UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

000-54600001-38362

(Commission File No.)

Registrant’s telephone number, including area code:(801) 736-0729

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:Common Stock, par value $.001 per share

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES [  ] NO [X].

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES [  ] NO [X].

Indicate by check mark whether the registrant (1) has 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 [X][  ] NO [  ][X]

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Report or any amendment to this Report. [  ]

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

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 Act): YES [  ] NO[X] [X]

The aggregate market value of the shares of common stock held by non-affiliates of the Registrant on June 30, 2017,2020, was approximately $23,514,247,$9,853,465 based upon 3,229,9793,989,257 shares held by non-affiliates and an assumed fair market value of $7.28$2.47 per share. The Registrant’s common stock does not trade on an established market; accordingly, fair market value is estimated based upon the last private purchasemost recent valuation of the Company’s common stock prior to June 30, 2017.Registrant. Shares of common stock held by each officer and director, and by each other person who may be deemed to be an affiliate of the Registrant have been excluded.

As of April 16, 2018,30, 2021, the Registrant had 3,861,8484,094,916 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE.None.

INDEX TO FORM 10-K

PART I

This Annual Report on Form 10-K for the year ended December 31, 20172020 (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties. Purchasers of any of the shares of common stock of ProLung, Inc. are cautioned that our actual results will differ (and may differ significantly) from the results discussed in the forward-looking statements. The reader is also encouraged to review other filings made by us with the Securities and Exchange Commission (the “SEC”) describing other factors that may affect future results.

In this filing, ProLung, Inc. and its consolidated subsidiary areis referred to as “ProLung”“ProLung,” “IONIQ Sciences” or “IONIQ” in addition to as the “Company” and versions of “we” or “us.” On May 27, 2020, ProLung, Inc. announced we had filed a dba IONIQ Sciences (“IONIQ” or the “Company”) to reflect our expanded early cancer detection strategy. Current and all granted trademarks include ProLungdx®IONIQ Sciences®, Fresh Medical Laboratories®IONIQ Science®, IONIQ Test®, IONIQ Screen®, ProLungdx®, ProLung®, EPN Scan®, Electro Pulmonary Nodule Scanner (EPN Scan)®, and EPN Scanner®. Any other trademarks and service marks used in this Report are the property of their respective holders.

Item 1. Business

We are a medical technology company specializingwith a mission to dramatically improve the cancer landscape with a modern solution for the early detection of multiple cancers thereby expanding the therapeutic window, significantly improving survivability, and reducing the cost of healthcare. One in predictivetwo Americans will be diagnosed with cancer during their lifetime and one in five will die. 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 may expand the therapeutic window, dramatically improve survivability and reduce the cost of healthcare. The first planned product utilizing our proprietary analytic early stageplatform, the IONIQ ProLung Test™ for lung cancer, risk testing,has been designated a Breakthrough Device by the U.S. FDA in February 2020, which we referincludes provisions for four years of CMS reimbursement.We remain fully committed to asgaining U.S. FDA regulatory de novo clearance and subsequently commercializing the “ProLung Test.” IONIQ ProLung Test for lung cancer.

Our noninvasive, painlessnon-invasive, rapid and radiation-free IONIQ ProLung Test was developed to immediately assess the risk of malignancy in lung nodules found in the chest by a ComputerComputed Tomography “CT” scan, which is currently the primary method used in the United States (“US”) for screening lung cancer. Lung cancer is the leading cause of cancer death.death in the US and the world according to American Cancer Society and World Health Organization. Earlier detection makes a substantial improvement in survival in individuals at high risk of lung cancer. Timely identification of malignancy is essential for patients and their families. Currently, patients often wait from three months to three and one-half years to have the risk of malignancy assessed through periodic CT scan surveillance. Until malignancy is determined to be likely, invasive biopsy and treatment are typically delayed. Current statistics reflect an average 17% survival rate at five years for those diagnosed with lung 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 reducescan reduce the time available to treat the tumor and may cause sustained emotional trauma.

The IONIQ ProLung Test enablesis designed to enable the practitioner to promptly assess the risk of malignancy in patients with lung nodules. The IONIQ ProLung Test utilizes mass averagingmass-averaging bioconductive technology. Mass averagingtechnology or Electrical Impedance Analytics (EIA). Mass-averaging bioconductive technology involves a sequential scanning process that measures significant differences in electrical conductance between cancerous and benign tissue. We plan to introduce the IONIQ ProLung Test to the market as a standard predictive analytic test, without the need for transmission of a physical sample or specimen to a lab for analysis.

The IONIQ ProLung Test acquires bio conductancebioconductance measurement data by means of a patented probe and disposable diaphoretic electrodes placed on the patient’s back and arms. The IONIQ ProLung Test registers and evaluates measurement data derived from 62numerous pathways through the chest and is processed by a predictive analytic algorithm. The results are summarized in a report that can be used by the physician, in concert with other risk factors such as nodule size, family history, smoking history and gender, to evaluate patients with nodules. The IONIQ ProLung Test requires minimal preparation and can be completed in fewer than 3020 minutes. Most importantly, it guides or informs the physicianphysician’s decision making without the time consuming, expensive and watchful waiting period. We believe the IONIQ ProLung Test provides considerable cost savings when compared with periodictoday’s status quo of patients undergoing repeated CT imaging studies due to repeated follow-up and potentially unnecessary surgery.

ProLung dba IONIQ Sciences licensed and developed the intellectual property and established the clinical research plan for the IONIQ ProLung Test. Beginning in 2005, we embarked on clinical research which revealed the potential of our technology. In 2011, our research demonstrated the utility of the IONIQ ProLung Test in lung cancer patients. To date, more than 550 patients1,200 subjects have been tested using the IONIQ ProLung Test at IONIQ’s headquarters and in major cancer centers such as Stanford, UCLA, Loyola, MD Andersoncenters. If our de novo FDA clearance is granted, of which there can be no assurance, we plan to transition the hospitals that participated in our clinical trials to commercial placements of the IONIQ ProLung Test System and Huntsman, among others.consumable IONIQ ProLunt Test kit.

In the US, the push for early detection of lung cancer was greatly accelerated in 2013.2013 and again most recenetly in 2020. Recognizing the dismal rate of lung cancer survival in the US, and the potential value of early detection, US guidelines were established for lung cancer CT screening. The guidelines provided for CT screening for lung cancer in asymptomatic adults aged 55 to 80 who have a 30 pack-year history of smoking and who currently smoke or have quit smoking in the past 15 years. This demographic group addresses a substantial portion of individuals of high risk of lung cancer. In 2020, the guidelines were expanded effectively doubling the population covered. The US health care industry has generally recognized the need for technologies that will provide for earlier detection of cancers at a lower cost. Genetic biomarkers, protein panels, and breath analysis, among others, are in various stages of development. The IONIQ ProLung Test is the first bioconductive technology that has been developed for the risk stratification of lung cancer. In February 2015, the US CenterCenters for Medicare and& Medicaid Services (CMS) announced its coverage of lung cancer screening by CT. This newly reimbursed screening procedure increased the number of individuals with suspicious lung nodules who may be candidates for the IONIQ ProLung Test.

