 128,890 ~~are~~warrants ~~exercisable~~with ata value of $~~10.53~~670,234 ~~and~~have ~~expires~~signed inexercise 10agreements, ~~years.~~the ~~The~~shares ~~fair~~have ~~value~~been ofissued but the ~~warrant~~cash ~~shares~~proceeds ~~issued~~have ~~was~~yet ~~$192~~to be received. - 120,~~161~~000 ~~and~~warrants ~~recorded as~~were anexercised ~~expense~~in ~~during~~a ~~the~~cashless ~~three~~exercise ~~and~~whereby ~~nine~~67,826 ~~month~~shares ~~period~~with a value of $9.20 ~~The~~per ~~assumptions~~share were used ~~for~~to ~~these~~settle ~~warrant~~the exercise price and the remaining 52,174 shares were ~~risk-free~~issued ~~interest~~to ~~rate~~the ofwarrant 0holders.~~98%~~ Also, ~~expected~~ ~~volatility~~for ofprofessional ~~184%,~~services ~~expected~~rendered ~~life~~by ofthese 5warrant ~~years~~holders an additional 27,671 ~~and~~shares ~~expected~~valued ~~dividend~~at ~~yield~~$254,574 of($9.20 ~~zero~~per share) were issued.

During the nine months ended September 30, 2020, the Company issued warrants as part of a consulting agreement. The Company recorded a $20,238 expense during the nine month period with none of that being associated with the three months ended September 30, 2020, respectively.10

11ProLung, Inc. and Subsidiary

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

A summary of warrant activity for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 is presented below:

Schedule of Warrant Activity

						Weighted		Aggregate		~~Aggregate~~
				Weighted		Average		Intrinsic		~~Intrinsic~~
	Shares			Average		Remaining		Value of		~~Value of~~
	Under			Exercise		Contractual		Vested		~~Vested~~
	Warrants			Price		Life		Warrants		~~Warrants~~
Outstanding at December 31, 2020		1,305,595		$	5.02		1.7 years
Outstanding at December 31, 2021		1,344,985		$	5.25	1.1 years
Issued		~~52,515~~-		$	~~10.53~~-
Exercised		(10521,~~000~~906	)	$	35.6022
Expired/Forfeited		(3506,~~125~~898	)	$	35.6020
Outstanding at September 30, 2021		1,344,985		$	5.25		1.3 years			$	2,235,767
Outstanding/Exercisable at March 31, 2022		316,181		$	5.20	3.6 years		$	1,305,077
Vested at September 30, 2021		1,344,985					1.3 years			$	2,235,767

Note 6 – ~~Commitments~~Stockholders’ ~~and Contingencies~~Equity

~~Lease~~Biomeridian ~~Agreement~~License Purchase (OT Acceptance)

InOn ~~May~~March ~~2019~~3, 2022, the Company ~~entered~~acquired ~~into~~from aOT ~~new~~Acceptance, ~~lease~~LLC ~~agreement~~(“OT ~~for~~Acceptance”) ~~its~~certain ~~office~~intellectual ~~space~~property formerly licensed to the Company by OT Acceptance. ~~The~~As ~~lease~~a ~~amount~~result isof $3this acquisition,~~600~~ ~~per~~the ~~month~~Company ~~and~~now ~~expires~~owns, inrather ~~April~~than having license rights, to all of ~~2022~~the intellectual property used by it with respect to early cancer detection. The aggregate consideration paid by the Company ~~inhabited~~to OT Acceptance under the ~~office~~Agreement inwas ~~September~~$134,211, which ~~2019~~was paid $75,000 in cash and ~~incurred~~the ~~$32~~issuance of 6,~~400~~436 ~~for~~shares ~~both~~shares of the ~~nine~~Company’s ~~months~~common ~~ended~~stock at ~~September~~$9.20 ~~30,~~per ~~2021~~share. The Company considers the acquisition of intellectual property as research and ~~2020~~development and expensed the acquisition as research and development.