With the arrival of lung cancer screening recommendations, the large US market and government-backed reimbursement represent near term opportunities to accelerate diagnosis and treatment of lung cancer while reducing invasive biopsies and costs. We made US approvalclearance and recognition of the IONIQ ProLung Test our major priority, targeting lung cancer risk stratification and reducing time to treatment. We intend to seek government-backed reimbursement after FDA approval.clearance. We are also interested in improving the cost of diagnosis and treatment with capitated providers. We believe the IONIQ ProLung Test can be offered at a fraction of the cost of current standard of care which is repeat periodic imaging studies.

In May 2013, we achieved an important validation of our IONIQ ProLung Test by receiving the “CE” mark in Europe. This certification verifies that the IONIQ ProLung Test meets the regulatory requirements for the marketing and sale of the IONIQ ProLung Test in the European Economic Area and European Free Trade Association Countries representing 510approximately 513 million individuals and 31-member28-member states. Our European clinical research includes testing more than 154 patients in Italy, Switzerland and Germany. We intend to seek European reimbursement approval and accelerate our marketing in Europe following receipt of US Food and Drug Administration, (“FDA”) market approval.clearance. We believe CT screening is likely to be implemented in Europe following the completion of several lung cancer screening trials already underway.

In September of 2013, we applied for marketing clearance under Section 510(k) from the FDA. After review of the 510(k) application, the FDA issued a letter to ProLung in May 2014 indicating that the FDA believed that our 510(k) would likely be found “Not Substantially Equivalent” to a legally marketed predicate device and the FDA believed ProLung may be suitable forde novo classification. Subsequently, we submitted ade novo petition in August of 2014. In February 2015, we received a “substantive review” from the FDA requesting additional information, regarding the risk classification of the test, the study design and study analysis. We held various meetings with the FDA and agreed to complete and include an additional clinical study which was already underway. Before the FDA can grant approvalclearance of ourde novo application, we must resubmit the application with positive results of the requested study and resolve any remaining issues previously identified by the FDA as well as address possible issues that may be identified in the future. We are in the process of preparing the necessary information requested by the FDA.

We have developed the quality management system as well as supply chain and the ability to fully manufacture the entire ProLungIONIQ System in our own Salt Lake City facility. We have received ISO 13485 and other approvalsclearances and made certain refinements to the intellectual property that will further our capabilities, especially the development of the underlying predictive analytic algorithm and refinements to various software and physical components. Over the last five years, weWe have repatedly expanded our intellectual property portfolio, completed the development of the IONIQ ProLung Test and manufacturing of the ProLungIONIQ System and embarked upon clinical trials to provide validation to the medical community.

The currentresults of the clinical trial hasof 420 enrolled patients atfrom 15 cancer and medical centers across the US.US, named PL-208, was published in early 2019. The results of another clinical trial of 486 patients from four cancer and medical centers in China, named PLW-216, was published in late 2019. We completed full clinical enrollmentbelieve the results are more solid indicators that our IONIQ ProLung Test is capable of identifying a signal that can be used to indicate the risk of malignancy in pulmonary nodules by non-invasively measuring their bioconductance biomarker. With the conclusion of these Studies, the IONIQ Team is eager to turn its focus to validating a number of already identified hardware, software and data collection improvements designed to strengthen our algorithm’s performance and support a future submission to the FDA. The Company is also in the midst of evaluating a number of potential strategic partnerships to accelerate our development by expanding our financial and support network.

In late 2018, we announced final results of our Repeatability Study, named PL-209. The repeatability study enrolled sixty subjects, 30 male and 30 female, half of each gender with a body mass index (BMI) of 30 or more, and half with a BMI of 28 or less. Each subject was scanned twice on Day One and twice on Day Two. All scans were done by the endsame operator on the same IONIQ System. Fifty-nine subjects produced evaluable data. Four models (algorithms) were tested. The study was conducted by ProLung. Study objectives included quantifying the effects of 2017. Ourgender, body mass index (BMI), day-to-day subject variability and variability of a single device when volume-averaged thoracic bioconductance was measured with the IONIQ ProLung Test. The repeatability study addressed several questions regarding use of the IONIQ ProLung Test. One significant limitation of this study is that no subjects with known pulmonary nodules or malignancy were enrolled. It is unknown whether pulmonary nodules or malignancy affect the repeatability of the IONIQ ProLung Test. While the study showed statistically significant variability of approximately 2% when testing the same subject twice on the same day, the clinical impact of this finding is unknown because it is not anticipated that patients will receive a second test on the same day in clinical use. While we note significant day-to-day variability when using an earlier model (the algorithm used in the Johns Hopkins Study, Journal of Thoracic Oncology, 2012), repeatability is markedly improved when using a more refined model.

In late 2019, we announced the final clinical results are anticipatedof our Validation Study, named PLW-216. The validation study enrolled 486 subjects from four leading cancer and medical centers in China. The results were 84% sensitivity and 73% specificity in the 418 subjects included in the analysis.

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.

PL-209 Study Conclusions

PL-208 Study (2012-2019)

Three Validation studies have been completed for the IONIQ ProLung Test. The first is PL-208 which enrolled 420 patients across 15 US centers (ID: NCT01566682). This study was two-phased, with a 200-patient open-labelled training set to test and optimize an algorithm, followed by testing of the optimized algorithm on the diagnosis-blinded 174-patient validation set. Forty-six (46) subjects (11%) were excluded for being lost to follow up or having an inconclusive diagnosis, missing or inadequate device data. The predictive algorithm utilized the patient’s bioconductance measurements coupled with the patient’s age and a binary cut-off point of 0.5 was chosen to distinguish between high and low likelihood of cancer. The algorithm was locked and applied to a blinded validation set of 174 patients and yielded a Sensitivity of 69% Specificity of 49%, Positive Predictive Value (PPV) of 70%, Negative Predictive Value (NPV) of 47% and overall Accuracy of 61%.

PLW-208 Study (2015-2016)

The second validation trial (PLW-208) was completed by the Company’s licensor (ProLung Wuxi). This study enrolled 138 subjects at 2 centers in China. This study was similar in design to the US PL-208 Study and obtained a Sensitivity of 77%, Specificity of 60%, PPV of 82%, NPV of 41% and an Accuracy of 73%. In reviewing this study, the Sponsor determined that test method and operator training needed to be complete in April 2018. When complete, data from our trial will be submittedimproved to obtain better results.

PLW-216 Study (2017-2019)

Ultimately, the Study Sponsor (ProLung Wuxi) improved the device operator training, test method and device predictive algorithm. The Sponsor concluded the PLW-208 Study and initiated PLW-216, utilizing improved training, test method and a modified locked predictive algorithm. This PLW-216 Study was a single-phase validation study whereby the predictive algorithm was locked prior to the FDAfirst patient being enrolled and the IONIQ ProLung Test results were provided to site investigators prior to knowing the subject’s actual diagnosis. The PLW-216 Study enrolled 486 subjects in China at 4 centers led by Dr. Bai, the Chair of the Chinese Alliance against lung Cancer and Director of the Shanghai Respiratory Research Institute (ID: NCT 02726633, registration No 20170226). The Validation Study demonstrated improved performance yielding a Sensitivity of 84% Specificity of 73%, Positive Predictive Value (PPV) of 78%, Negative Predictive Value (NPV) of 80% and overall Accuracy of 79% from the US Study PL-208 (ID NCT0156668). This performance is comparable to other diagnostic cancer devices such as Mammogram (~sensitivity of 75%, specificity of 71%) and was demonstrated in a large sample size of 418 subjects included in the final analysis.

PL-210 - ProLung Test Measurement Collection Protocols forde novo market approval. Label Expansion (Ongoing NCT04134520)

The purpose of this Study is to identify and test different data collection methods to determine which approaches may be useful in evaluation additional cancers to lung cancer (including breast cancer) and improve the ProLung Testing procedure. Once this Study is complete, the Sponsor plans to evaluate these improvements in future follow up cancer validation studies that will assess device accuracy using the new measurement collection methods.

The address of our principal executive office is:

ProLung, Inc.IONIQ Sciences

Attention: Chief Executive Officer

757 East South Temple,350 W. 800 N., Suite 150214

Salt Lake City, Utah 8410284103

Our telephone number is (801) 736 – 0729.

Our facsimile number is (801) 906 – 0333.

Our e-mail address is info@ProLungInc.com.info@IONIQsciences.com.

Our website may be viewed at www.ProLungInc.com.www.IONIQsciences.com. Information included in our website is not a part of this Report.

Company Overview

The Company was incorporated on November 19, 2004, as a Delaware corporation under the name of Hilltop Group Technologies Corp. In November 2006, the Company began operations and changed its name to Fresh Medical Laboratories, Inc., and in April 2017, the Company changed its name to ProLung, Inc. In May 2020, the Company filed a dba for IONIQ Sciences.

On November 15, 2006, the Company entered into an exclusive license agreement with BioMeridian Corporation (“BMC”). The license agreement allowed the Company to include the use of certain BMC technologies in the development of a medical device.

ProLung dba IONIQ Sciences is a clinical research company. Our expertise is managing lung cancer innovation. Our focus is to develop, market, and sell precision predictive analytical devices for a life-threatening disease. Our mission is to make a difference in time for underserved lung cancer patients.

If and when the Company has the required regulatory approvals,clearances, we plan to market, and sell the IONIQ ProLung Test in the U.S. market, theUS, European, market, Latin American market,Chinese and the Chinese market, as well as other international markets.

Lung Cancer Market Summary

According to the American Cancer Society (“ACS”), lung cancer is the leading cause of cancer death among both men and women;women in the US; about one out of four cancer deaths in the US are from lung cancer. The ACS estimates that in 2017 more people in the United States will die of lung cancer than of colon, breast, and prostate cancers combined.

According to the World Health Organization (“WHO”), lung cancer is the most common cause of death from cancer worldwide and is estimated to be responsible for nearly one in five cancer related deaths. The overall ratio of mortality to incidence is 87%. Each year there are over 1.8 million new cases of lung cancer worldwide, as well as nearly 1.6 million deaths. The lifetime chance of developing lung cancer is 1:17 in women and 1:14 in men.

Until recently, asymptomatic lung cancer was detected only incidentally when looking for something else. Currently, a lung cancer screen now reimbursed by Medicare, is performed by low-dose computed tomography. This has led to a dramatic increase in number of individuals with lung nodules detected, which is intensifying the need for a risk stratification test such as the IONIQ ProLung Test. The following is a summary of the principal markets for the Company’s IONIQ ProLung Test.

Lung Cancer Incidence and Mortality

Lung cancer patients face median five-year survival rates of only 17% (compared to 89% for breast cancer and 98% for prostate cancer). Survival rates of lung cancer lags behind that of other cancer rates due to a lack of early and effective detection, and a challenging biopsy. A significant amount of time is required to assess the risk under current guidelines. Should innovation reduce the time required for assessing the risk of malignancy, lung cancer mortality wouldcould approach that of other cancer rates. In those instances when lung cancer was detected in its earliest stage, the five-year survival improves by 38%. Experts project that with accurate and early diagnosis, ten-year survival could approachto 80%. or approximately an improvement of five times.

U.S. Market

Americans at high risk:

Symptomatic:

Each year approximately 225,500 people are diagnosed with lung cancer. Approximatelycancer and approximately 90 percent of lung cancer patients are symptomatic at presentation.

Lung Cancer Screening:

Given the size of the US market and the progression of CT scan use in early detection, approvalclearance and acceptance of the IONIQ ProLung Test in the US is the major priority. The CDC estimates that there are 94 million Americans at risk of lung cancer (which includes current and former smokers). In the National Lung Cancer Screening Trial of 53,454 patients, approximately 24% of the CT scans performed were positive revealing a lung nodule suspicious for lung cancer that required follow-up. CT screening was recommended by the US Preventive Services Task Force on December 31, 2013, and Medicare began to pay for lung cancer screening on February 5, 2016. Based on these estimates, if the approximately 94 million Americans at risk for lung cancer received a low dose CT screen approximately 24% (or 23 million) Americans may reveal lung nodules requiring follow up. We believe these patients would be eligible to receive the IONIQ ProLung Test.

In the US, 15 hospital groups are currently using ProLung’s Test in lung cancer research. If ourde novo FDA clearance is granted, of which there can be no assurance, we plan to transition hospitals involved in research to commercial placements of the ProLung Test System and consumable test kit.

European Market

ProLung plans to utilize its CE mark in conjunction with US approvalclearance in the European Union and European Free Trade Association Countries which represents 510approximately 513 million individuals and 31 member states including the UK.28-member states. Europe has some of the highest smoking prevalence of any region in the world which has led to a high incidence of lung cancer. In 2012, the World Health Organization estimated that 268,000 individuals died from lung cancer and that more than 313,000 cases were diagnosed in the European Union.

It is estimated that 28% of Europeans smoke and approximately 133 million individuals are at high-risk of lung cancer. Applying the US rates in the published National Lung Screening Trial (2011), over 30 million of these individuals are estimated to have an indeterminate lung nodule and require follow-up to determine the risk of malignancy. As the number of individuals with indeterminate lung nodules continues to increase in Europe, risk stratification tools such as the IONIQ ProLung Test are needed to close the gap between discovery of a nodule and the determination of malignancy.

China Market

According to the World Health Organization, the number of smokers in China is steadily growing and increasing at higher rates than any other world region. One in three of the world’s cigarettes is smoked in China. The average Chinese smoker consumes 22 cigarettes per day. This is nearly a 50% increase from 1980. Overall, more cigarettes are smoked in China than in the next top 29 cigarette-consuming countries combined. Lung cancer is epidemic in China with 653,000 cases in 2012 and an estimated 597,000 deaths.

The government’s smoking cessation campaign and interventions are poorly funded and weakly enforced, and certain provincial governments are somewhat dependent upon state-owned tobacco sales and taxation. However, China’s Government is collaborating with pulmonology and radiology leadership to study low-dose CT screening for earlier detection of lung cancer. The government has also sponsored economic studies to investigate the reimbursement of lung cancer screening in the health insurance system.