~~Research~~Vine ~~and~~Medical ~~Development~~Asset ~~Agreement~~Purchase

On ~~July~~March 2930, ~~2019,~~2022 the Company ~~amended~~acquired afrom ~~license~~Vine ~~agreement~~Medical ~~dated~~LLC ~~April~~(“Vine”) ~~10,~~certain ~~2013~~intellectual ~~between~~property ~~the Company~~ and ~~ProLung~~designs ~~Biotech~~that ~~Wuxi / ProLung China~~are ~~(Wuxi).~~expected ~~The original agreement allowed Wuxi~~ to ~~utilize~~accelerate ~~the~~IONIQ ~~Company~~Sciences’s ~~technology~~product indevelopment ~~China~~efforts. inThe ~~return~~aggregate ~~for~~consideration ~~royalty~~paid ~~payments~~by ~~based~~the ~~on Wuxi’s~~Company ~~revenues. Wuxi has yet~~ to ~~earn~~Vine Medical ~~any~~LLC ~~revenue~~under ~~but~~the ~~has~~Agreement ~~been~~was ~~conducting~~$313,750, which ~~clinical trials. The license agreement~~ was ~~amended~~$200,000 ~~whereby~~in ~~Wuxi~~cash ~~will~~and ~~provide~~ the ~~Company~~seller’s ~~its~~exercise ~~clinical~~of ~~trial data~~19,414 ~~know-how~~previously ~~and~~issued ~~improvements~~warrants, ~~which~~in the ~~Company~~amount ~~will~~of ~~use~~$113,750 ~~outside~~which ~~the~~represents ~~greater~~forgone ~~China~~cash ~~area.~~proceeds ~~This~~that ~~amendment~~would ~~further~~have ~~requires~~otherwise ~~full~~been ~~collaboration (i~~received.~~e.,~~ ~~protocols~~The ~~and~~Company ~~methodologies)~~considers ~~between~~ the ~~two~~acquisition ~~entities.~~of Inintellectual ~~consideration for~~property ~~such~~as ~~trial~~research ~~data~~and development and ~~know-how,~~expensed the ~~Company~~acquisition ~~will~~as ~~make~~research ~~cash payments to Wuxi of up to $575,000~~ and ~~issue up to 347,566 shares of common stock upon the completion of certain events~~development.

Through September 30, 2021, 278,053 shares had been issued based on conditions being met. The final 69,513 shares will be issued once the final milestone is met. Through September 30, 2021, $210,000 in payments had been made plus $50,000 in equipment (see below) with the remaining $315,000 payable as follows: $190,000 currently due; $100,000 in October 2021; and $25,000 in April 2022.

Settlement of Liabilities

During the nine months ended September 30, 2021, the company recorded $136,891 in gains from settlement of liabilities. Write-down of accounts payable related to agreed-to settlement accounted for $86,891 with the remaining $50,000 attributed to the agreed to value of equipment transferred to Wuxi. This equipment had previously been written off against inventory.

Note 7 – Subsequent Events

~~None~~Amendment to the Company’s Stock Incentive Plan

12On April 26, 2022, the Board of Directors unanimously voted to approve a resolution to increase the size of the option pool over the next three years to meet the needs of the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the “~~2020~~2021 Form 10-K”) of ProLung, Inc. (the “Company”).

The statements contained in this Report that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should” and “would,” as well as similar expressions, may identify forward-looking statements, but the absence of these words does not mean a statement is not forward looking. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties, or assumptions, many of which are beyond our control that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Important factors that could cause these differences include the following:

● We are a development stage company with limited revenue and no assurance of earning significant revenue over the long term. ● We will need significant capital to execute our business plan, particularly as we continue to seek clearance from the FDA to market our IONIQ ProLung Test. ● We are dependent upon financings to fund our operations and may be unable to continue as a going concern. ● We have issued indebtedness and, if we are unable to repay or refinance it, our creditors could foreclose on our assets and force us into bankruptcy. ● We are in the early stages of commercialization, and our IONIQ ProLung Test may never receive marketing approval from the FDA or achieve commercial market acceptance. ● Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties. ● We are reliant on a single product and if we are not successful in commercializing the IONIQ ProLung Test and are unable to develop additional products, our business will not succeed. ● We are subject to litigation risk for product liability if our IONIQ ProLung Test is not effective. ● We may incur substantial product liability expenses due to manufacturing or design defects, or the use or misuse of our products. ● We are subject to the risk of product recalls if our products are defective. ● We may not obtain any, or adequate, third-party coverage and reimbursement for our prospective customers. ● The absence of, or limits on, reimbursements may affect our revenues and our ability to achieve profitability. ● If the IONIQ ProLung Test is not accepted by physicians and patients, we will be unable to achieve market acceptance. ● We are a small company and may be unable to compete with competitive technologies. ● We are dependent upon our suppliers to safely and timely manufacture our products.

13● We will need significant capital to execute our business plan, particularly as we continue to seek clearance from the FDA to market our IONIQ ProLung Test.

●

We are dependent upon financings to fund our operations and may be unable to continue as a going concern.

●

We have issued indebtedness and, if we are unable to repay or refinance it, our creditors could foreclose on our assets and force us into bankruptcy.

●

We are in the early stages of commercialization, and our IONIQ ProLung Test may never receive marketing approval from the FDA or achieve commercial market acceptance.

●

Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

●

We are reliant on a single product and if we are not successful in commercializing the IONIQ ProLung Test and are unable to develop additional products, our business will not succeed.

●

We are subject to litigation risk for product liability if our IONIQ ProLung Test is not effective.

●

We may incur substantial product liability expenses due to manufacturing or design defects, or the use or misuse of our products.

●

We are subject to the risk of product recalls if our products are defective.

●

We may not obtain any, or adequate, third-party coverage and reimbursement for our prospective customers.

●

The absence of, or limits on, reimbursements may affect our revenues and our ability to achieve profitability.

●

If the IONIQ ProLung Test is not accepted by physicians and patients, we will be unable to achieve market acceptance.

●

We are a small company and may be unable to compete with competitive technologies.

●

We are dependent upon our suppliers to safely and timely manufacture our products.

●

We are dependent upon third parties for marketing and other aspects of our business.

● Any clinical trials that we conduct, including our ongoing trial, may not be completed on schedule, or at all, or may be more expensive than we expect, which could prevent or delay regulatory authorization(s) of our products or impair our financial position. ● We engage in related party transactions, which result in a conflict of interest involving our management. ● Our clinical studies, including our ongoing clinical study, may produce unfavorable results. ● Our success depends upon our ability to effectively market our products. ● We are dependent on key personnel, whose employment may be terminated by the Company or the employee at any time, which could cause significant disruption in our business and lead to significant expenses. ● We must obtain regulatory clearance or approval in the US and other non-European Union markets to be able to commence marketing and sales in those markets. ● Even if we receive regulatory clearance or approval for the IONIQ ProLung Test, we still may not be able to successfully commercialize it and the revenue that we generate from its sales, if any, may be limited. ● If we obtain FDA clearance or approval, we will be subject to Medical Device Reporting. ● Recently proposed healthcare reform measures could hinder or prevent the commercial success of our products. ● We will be subject to healthcare fraud and abuse law regulations. ● Our business is subject to complex and evolving U.S. and international laws and regulation regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business. ● ProLung clinical study designs have not been reviewed by the FDA, and there is a risk that the FDA will not agree with our study designs or results. ● We may be unable to protect our intellectual property rights, which are important to the potential value of our products and company. ● We rely on an exclusive license maintained by the licensor, and if the licensor does not adequately defend the license our business may be harmed. ● We may incur significant costs and liability if we infringe, or are accused of infringing on, the intellectual property rights of others. ● We may need to market the IONIQ ProLung Test under a different name in the EU to avoid the risk of infringement. ● If outstanding warrants are exercised, or Convertible Debentures are converted, stockholders will be diluted. ● Our officers and directors have significant voting power and may take actions that may not be in the best interests of other stockholders. ● Our common stock is not quoted or traded in any market, limiting liquidity opportunities for investors. ● Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

14● We engage in related party transactions, which result in a conflict of interest involving our management.

● WeOur ~~are~~clinical ~~subject to various regulatory regimes~~studies, ~~and~~including ~~may~~our beongoing ~~adversely~~clinical ~~affected by inquiries~~study, ~~investigations~~may ~~and~~produce ~~allegations~~unfavorable ~~that we have not complied with governing rules and laws~~results. ~~● If a market develops for our common stock, we expect the market price to be volatile and trading in our common stock to be of limited volume.~~

● WeOur ~~have~~success ~~never~~depends ~~paid,~~upon ~~and do not intend to pay in the future, dividends on~~ our ~~common~~ability ~~stock. ● We are uncertain when or if full clinical results will be complete and when they will be submitted~~ to ~~the~~effectively ~~FDA.~~market ~~● Although we are capable of internally manufacturing to meet foreseeable demand, we may at some time be dependent upon contract manufacturers to safely and timely manufacture~~ our products. ● There is no guarantee that FDA approval will lead to the IONIQ ProLung Test being approved by payors for reimbursement. ● Our IONIQ ProLung Test may produce false positive and false negative results.

~~In addition~~● We are dependent on key personnel, ~~please~~whose ~~review~~employment may be terminated by the ~~other,~~Company ~~and~~or ~~more~~the ~~detailed~~employee at any time, ~~risk~~which ~~factors~~could ~~discussed~~cause significant disruption in our ~~2020~~business ~~Form~~and ~~10-K~~lead to significant expenses.

●

We must obtain regulatory clearance or approval in the US and other non-European Union markets to be able to commence marketing and sales in those markets.

●

Even if we receive regulatory clearance or approval for the IONIQ ProLung Test, we still may not be able to successfully commercialize it and the revenue that we generate from its sales, if any, may be limited.

●

If we obtain FDA clearance or approval, we will be subject to Medical Device Reporting.

●

Recently proposed healthcare reform measures could hinder or prevent the commercial success of our products.

●

We will be subject to healthcare fraud and abuse law regulations.

●

Our business is subject to complex and evolving U.S. and international laws and regulation regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

●

IONIQ Sciences clinical study designs have not been reviewed by the FDA, and there is a risk that the FDA will not agree with our study designs or results.

●

We may be unable to protect our intellectual property rights, which are important to the potential value of our products and company.

●

We may incur significant costs and liability if we infringe, or are accused of infringing on, the intellectual property rights of others.