As the number of individuals with indeterminate lung nodules continues to increase in China, risk stratification tools, such as the IONIQ ProLung Test will be needed to close the gap between discovery of a nodule and the determination of malignancy. This clinical need for risk stratification willmay be multiplied if a lung cancer screening program is implemented in the Chinese healthcare system.

Latin American Market – potential market of 25 million patients

Nearly 10% of the world’s smokers live in Latin America (i.e., more than 120 million). As yet, the lung cancer screening is not widespread. As the number of individuals with indeterminate lung nodules increases in Latin America, another growing market will be available to the ProLung Test.

Latin America has a population at-risk for lung cancer of at least 120 million. In accordance with rates from the National Lung Screening Trial (2010), roughly 25 million individuals will have an indeterminate pulmonary lesion if screened and require follow up to determine the risk of malignancy. As the number of individuals with indeterminate lung nodules increases in Latin America, risk stratification tools such as the ProLung Test are needed to close the gap between discovery of a nodule and the determination of malignancy.

Competition

The development and commercialization of new products to improve the accuracy and efficiency of risk stratification of lung cancer is competitive, and we expect considerable competition from major medical device companies, laboratory biomarker tests, and academic institutions that are conducting research in lung cancer. Extensive research and financial resources have been invested in the discovery and development of new lung cancer detection tests. Potential competing technologies include, but are not limited to, breath markers, sputum cytology, and DNA relatedDNA-related markers, blood markers, radiography and CT imaging.

The timing of market introduction of some of our potential products or of competitors’ products may be an important competitive factor. We believe the speed with which we can develop products, complete clinical trials and approvalclearance processes, and supply commercial quantities to market are important competitive factors. We expect that competition among products approved for sale will be based on various factors including product efficacy, safety, reliability, availability, price, reimbursement, and patent position. We believe that our IONIQ ProLung Test is superior or equivalent to existing alternatives in all of these areas, other than availability (in the US due to lack of FDA approval)clearance) and reimbursement. We are in the process of seeking reimbursement approval in the European Union and expect to seek reimbursement approval in the US assuming we obtain marketing approval.

Business

IONIQ ProLung Test

The IONIQ ProLung Test is comprised of the following two components:

ProLung’s novel mass-averaging bioconductiveElectrical Impedance Analtyics technology simultaneously considers data from multiple measurement pathways and utilizes a patented predictive analytic algorithm to combine the individual measurements into a weighted average composite score that indicates an increased or decreased risk of malignancy in the individual in which the nodule has been detected. No images are generated by the IONIQ ProLung Test and extensive training is not required to interpret the composite score.

If required approvalsregulatory clearances are received, the IONIQ ProLung Test will be introduced to the market as a standard predictive analytic test without the need for transmission of a physical sample or specimen. Instead, the IONIQ ProLung Test acquires bioconductive measurement data by means of a patented probe and disposable diaphoretic electrodes placed on the back and arms.hands. The data containing precision measurements is processed by a patented predictive analytic algorithm and a report is generated that may be used by the physician in addition to other risk factors, such as nodule size, family history, smoking history, and gender to evaluate patients with suspicious masses or lesions identified by CT scan. The IONIQ ProLung Test is immediate, pain-free, non-invasive, rapid and non-radiating. It requires minimal patient preparation and can be completed in fewer than 30 minutes.

The IONIQ ProLung Test Procedure

Research and Clinical Trial Results

Our IONIQ ProLung Test has been evaluated in fourseven clinical trials and is in the process of its fifthat 24 clinical trial. The ProLung Test is currently being evaluated in a US multicenter trial.sites with 1,200 subjects generating more than 20,000,000 data points. We made modifications to the IONIQ ProLung Test throughout the research process.process and will continue to attempt to improve its performance. A description of each clinical trial is below:

Proof of Principle -— McHenry, IL (2005)

Subsequent analysis of the Third Cohort offered potentially confounding results, but ProLung felt the hypothesis of feasibility of the device had been successfully demonstrated and that sufficient evidence of feasibility existed to proceed with further research.

Reliability and Repeatability ―— Salt Lake City, UT (2006)

Efficacy and Safety in the Target Indication ―a.k.a. FML-204 — Baltimore, MD (2012)

Reliability and Repeatability —Salta.k.a. PL-209 — Salt Lake City, Utah (2015)

PL-208 Study – (2012-2019)

PLW-208 Study – (2015-2016)

PLW-216 Study – (2017-2019)

Multicenter Study of the ProLung Test – Multicenter (ongoing)

There are three Specific Aims of this study:

Status.We completed full clinical enrollment by the end of 2017. Our final clinical results are anticipated to be complete April 2018. To be cleared by the FDA the results must present sufficient evidence of safety and effectiveness for the intended use. These results will not be known until the end of the clinical analysis. If the results are favorable, they will then be included in our amended FDA application which we anticipate to submit during the second quarter of 2018.

Other Research

PL-210 - ProLung Test Measurement Collection Protocols for Label Expansion (Ongoing NCT04134520)

The purpose of this Study is to identify and test different data collection methods to determine which approaches may be useful in evaluation additional cancers to lung cancer (including breast cancer) and improve the ProLung Testing procedure. Once this Study is complete, the Sponsor plans to evaluate these improvements in future follow up cancer validation studies that will assess device accuracy using the new measurement collection methods.

Mexico.In 2011, ProLung supported a study with a hospital located in Mexico City. The study was administered by ProLung’s partner who was pursuing a joint venture license for the Mexico territory. The partner eventually abandoned the study. After receiving preliminary test results, ProLung had reason to question the quality of the data being gathered and withdrew its support of the study.

China.ProLung hasWe issued a nonexclusive license to an entity conducting research in China.China in 2013. This Chinese researcher has independently changed the measurement collection methodology and classifier algorithm of the device. ResultsTheir 486 patient Validation Study in China using the ProLung technology with the modified measurement collection methodology and modified classifier algorithm was completed in 2019. Preliminary results of the completed research in China have been presented inat the 2017 American Thoracic Society International Conference Poster Session. These results, however, were derived fromSession, as well as the 2019 International Symposium on Respiratory Diseases (ISRD) & American Thoracic Society (ATS) Joint Medical Conference.

In January 2019, ProLung amended the ProLung China license. The second addendum extends the exclusivity of our licensees’ license and allows ProLung to pursue a new device developed byUS FDA pre-submission review using the licenseelicensee’s Chinese clinical Protocol. The purpose of the US FDA pre-submission is to obtain the FDA’s feedback regarding the use of Chinese clinical data to demonstrate safety and therefore,efficacy for US FDA marketing clearance. ProLung may not beuse the Chinese study data to support its US FDA application if it follows Good Clinical Practice, compliant with FDA regulations and is applicable to the US Population. The FDA recommends a pre-submission when seeking approval solely on foreign data. However, we believe it is likely FDA will require a smaller US Study replicating China results and showing repeatability. (Guidance for Industry and FDA Staff: FDA Acceptance of Foreign Clinical Studies Not Conducted Under IND Frequently Asked Studies, 21 CFR 314.106, 21 CFR 312.120).