●

We may need to market the IONIQ ProLung Test under a different name in the EU to avoid the risk of trademark infringement.

●

If outstanding warrants are exercised, or Convertible Debentures are converted, stockholders will be diluted.

●

Our officers and directors have significant voting power and may take actions that may not be in the best interests of other stockholders.

●

Our common stock is not quoted or traded in any market, limiting liquidity opportunities for investors.

●

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

●

We are subject to various regulatory regimes, and may be adversely affected by inquiries, investigations and allegations that we have not complied with governing rules and laws.

●

If a market develops for our common stock, we expect the market price to be volatile and trading in our common stock to be of limited volume.

●

We have never paid, and do not intend to pay in the future, dividends on our common stock.

●

Although we are capable of internally manufacturing to meet foreseeable demand, we may at some time be dependent upon contract manufacturers to safely and timely manufacture our products.

●

There is no guarantee that FDA clearance will lead to the IONIQ ProLung Test being approved by payors for reimbursement.

●

Our IONIQ ProLung Test may produce false positive and false negative results.

In addition, please review the other, and more detailed, risk factors discussed in our 2021 Form 10-K.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Overview

We are a medical technology company with a mission to dramatically improve ~~cancer outcomes by~~ the ~~development~~cancer oflandscape ~~our~~with a modern ~~screening~~solution ~~technology~~ for the early detection of multiple cancers, ~~which~~thereby ~~has~~expanding the ~~potential to expand~~ therapeutic ~~windows~~window, significantly ~~improve~~improving survivability, and ~~reduce~~reducing ~~treatment~~the ~~costs.~~cost ~~Half~~ of ~~all~~healthcare. One in two Americans will be diagnosed with cancer during their ~~lifetimes~~lifetime and one in five ~~of those diagnosed with cancer~~ will die ~~from it~~. Clinical literature shows that early detection can save lives and money. We operate at the confluence of our Electrical Impedance Analytics (EIA) technology and artificial intelligence (AI). We are developing an advanced multi-cancer screening technology for early detection that will expand the therapeutic window, dramatically improve survivability and reduce the cost of healthcare. The first planned product utilizing our proprietary analytic platform, the IONIQ ProLung Test™ for lung cancer, has been designated a Breakthrough Device by the U.S. FDA. We remain fully committed to gaining U.S. FDA regulatory de novo clearance and subsequently commercializing the IONIQ ProLung Test ™ for lung cancer.

~~Lung~~Our ~~cancer~~non-invasive, israpid ~~the~~and ~~leading~~radiation-free ~~cause~~IONIQ ofProLung ~~cancer~~Test ~~death~~has inbeen ~~the~~developed USto ~~and~~assess the ~~world~~risk ~~according~~of tomalignancy ~~American~~in ~~Cancer~~lung ~~Society~~nodules found ~~and~~in ~~World~~the ~~Health~~chest ~~Organization. Current~~by ~~statistics~~a ~~reflect~~Computed anTomography ~~average~~“CT” ~~17%~~scan, ~~survival~~which ~~rate~~is atcurrently ~~five~~the ~~years~~primary ~~for~~method ~~those~~used ~~diagnosed~~in ~~with~~the United States (“US”) for screening lung cancer. ~~Early~~Lung ~~detection~~cancer ~~substantially improves~~is ~~rates~~the ofleading ~~survival.~~cause ~~Patients~~of atcancer ~~high~~death ~~risk~~in ofthe ~~lung~~US ~~cancer~~and ~~are~~the ~~recommended~~world according to ~~undergo~~American ~~regular~~Cancer ~~Computed~~Society and ~~Tomography~~World ~~“CT” chest~~Health ~~scans~~Organization. toEarlier ~~detect~~detection ~~nodules.~~makes ~~Due~~a tosubstantial ~~the~~improvement ~~risks~~in ~~and~~survival ~~costs~~in ~~associated~~individuals ~~with~~at ~~assessing~~high risk of lung cancer. Timely identification of malignancy byis ~~current~~essential ~~technology~~for patients and their families. Currently, patients ~~now~~often ~~normally~~ wait from three months to three ~~3.5~~and one-half years to have the risk of malignancy assessed ~~upon~~through ~~detection~~periodic ~~of a nodule by~~ CT ~~chest~~ scan surveillance. ~~Our~~Until ~~IONIQ~~malignancy ~~ProLung Test~~is ~~was developed~~ determined to ~~provide~~be alikely, ~~non-~~invasive, ~~rapid~~biopsy and ~~radiation-free~~treatment ~~option~~are ~~for~~typically ~~assessing~~delayed. ~~the~~Current ~~risk~~statistics ofreflect ~~malignancy~~an inaverage ~~lung~~17% ~~nodules~~survival ~~found~~rate at five years infor ~~the~~those ~~chest~~diagnosed bywith CTlung ~~scans~~cancer.

We believe the IONIQ ProLung Test, in conjunction with the discovery of a nodule by CT scan, provides a more rapid assessment of the risk of malignancy, which must be determined prior to biopsy. Since a lung biopsy is invasive and may require life threatening thoracic surgery, physicians, patients, and insurance companies typically delay biopsy and therapy until the risk of malignancy outweighs the risk of further diagnostic procedures. For these patients, the delay can reduce the time available to treat the tumor and may cause sustained emotional trauma.

15In February 2020, the FDA designated the IONIQ ProLung Test a Breakthrough Device. Through the Breakthrough Device program, the FDA will provide ProLung with expedited reviews. This is not a marketing clearance.

In February 2020, the FDA designated the IONIQ ProLung Test a Breakthrough Device. Through the Breakthrough Device program, the FDA will provide ProLung with expedited reviews and the Centers for Medicare & Medicaid Services (CMS) has provisions for a simpler and faster pathway to reimbursement. This is not a marketing clearance.

We are an “emerging growth company” and a “smaller reporting company” under the federal securities laws and will be subject to reduced public company reporting requirements.

Results of Operations

The following discussion is included to describe our financial position and results of operations. The financial statements and notes thereto contain detailed information that should be referred to in conjunction with this discussion.

~~Three~~Revenues ~~Months~~and ~~Ended~~Cost ~~September~~of ~~30,~~Revenue. ~~2021~~During ~~compared~~the tothree ~~the~~months ~~Three~~ended ~~Months~~March ~~Ended~~31, ~~September~~2022 30and March 31, ~~2020~~2021 we had no revenues or cost of revenues.

~~Revenues~~Operating ~~and~~Expenses. ~~Cost~~Total ofoperating ~~Revenue.~~expense ~~During~~for the three months ended ~~September~~March 3031, 2022 was $1,430,521 compared to the total operating expenses for the three months ended March 31, 2021 of $469,386, representing an increase of $961,135. Operating expenses have been classified by management as either research and ~~2020~~development weor ~~had~~selling, nogeneral ~~revenues~~and administrative based on an assignment of certain expenses directly to these classifications or ~~cost~~based on management’s allocation of ~~revenues~~certain expenses between these classifications.

~~Operating Expenses.~~The ~~Total~~overall increase in operating expense ~~for~~is ~~the~~primarily ~~three~~due ~~months ended September 30, 2021 was $719,465 compared~~ to ~~the total operating~~increased ~~expenses~~equity issuances for ~~the~~purchased ~~three~~research ~~months~~and ~~ended~~development ~~September~~and ~~30,~~expense ~~2020~~recorded offor ~~$457,073,~~additional ~~representing~~shares anissued ~~increase~~to ofwarrant ~~$262,392~~holders. ~~Operating~~Also, ~~expenses have been~~the ~~classified~~value byof ~~management~~our ascommon ~~either~~stock ~~research~~increased ~~and~~which ~~development~~made orthe ~~selling,~~value ~~general and administrative based on an assignment~~ of ~~certain expenses~~options ~~directly~~issued toworth ~~these~~more ~~classifications~~than orpreviously-issued ~~based~~equity ~~on management’s allocation of certain expenses between these classifications~~instruments.

~~The~~Research ~~overall~~and ~~increase~~Development inExpense. ~~operating~~Research and development expense isfor ~~primarily~~the ~~due~~three months ended March 31, 2022, was $726,711, compared to research ~~our~~and ~~issuance~~development expense of ~~warrants~~$179,309 tofor athe ~~consultant~~three ~~and~~months ~~higher~~ended ~~wage~~March ~~expense~~31, 2021; representing an increase of $547,402. This increase was mostly due to ~~additional~~research and development expenses from the acquisition of certain intellectual property from two ~~staff~~entities paid for in cash and equity instruments.

~~Research~~Selling, General and ~~Development~~Administrative Expense. ~~Research~~Selling, general and ~~development~~administrative expense for the three months ended ~~September~~March 3031, ~~2021,~~2022 was $~~161~~703,~~569,~~ 810 compared to ~~research~~ ~~and~~selling, ~~development~~general ~~expense~~and administrative of $~~165~~290,~~891~~077 for the three months ended ~~September~~March 3031, ~~2020~~2021; representing aan ~~decrease~~increase of $4413,~~322~~733. This ~~decrease is~~increase was primarily due to usshares ~~being~~issued ~~sensitive~~ to ~~limited~~warrant ~~cash~~holders ~~flows~~for ~~this~~additional ~~quarter~~services. ~~offset~~Also, the fair value of the options issued increased substantially due to anthe increase in value of our common stock ~~based~~when ~~compensation~~compared to previous issuances.