In August 2019, ProLung Test.announced that it amended the ProLung China license. The third addendum supports an expanded full collaboration business relationship wherein Prolung China Co. (“Prolung China”) and subsidiary (ProLung Biotech Wuxi) agree to provide all ProLung Biotech Wuxi Know-How and Improvements and clinical data which are used in Clinical Trials in China (PLW-208 and PLW-216) to ProLung, and other matters

Italy and Switzerland. Four centers in Italy and one center in Switzerland conducted research with the IONIQ ProLung Test under the direction of local clinicians. At three of these sites, the research was part of a sales evaluation program for potential sale of the IONIQ ProLung Test. Subject enrollment at these sites did not conform to research protocols utilized by ProLung. Consequently, the data generated by these clinics were not published by the Company.

At two other sites, Geneva and Florence, additional physician-sponsored research was conducted. It is not known whether these sites conducted research with the IONIQ ProLung Test that was compliant with Good Clinical Practice or whether these patients conformed with the IONIQ ProLung Test patient selection criteria. However, in June 2017, at the World Congress of Thoracic Imaging the Geneva site posted results indicating Test sensitivity of 66% and a specificity of 66%. The positive predictive value was 94% and negative predictive value was 20%. Geneva researchers concluded the IONIQ ProLung Test could lower the need for invasive biopsies, especially in high risk patients. The small number of patients (n=27) precludes definitive conclusions.

Similarly, at a center in Florence, Italy, a study looked at 22 subjects undergoing the IONIQ ProLung Test and PET CT scans. They reported a sensitivity of 75% and a specificity of 50%, with a positive predictive value of 94% and a negative predictive value of 17%. Researchers concluded that the high positive predictive value of the IONIQ ProLung Test suggested utility in the evaluation of solitary pulmonary nodules, adding that further research was warranted. This was presented in the form of a poster at the 2017 American Thoracic Society Conference.

Intellectual Property

Protecting our intellectual property, exclusively licensed and owned, is essential to the creation of value in our business. We protect our intellectual property through confidentiality and trade secret agreements. We also have filed, and intend to continue to file, patent applications to protect key aspects of our technology.

Key Patents

Our patent protection is focused upon two key elements of the IONIQ ProLung Test:

We intend to actively pursue our patent opportunities in the US and abroad. We have 3three issued US patents and license 3three additional US patents. Product specific patents may be filed for all final products and issuance may correspond closely with regulatory agency approval to provide the longest proprietary protection. Existing patent applications of ours and BMC, from whom we have exclusive licenses, are set forth below:

ProLung Patent Applications

(1) Ordinary patent application - The first application for patent filed in the Patent Office without claiming priority from any application or without any reference to any other application under process in the Patent Office.

(2) Continuing patent application - A patent application which follows, and claims priority to, an earlier filed patent application.

(3) Divisional patent application - A patent application which has been divided from an existing application.

(4) International patent application - An international agreement for filing patent applications.

(5) Patent Cooperation Treaty Agreement

(6) All patents expire 20 years from the date filed.

ProLung Patent Applications

Exclusive License Agreements

Effective November 2, 2006, we entered into an exclusive, worldwide, royalty-bearing License Agreement with BioMeridian Corporation (“BMC License”) to use certain patents. Under the agreement, we have the right to the exclusive use of certain patents, patents pending, and related technology in its medical devices and other products until such time that we are no longer utilizing any form, in whole or in part, of the licensed technology to develop, market or sell our products or generate revenues. In return, we agree to incur, and have incurred, a minimum of $4,750,000 in costs to develop and market our products worldwide and to make royalty payments based on a percentage of the aggregate worldwide net sales (as defined in the agreement) of our medical device and other products to the extent they utilize the licensed technology. Specifically, we have licensed from BMC certain design features of the IONIQ ProLung Test including the probe and system, which are described in US patent numbers 7536220, 7542796, and 7937139. In addition, pursuant to the BMC License, we have licensed from BMC the rights to the technology that controls the functionality of the probe.

Governmental Regulations

Our business is subject to extensive federal, state, local and foreign laws and regulations, including those relating to the protection of the environment, health and safety. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations. In addition, these laws and their interpretations are subject to change, or new laws may be enacted.

Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. We discuss below the statutes and regulations most relevant to our business.

US Food and Drug Administration regulation of medical devices.

The Federal Food, Drug and Cosmetic Act (the “FDCA”) and FDA regulations establish a comprehensive system for the regulation of medical devices intended for human use. Our products include medical devices that are subject to these, as well as other federal, state, local and foreign, laws and regulations. The FDA is responsible for enforcing most of the federal laws and regulations governing medical devices in the United States.

The FDA classifies medical devices into one of three classes - Class I, Class II, or Class III depending on their level of risk and the types of controls that are necessary to ensure device safety and effectiveness. The class assignment is a factor in determining the type of premarket submission or application, if any, that will be required before marketing in the United States. We currently anticipate that the ProLungIONIQ System will be classified as a Class IIde novo medical device.

Unless it is exempt from premarket review requirements, a medical device must receive marketing authorization from the FDA prior to being commercially marketed, distributed or sold in the United States. The most common pathways for obtaining marketing authorization are 510(k) clearance and PMA.

510(k) pathway

The 510(k)-review process compares a new device to a legally marketed device. Through the 510(k) process, the FDA determines whether a new medical device is “substantially equivalent” to a legally marketed device (i.e., predicate device) that is not subject to PMA requirements. “Substantial equivalence” means that the proposed device has the same intended use as the predicate device, and either the same or similar technological characteristics as the predicate device, or if there are differences in technological characteristics, the differences do not raise different questions of safety and effectiveness as compared to the predicate, and the information submitted in the 510(k) demonstrates that the proposed device is as safe and effective as the predicate device.

To obtain 510(k) clearance, a company must submit a 510(k)-application containing sufficient information and data to demonstrate that its proposed device is substantially equivalent to a legally marketed predicate device. These data generally include non-clinical performance testing (e.g., software validation, animal testing, electrical safety testing), but clinical data may also be required. Typically, it takes six to twelve months for the FDA to complete its review of a 510(k) submission; however, it can take significantly longer and clearance is never assured. During its review of a 510(k), the FDA may request additional information, including clinical data, which may significantly prolong the review process. After completing its review of a 510(k), the FDA may issue an order, in the form of a letter, that finds the device to be either (1) substantially equivalent and states that the device can be marketed in the United States, or (2) not substantially equivalent and states that device cannot be marketed in the United States. Depending upon the reason(s) for the not substantially equivalent finding, the device may need to be approved through the PMA pathway (discussed below) prior to commercialization.

After a device receives 510(k) clearance, any modification that could significantly affect the safety or effectiveness of the device, or that would constitute a major change in its intended use, including significant modifications to any products or procedures, requires a new submission and clearance of a new 510(k). The FDA relies on each manufacturer to make and document its determination that a new 510(k) is (or is not) required, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If we are granted an initial 510(k), we may make minor product enhancements that we believe do not require new 510(k) clearance. If the FDA disagrees with our determination regarding whether a new 510(k) clearance was required for these modifications, we may need to cease marketing and/or recall the modified device. The FDA may also subject us to other enforcement actions, including, but not limited to, issuing a warning letter or untitled letter to us, seizing our products, imposing civil penalties, or initiating criminal prosecution.