~~Selling,~~Other ~~General and Administrative~~ Expense. ~~Selling,~~Other ~~general and administrative~~ expense for the three months ended ~~September~~March 3031, ~~2021~~2022 was $~~557~~330,~~896~~903 as compared to ~~selling, general and administrative of~~ $~~291~~256,~~182~~163 for the three months ended March ~~September 30~~31, ~~2020;~~2021 representing an increase of $~~266~~74,~~714~~740. ~~The~~This ~~overall~~ increase iswas ~~primarily~~solely ~~due~~related to aninterest ~~increase~~expense. inDue ~~stock~~to ~~based~~higher ~~compensation~~debt ~~based~~amounts including onamortizing acash ~~one~~and non-~~time~~cash ~~warrant~~loan ~~issuance to~~costs aduring ~~consultant~~2022 as compared to 2021. WeDuring ~~also~~the ~~had~~three anmonths ~~increase~~ended inMarch ~~salary~~31, ~~expense~~2022, ~~due~~the remaining loan costs were amortized with no non cash expenses deferred to ~~hiring~~ ~~additional~~the ~~staff~~future.

Other Expense. Other expense for the three months ended September 30, 2021 was $335,515 as compared to $208,668 for the three months ended September 30, 2020 representing an increase of $126,847. This increase is due to interest related to increased debt levels and the associated amortization of additional loan costs offset by gains on settlement of various liabilities.15

Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020

Revenues and Cost of Revenue. During the nine months ended September 30, 2021 and 2020 we had no revenues or cost of revenues.

Operating Expenses. Total operating expenses for the nine months ended September 30, 2021 were $1,859,150 compared to the total operating expenses for the nine months ended September 30, 2020 of $1,657,180 representing an increase of $201,970. Operating expenses have been classified by management as either research and development or selling, general and administrative based on an assignment of certain expenses directly to these classifications or based on management’s allocation of certain expenses between these classifications.

The overall increase in operating expense is primarily due to our issuance of warrants to a consultant and higher wage expense due to additional staff.

Research and Development Expense. Research and development expense for the nine months ended September 30, 2021, was $554,933 compared to research and development expense of $555,830 for the nine months ended September 30, 2020; representing a decrease of $897. This decrease is considered negligible. We would expect our research and development costs to remain relatively constant for the remainder of 2021.

Selling, General and Administrative Expense. Selling, general and administrative expense for the nine months ended September 30, 2021, was $1,304,217 compared to selling, general and administrative of $1,101,350 for the nine months ended September 30, 2020; representing an increase of $202,867. The overall increase is primarily due to an increase in stock based compensation based on a one-time warrant issuance to a consultant, an increase in salary expense due to hiring additional staff and an increase in our D&O insurance.

Other Expense. Other expense for the nine months ended September 30, 2021 was $793,592 as compared to $528,177 for the nine months ended September 30, 2020 representing an increase of $265,415. This increase was primarily due to debt levels and the associated amortization of additional loan costs. This is offset by gains on settlement of various liabilities.

Liquidity and Capital Resources

The following is a summary of our key liquidity measures at ~~September~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021:

We need additional capital to continue our operations. We issued $3,448,779 in convertible notes during the nine months ended September 30, 2021 of which we repaid $864,284 to another convertible note holder and paid $259,086 in loan costs. We also received $36,000 from the exercise of stock warrants that were about to expire. In order for us to continue operations we will need additional capital which will require us to issue equity securities, debt securities and rights to acquire equity securities. We have no existing commitment to provide capital, and given our early stage of development, we may be unable to raise sufficient capital when needed and, in any case, will likely be required to pay a high price for capital.

	March 31,			December 31,
	2022			2021

Cash	$	1,252,156		$	745,003

Current assets		1,252,156			745,003
Current liabilities		(2,301,982	)		(12,435,011	)

Working (deficit) capital	$	(1,049,826	)	$	(11,690,008	)

	September 30,			December 31,
	2021			2020
Cash	$	1,145,782		$	185,126
Current assets		1,145,782			190,553
Current liabilities		(12,106,045	)		(1,730,413	)
Working (deficit) capital	$	(10,960,263	)	$	(1,539,860	)

We need additional capital to continue our operations. We received $1,318,722 from the exercise of warrants during the three months ended March 31, 2022 and subscription receivables totalling $670,234. In order for us to continue operations we will need additional capital which will require us to issue equity securities, debt securities and rights to acquire equity securities. We have no existing commitment to provide capital, and given our early stage of development, we may be unable to raise sufficient capital when needed and, in any case, will likely be required to pay a high price for capital.

Our future capital requirements and adequacy of available funds will depend on many factors including:

● Our ability to find a commercial market for our IONIQ ProLung Test and obtain needed regulatory clearance ● Our financial results; ● ~~the~~The cost and availability of capital generally; and ● ~~the~~The occurrence of unexpected adverse expenses or events.

Cash provided by (used in) operating, investing and financing activities

Cash provided by (used in) operating, investing and financing activities for the ~~nine~~Three ~~months~~Months ~~ended~~Ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021 is as follows:

	Nine Months Ending September 30,
	Three Months Ending
	2021			2020
	2022			2021
Operating activities	$	(1811,~~398,616~~569	)	$	(1501,~~595,251~~339	)
Investing activities		~~(2,137~~-	)		~~(3,588~~-	)
Financing activities		21,~~361~~318,~~409~~722			12,~~651~~379,~~925~~017
Net increase (decrease) in cash	$	~~960~~507,~~656~~153		$	531,~~086~~877,678

Operating Activities

For the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, the differences between our net loss and net cash used in operating activities were due to ~~net~~ net non-cash charges ~~totaling~~totalling $~~755~~752,~~599~~455 for stock-based compensation, share issuances, amortization of debt discount, ~~a gain on settlement of R&D,~~ and depreciation. ~~We also had a large increase in our accrued interest due to increased debt levels offset by a decrease in accounts payable due to payment and settlement.~~

For the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, the differences between our net loss and net cash used in operating activities were due to ~~net~~ net non-cash charges ~~totaling~~totalling $~~525~~139,~~655~~814 for stock-based compensation, amortization of debt discount and depreciation.

Investing Activities

During the nine months ended September 30, 2021 and 2020 we purchased equipment totaling $2,137 and $3,588, respectively.

Financing Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, cash flows from financing activities ~~totaled~~totalled $21,~~361~~318,~~409~~722. ~~The~~This ~~cash~~was ~~flows~~solely ~~were~~due ~~related~~ to ~~proceeds received from~~ the ~~issuance and payment of convertible notes and the~~ exercise of ~~stock~~ warrants for cash.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, cash flows from financing activities ~~totaled~~totalled $12,~~651~~379,~~925~~017. ~~Part~~The ~~of the~~ cash flows were related to to proceeds received from the issuance of convertible notes net of offering costs. ~~Also~~of $3,207,216 ~~the~~as ~~Company~~well ~~entered~~as ~~into~~cash areceived ~~SBA~~from ~~Loan~~exercise ~~pursuant~~of tostock ~~the~~warrants ~~Paycheck~~of ~~Protection Program (the “PPP”) under the Coronavirus Aid~~$36,000; ~~Relief,~~this ~~and~~was ~~Economic~~offset ~~Security Act (“CARES Act”) administered~~ by ~~the~~a ~~U.S.~~$864,199 ~~SBA.~~payment ~~The~~to ~~Company~~settle ~~received~~a ~~total~~convertible ~~proceeds~~note ~~of $126,000 from the SBA Loan~~payable.

Critical Accounting Policies and Estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. We evaluate our estimates on an on-going basis. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances. However, future events may cause us to change our assumptions and estimates, which may require adjustment. Actual results could differ from these estimates. We have determined that for the periods reported in this Quarterly Annual Report on Form 10-Q the following accounting policies and estimates are critical in understanding our financial condition and results of operations.

Long-lived Assets – Long-lived assets, including property and equipment, and intangible assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of the long-lived asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is calculated based on fair value.

Convertible Debt – The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued. The BCF for the convertible instruments is recognized as a discount equal to the intrinsic value of the conversion features, which is also recorded as an increase to additional paid-in capital.

Stock-based Compensation – The Company measures the cost of employee and consulting services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The awards issued are valued using a fair value-based measurement method. The resulting cost is recognized over the period during which an employee or consultant is required to provide services in exchange for the award, usually the vesting period.

Off Balance Sheet Arrangements

The Company has not had any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not applicable to the Company because the Company is a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of ~~September~~March 3031, ~~2021~~2022. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer concluded as of September 30, 2021 that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in the reports filed or submitted by us under the Exchange Act was recorded, processed, summarized and reported within the requisite time periods and that such information was accumulated and communicated to our chief executive officer, as appropriate to allow for timely decisions regarding required disclosure.17

Based on that evaluation, our chief executive officer concluded as of March 31, 2022 that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in the reports filed or submitted by us under the Exchange Act was recorded, processed, summarized and reported within the requisite time periods and that such information was accumulated and communicated to our chief executive officer, as appropriate to allow for timely decisions regarding required disclosure.

The Company did not maintain effective disclosure controls and procedures as defined by the framework issued by COSO. Specifically, the Company did not effectively segregate certain accounting duties due to the small size of the Company’s accounting staff. In order to mitigate these material weaknesses regular meetings are held with the audit committee and the audit committee approves all audit functions. If at any time, we determine a new control can be implemented to mitigate these risks at a reasonable cost, it is implemented as soon as possible.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred in the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 that ~~has~~ has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

We are a smaller reporting company and, as a result, are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The offer and sale of the Notes, and shares of common stock issuable upon conversion of the Note (the “Conversion Shares”) have been effected in reliance upon the exemptions for sales of securities set forth in Rule 506(c) under the Securities Act, based upon the following: (a) we have confirmed in a manner consistent with the requirements of Rule 506(c) that each investor is an “accredited investor,” as defined in Rule 501 promulgated under the Securities Act, (b) each investor has represented to us that the investor has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (c) the investors have been provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors have acknowledge that all Notes and Conversion Shares being purchased are “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; (e) there are restrictions on transfer on the Notes, and any Conversion Shares are subject to restrictions and a legend, providing that the respective security can be transferred only if subsequently registered under the Securities Act or in a transaction exempt from registration under the Securities Act; and (f) a Form D has been filed with respect to the offering.