De novo pathway

If, at the end of the FDA review of a 510(k), the FDA determines that a device is “Not Substantially Equivalent” (“NSE”) due to the unavailability of a predicate device, a new intended use or different technological characteristics that raise different questions of safety and effectiveness, the FDA may indicate that the device may be suitable for review under thede novo classification process. If the FDA believes general controls or general and special controls may provide reasonable assurance of safety and effectiveness, the FDA may indicate in the NSE letter that the product may be appropriate for thede novo classification process under section 513(f)(2) of the Federal Food Drug and Cosmetic Act (“FD&C Act”). Inclusion of this language within an NSE letter does not indicate that sufficient information currently exists to support a successfulde novo request, but simply indicates that given the risk profile of the device, it seems reasonable thatde novo classification may be appropriate.

Alternatively, if a manufacturer believes their device is appropriate for classification into Class I or Class II and has determined, based on currently available information, there is no legally-marketed predicate device, they may submit ade novo request without a preceding 510(k) and NSE.

Once ade novo request is received (regardless of whether it is preceded by a 510(k) and NSE determination), the FDA will also check that the content of thede novo request includes the information required by section 513(f)(2) of the FD&C Act.De novo requests that lack information to determine whether a potential predicate device exists may be placed on hold. If thede novo request is missing information and/or data necessary to determine whether general controls or general and special controls can provide reasonable assurance of safety and effectiveness, the FDA may issue an additional information (AI) letter or request information via interactive review. If thede novo requestor fails to provide a complete response within 180 calendar days of the date of the AI request, the FDA will consider thede novo request to be withdrawn. If ade novo request is withdrawn due to failure to submit adequate information, a newde novo request is required in order to reinitiate review of the device under thede novo classification process.

If the data and information submitted demonstrate that general controls or general and special controls are adequate to provide reasonable assurance of safety and effectiveness, the FDA will grant thede novo request. If ade novo request is granted, the FDA will issue you a written order granting thede novo request and identifying the classification of the device (either class I or class II). For class II devices, the FDA will also identify the applicable special controls. Effective on the date of the granting order, the requester may immediately begin marketing the device subject to the general controls and any identified special controls. The device may be used as a predicate device for future 510(k) submissions as appropriate.

Premarket approval pathway

Unlike the comparative standard of the 510(k) pathway, the PMA approval process requires an independent demonstration of the safety and effectiveness of a device. PMA is the most stringent type of device marketing application required by the FDA. PMA approval is based on a determination by the FDA that the PMA contains sufficient valid scientific evidence to ensure that the device is safe and effective for its intended use(s). A PMA application generally includes extensive information about the device including the results of clinical testing conducted on the device and a detailed description of the manufacturing process.

After a PMA application is accepted for review, the FDA begins an in-depth review of the submitted information. FDA regulations provide 180 days to review the PMA and make a determination; however, the review time is normally longer (e.g., 1-3 years). During this review period, the FDA may request additional information or clarification of information already provided. Also, during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the data supporting the application and provide recommendations to the FDA as to whether the data provide a reasonable assurance that the device is safe and effective for its intended use. In addition, the FDA generally will conduct a preapproval inspection of the applicant’s establishment to ensure compliance with the Quality System Regulation (“QSR”), which governs the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labeling, storage, installation, and servicing of finished devices.

Based on its review, the FDA may (1) issue an order approving the PMA, (2) issue a letter stating the PMA is “approvable” (e.g., minor additional information is needed), (3) issue a letter stating the PMA is “not approvable,” or (4) issue an order denying PMA. A company may not market a device subject to PMA review until the FDA issues an order approving the PMA. As part of a PMA approval (or 510(k) clearance), the FDA may impose post-approval conditions intended to ensure the continued safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution, and requiring the collection of additional clinical data. Failure to comply with the conditions of approval (or clearance) can result in materially adverse enforcement action, including withdrawal of the approval (or clearance).

Most modifications to a PMA approved device, including changes to the design, labeling, or manufacturing process, require prior approval before being implemented. Prior approval is obtained through submission of a PMA supplement. The type of information required to support a PMA supplement and the FDA’s time for review of a PMA supplement vary depending on the nature of the modification.

Clinical trials

FDA generally prohibits the shipping and marketing of medical devices in the absence of a premarket clearance or approval (where required). However, the FDA’s Investigational Device Exemption (“IDE”) regulation exempts the provision of devices for use in certain types of clinical trials – i.e., clinical trials to collect safety and effectiveness data for investigational devices, and clinical trials evaluating new intended uses and/or certain modifications to a legally marketed device – from this prohibition. This regulation places significant responsibility on the sponsor of the clinical study including, but not limited to, choosing qualified investigators, monitoring the trial, submitting required reports, maintaining required records, and assuring investigators obtain informed consent, comply with the study protocol, control the disposition of the investigational device, submit required reports, etc.

Clinical trials of significant risk devices (e.g., implants, devices used in supporting or sustaining human life, devices of substantial importance in diagnosing, curing, mitigating or treating disease, or otherwise preventing impairment of human health, or that otherwise present a serious risk to the health, safety, and welfare of a subject) require FDA and Institutional Review Board (“IRB”) approval prior to starting the trial. FDA approval is requested through submission of an IDE application. Clinical trials of non-significant risk (“NSR”), devices (i.e. devices that do not meet the regulatory definition of a significant risk device) do not require FDA approval but do require IRB approval before starting. The clinical trial sponsor is responsible for making the initial determination of whether a clinical study is significant risk or NSR; however, a reviewing IRB and/or FDA may review this decision and disagree with the determination.

An IDE application must be supported by appropriate data, such as nonclinical performance data, animal and laboratory testing results, showing that it is safe to evaluate the device in humans and that the clinical study protocol is scientifically sound. There is no assurance that submission of an IDE will result in the ability to commence clinical trials. Additionally, after a trial begins, the FDA may place a clinical trial on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to an unacceptable health risk.

As noted above, the FDA may require a company to collect clinical data on a device in the post market setting.

The collection of such data may be required as a condition of PMA approval. The FDA also has the authority to order, via a letter, a post market surveillance study for certain devices at any time after they have been cleared or approved.

Pervasive and continuing FDA regulation

After a device is placed on the market, regardless of its classification or premarket pathway, numerous additional FDA requirements generally apply. These include, but are not limited to:

The FDA enforces these requirements by inspection and market surveillance. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include, but is not limited to, the following sanctions:

We are subject to unannounced device inspections by the FDA, as well as other regulatory agencies overseeing the implementation of and compliance with applicable state public health regulations. These inspections may include our suppliers’ facilities.

Marketing Approvals Outside the United States

Sales of medical devices outside the United States are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ.

Europe

Under the European Union Medical Device Directive, or EU MDD, medical devices must meet the EU MDD requirements and receive a CE marking certification prior to marketing in the European Union, or EU, which we received for the IONIQ ProLung Test in May 2013. CE marking is the uniform labeling system of products designed to facilitate the supervision and control of the EU concerning manufacturers’ compliance with the various regulations and directives of the EU and to clarify the obligations imposed in the various legislative provisions in the EU. Use of a uniform product labeling indicates compliance with all the directives and regulations required for the application of such labeling, and it is effective as a manufacturer’s declaration that the product meets the required criteria and technical specifications of the relevant authorities such as health, safety, and environmental protection. CE marking ensures free trade between the EU and European Free Trade Association countries (Switzerland, Iceland, Liechtenstein, and Norway) and permits the enforcement and customs authorities in European countries not to allow the marketing of similar products that do not bear the CE marking sign. Such certification allows, among other things, marking the products (according to various categories) with the CE marking and their sale and marketing in the EU.

CE marking certification requires a comprehensive quality system program, comprehensive technical documentation and data on the product, which are then reviewed by a Notified Body, or NB. An NB is an organization designated by the national governments of the EU member states to make independent judgments about whether a product complies with the EU MDD requirements and to grant the CE marking if we, and our product, comply with specified terms. After receiving the CE marking, we must pass a review carried out by the competent NB annually, under which it audits our facilities to verify our compliance with the ISO 13485 quality system standard.

Compliance with the ISO 13485 standard, for medical device quality management systems, is required for regulatory purposes. ISO standards are recognized international quality standards that are designed to ensure that we develop and manufacture quality medical devices. Other countries are also instituting regulations regarding medical devices. Compliance with these regulations requires extensive documentation and clinical reports for all our product candidates, revisions to labeling, and other requirements such as facility inspections to comply with the registration requirements.

China

China’s medical device market, currently in a rapid state of expansion, is overseen by the China Food and Drug Administration, or CFDA (formerly the State Food and Drug Administration). The CFDA issues registration certificates required for all medical devices sold in China. The CFDA uses a risk-based system, and its approval process requires mandatory testing for Class II and III devices. Class II devices are moderate-risk devices and Class III devices are high-risk medical devices. Third-party review of devices is currently not allowed in China; only the CFDA is authorized to approve devices. The registration process requires the submission of a registration standard along with device samples for testing. Manufacturers of Class II and Class III medical devices are also required to demonstrate that the device has been approved by the country of origin with documents like a CE certificate, 510(k) letter and PMA approval and compliance with ISO 13485, and they may also be required to submit clinical data in support of their application. In addition to these requirements, all medical device manufacturers must also include product information in Chinese on all packaging and labeling. Manufacturers exporting medical devices to China must appoint several China-based agents to act on their behalf. These include a registration agent to coordinate the CFDA registration process, a legal agent to handle any adverse events reported with a registered device, including a product recall, and an after-sales agent to provide technical service and maintenance support.

Other Healthcare Laws and Compliance Requirements

In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the CMS, other divisions of the United States Department of Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. These regulations include:

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of protected health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Post-Marketing Regulations

Following approval of a new product, a company and the approved product are subject to continuing regulation by the FDA and other federal and state regulatory authorities, including, among other things, monitoring and recordkeeping activities, reporting to applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting for uses or in patient populations not described in the product’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such off label uses. Modifications or enhancements to the products or labeling or changes of site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process.

Other Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, CMS, other divisions of the Department of Health and Human Services, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments. Sales, marketing and scientific/educational programs must also comply with federal and state fraud and abuse laws. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of medical device products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of medical device products.

Our Marketing Process

We must receive separate regulatory approvals from the FDA and equivalent regulatory bodies in other countries for each of the devices before we can sell them commercially in the US or internationally. We cannot make the claims necessary to market any of our product candidates until we have completed the requirements for regulatory authorization. We do not know whether regulatory authorities will grant authorization for any of the products that we, our marketing partners, or distribution partners will develop.

A summary of the status of our marketing authorizations in the key initial markets we have identified is set forth below:

After each respective regulatory approvalclearance is obtained, the next step in each of these markets is for insurance companies or government agencies, as applicable, to agree to reimburse providers for the IONIQ ProLung Test. We have not commenced this process in the US or China,any other market, as we do not yet have marketing authorization.authorizations.

Manufacturing Requirements

As a manufacturer of medical devices, we must comply with the 21 CFR Part 820 Good Manufacturing Practice regulations established by the FDA. These requirements are meant to ensure that medical devices are safe and effective. We maintain a quality management system that includes standard operating procedures for key processes such as design, manufacturing, packaging, labeling, storage, installation, servicing, record keeping, complaint handling and corrective and preventative action. Our quality management system is currently ISO 13485 certified and is intended to meet the 21 CFR Part 820 Good Manufacturing Practice regulations. We will also be subject to similar requirements imposed by other countries.

Manufacturing

We currently manufacture the IONIQ ProLung Test and the IONIQ ProLung Test Kit. When volume requirements exceed current manufacturing capacity, we intend to utilize contract manufacturers for the physical manufacturing of our products. This may afford us numerous benefits, including:

We have interviewed, performed site visits, and qualified multiple, redundant contract manufacturers which may be required to produce our products. As of January 16, 2018, weWe have no contractual obligations with such contract manufacturers for the manufacturing of our products.

Our prospective contract manufacturers will source our product components from multiple specialized vendors that supply plastics, sheet metal, machining, cables, wire harnesses, and other computer hardware components. We maintain our own design control and ISO 13485 quality system.

Research and Development

The Company spent $1,630,837$2,099,463 and $1,219,189$2,036,792 on company-sponsored research and development during fiscal years ending December 31, 2017,2019, and 2016,2018, respectively.

Employees

As of April 16, 2018,December 31, 2020, we had 15eight employees. As of April 30, 2021, we had eight employees.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

As of December 31, 2020, we remain an “emerging growth Company. We believe we will remain an “emerging growth company” through at least December 31, 2018.2021.

Item 1A. Risk Factors

Our business, operations, and financial condition are subject to certain risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, our actual results will vary, and may vary materially, from those anticipated, estimated, projected, or expected. Among the key factors that may have a direct bearing on our business, operations or financial conditions are the factors identified below:

RISKS RELATED TO OUR STAGE OF DEVELOPMENT

We are a development stage company with limited revenue and no assurance of earning significant revenue over the long term.

We were organized in 2004 and since that date have experienced significant losses from operations. We are in the process of commercializing our proprietary IONIQ ProLung Test in the US and Europe and seeking marketing clearance for the IONIQ ProLung Test in the United States and expect to incur additional operating losses in the near term. We have generated limited revenue from the sale of our products and services. The amount of losses we will incur, and whether we will become profitable at all, are highly uncertain. Our net loss for the year ended December 31, 2020 was $2,727,616 and for the year ended December 31, 2019 was $4,619,887.

Our future success depends on our ability to begin generating revenues on a regular and continuing basis and to properly manage costs. Our ability to generate revenues depends on several factors, some of which are outside our control. These factors include our ability to obtain necessary government and regulatory marketing authorizations, our ability to successfully commercialize the IONIQ ProLung Test, our ability to protect intellectual property related to the IONIQ ProLung Test, our ability to obtain coverage and reimbursement for the test procedure from Medicare and other third- party payers, and our ability to effectively market our products. If we cannot expand our revenue significantly over the long term, we will not be profitable.