~~During~~The ~~the~~Company ~~nine~~also ~~months~~had ~~ended~~the ~~September~~following ~~30, 2021, we issued 37,214~~ unregistered common shares ~~for the conversion of debt and the exercise of stock warrants.~~issuances

	-	253,602 warrants were exercised for 256,302 unregistered common shares for cash.

	-	19,414 warrants were exercised and 6,436 unregistered common shares were issued for the acquisition of research and development.

	-	128,891 warrants were exercised for 128,891 unregistered common shares for signed exercise agreements with us awaiting the proceeds.

	-	120,000 warrants were exercised in a cashless exercise for 52,174 unregistered common shares. These same warrant holders received an additional 27,671 unregistered common shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None~~Utah Division of Securities

On April 23, 2019, the Utah Division of Securities (the “Division”) filed a Notice of Agency Action and an Order to Show Cause before the Division of Securities of the Department of Commerce of the State of Utah against the Company, Jared Bauer (Bauer) and former Board Members (Clark Campbell, Tim Treu, Todd Morgan and Robert Raybould).

In January 2020, the Division issued a Stipulation and Consent Order which set forth the following: 1) the Company agrees to settle the matter with the Division by way of the Stipulation and Consent Order; 2) the Stipulation and Consent Order fully resolves all claims the Division has against the Company pertaining to the Order to Show Cause; 3) the Division, the Company and Bauer, agree to promptly file a stipulation and joint motion to dismiss the Company and Bauer from this administrative action, with respect to Count 1 against the Company and Bauer (the only claim brought against Bauer); 4) In or about April 2014, the Company Board of Directors circulated a consent agreement regarding the issuance of 72,763 Company stock certificates to select members of the Company Board of Directors in connection with “financing services provided” by those members; 5) In or about April 2014, the Company issued stock grants of 27,000 shares to Robert W. Raybould, 2,044 shares to Steve Eror, 7,969 shares to Tim Treu; 24,188 shares to Clark Campbell; and 12,188 shares to Todd Morgan; 6) Subsequent to issuance of those shares, ProLung was informed by counsel of potential consequences for Pro Lung employing unlicensed agents and individuals receiving the shares as compensation directly for sale of securities without a securities license, as opposed to receiving shares as compensation for generalized board service. Subsequently, no further shares were issued as compensation for fundraising. Mr. Eror returned his shares to the Company. However, Raybould, Treu, Campbell and Morgan did not return their shares to the Company. The Company did not disclose the potential licensing violation until on or about December 3, 2018, in its Note Purchase Agreements.

As set forth by the Company in its Form 8-K dated November 27, 2019, Campbell, Treu, Morgan, and Raybould entered into Stipulation and Consent Orders wherein they returned shares of stock to the Company’s treasury and paid fines to the Division of Securities.

On January 9, 2020, the Division entered an order as follows: 1) entering certain Findings and Conclusions by the Division, which ProLung admitted via a Stipulation and Consent Order; 2) ordering ProLung to cease and desist from violating Utah Uniform Securities Act (the “Act”) and to comply with the requirements of the Act in all future business in the state of Utah; 3) ordering ProLung to disclose the contents of the order to investors and prospective investors in all future capital raising efforts and disclosure documents of ProLung; and 4) Ordering ProLung to pay a fine of $55,000 to the Division. Through March 31, 2021, the Company had paid the fine in full.

ITEM 6. EXHIBITS

Exhibit Number		Description
3.1		Third Amended and Restated Certificate of Incorporation, as amended by Certificate of Amendment dated October 10, 2017⁽¹⁾
3.2		Amended and Restated By-Laws⁽¹⁾
31.1		Certification Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Amended*
32.1		Certification 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 Schema Document*
101 CAL		Inline XBRL Calculation Linkbase Document*
101 LAB		Inline XBRL Labels Linkbase Document*
101 PRE		Inline XBRL Presentation Linkbase Document*
101 DEF		Inline XBRL Definition Linkbase Document*
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

(1) Incorporated by reference from our Current Report on Form 8-K filed with the SEC on July 19, 2017.

2019

SIGNATURES

Pursuant to the requirements 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.

	PROLUNG, Inc.
November 12, 2021	By:	/s/ Jared Bauer
May 23, 2022	By:	/s/ Jared Bauer
Date		Jared Bauer, Chief Executive Officer
		Chief Executive Officer

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