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

We do not generate sufficient cash flows from operations to meet the cash requirements of our operations and other commitments without raising funds through the sale of debt andand/or equity securities. We do not expect to generate enough cash, if any, from operations to meet our requirements in the near term. Proceeds raised from funding activities, including the net proceeds from this offering, are required for us to have funds to meet our obligations for the foreseeable future. Our ability to continue as a going concern will depend, in large part, on our ability to obtain additional financing and generate positive cash flow from operations, neither of which is certain. If we are unable to achieve these goals, our business would be jeopardized and it may not be able to continue operations.

We will need significant capital to execute our business plan.

You may lose your entire investment

We currently generate no revenue, and we require at least $2.0 million in capital each year to operate our business. We also anticipate requiring additional capital to conduct additional clinical studies prior to submitting an application for FDA clearance for our IONIQ ProLung Test, If we obtain FDA clearance, of which there is no assurance, we will need to obtain significant additional capital in order to execute our sales and marketing go-to-market plan.

An investmentWe do not currently have any arrangements or credit facilities in our common stock isplace as a high-risk investment. Potential investors must consider the possibilitysource of funds, and there can be no assurance that we will not be successfulable to raise sufficient additional capital on acceptable terms, or at all. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that an investment in the Shares mayinclude covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets secure such debt. Moreover, any debt we incur must be repaid regardless of our operating results. Equity financing, if obtained, could result in a total loss of investment. You shoulddilution to our then existing stockholders. If such financing is not purchase shares ofavailable on satisfactory terms, or at all, we may be required to delay, scale back or eliminate our common stocktesting and developing activities or, invest in the Company unless you can affordif we obtain FDA clearance, marketing efforts, which will harm our operations and financial condition, if we are unable to lose your entire investment.secure sufficient capital to fund our operations, we may have to discontinue operations and liquidate (and we anticipate that our liquidation value would be nominal).

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

As of December 31, 2017,2020, we had outstanding indebtedness of $1,206,931, which includes outstanding principalNotes and accrued, but unpaid interest.Loans totaling $7,948,929. The balances of our loan obligations are scheduled to come due through November 2020.in 2022. If we default under our loan obligations, and we do not have sufficient cash resources to repay the secured creditors would have the right to foreclose upon our assets. Even if the secured debt is paid off,loan, our creditors would have the ability to force us into bankruptcy in connection withbankruptcy. As a default. In connection withresult of any bankruptcy proceeding, if cash resources were depleted, it is doubtful that there will be any amount available for distribution to our stockholders.

We are a development stage company with limited revenueRisks Related to Our Business and no assurance of earning significant revenue over the long term.Industry

We were organized in 2004 and since that date have experienced significant losses from operations. We are in the process of commercializing our proprietary ProLung Test in the US and Europe and seeking marketing clearance for the ProLung Test in the United States and expect to incur additional operating losses in the near term. We have generated limited revenue from the sale of our products and services. The amount of losses we will incur, and whether we will become profitable at all, are highly uncertain. Our net loss for the years ended December 31, 2017 and 2016 was $5,369,312 and $2,775,456, respectively. As of December 31, 2017, we had an accumulated deficit of $21,454,945.

Our future success depends on our ability to begin generating revenues on a regular and continuing basis and to properly manage costs. Our ability to generate revenues depends on several factors, some of which are outside our control. These factors include our ability to obtain necessary government and regulatory marketing authorizations, our ability to successfully commercialize the ProLung Test, our ability to protect intellectual property related to the ProLung Test, our ability to obtain coverage and reimbursement for the test procedure from Medicare and other third-party payers, and our ability to effectively market our products. If we cannot expand our revenue significantly over the long term, we will not be profitable.

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

If we obtain FDA clearance for our ProLung Test, we expect to need significant cash resources to fund our US market launch as well as our working capital and general corporate activities. In connection with this prospective market launch, we also expect expenses in all categories, including marketing, administrative and development expense, to expand significantly as we attempt to increase product sales, increase our market and expand our administrative team to support expanded sales efforts, pursue additional funding opportunities and expand our financial and compliance personnel. If at any point we do not have enough capital, it may result in slower growth in revenue and market penetration and we would modify our business plan accordingly. We may, at some future date, be unable to raise capital in which case we will be unable to continue our business.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

We are in the early stages of commercialization and our IONIQ ProLung Test may never achieve commercial market acceptance.

Our IONIQ ProLung Test is approved and commercially available only in a limited number of countries and will not be available for sale in other countries, including the United States, until clinical development is completed and regulatory authorizations are obtained. Following ourde novo application for marketing clearance for the IONIQ ProLung Test from the FDA, in February 2015, we received a letter from the FDA identifying many issues, questions, and concerns in our submission, including issues regarding our proposed risk classification for the test, the study design and analysis plan for the clinical trial intended to support our submission, along with certain other questions. In subsequent communications and meetings with the FDA, we succeeded in addressing a number of the FDA’s concerns, and we were asked to complete a clinical study. In 2018, before breaking the study that was then currently underway. Beforedata blind and analyzing the amassed clinical data for our PL-208 study, we collaborated with the FDA will clearthrough two formal Pre-Submission Meetings regarding our PL-208 Study Statistical Analysis Plan, study design, device output and statistical approaches. Furthermore, in 2020 we have received feedback from the ProLung Test, we must resubmitFDA regarding the submissionPLW-216 Study. The FDA has shared concerns regarding, indications for use, risks of the device, mechanism of action, device usability and repeatability, efficacy, PLW-216 Study design and applicability of the PLW-216 study results to the US population. We have ongoing meetings with the resultsFDA to address these significant comments from the FDA many of the requestedwhich have not yet been resolved.

The FDA will likely require additional clinical study work and resolve or negotiate the removal of the remaining issues previously identifiedpreviouslyidentified by the FDA, as well as address possible issues to be identified in the future.future, before clearing the IONIQ ProLung Test for marketing. This may nevermaynever occur. Moreover, the successful commercialization of our product will require significant, time-consuming and costly sales and marketing efforts. If the commercialization of our IONIQ ProLung Test is unsuccessful or we are unable to market our IONIQ ProLung Test due to market developments, failure to obtain and maintain the regulatory authorizations necessary for our business to be commercially viable, development of alternative diagnostics or otherwise, we will be required to expend significant additional resources on research and developmentanddevelopment to improve our IONIQ ProLung Test. The development of a new test will be subject to the risks of failure inherent in the creation of any innovative new medical technology. These risks include the possibilities that our test will not be effective or of acceptable quality, will fail to receive necessary regulatory authorizations, will be uneconomical to manufacture or market or does not achieve broad marketbroadmarket acceptance, and that third parties market a superior or equivalent product. Even if our test is effective, it may not be accepted by patients or physicians. The failure of our research and development activities to result in any commercially viable products would have a material adverse effect on our business and financial condition.

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.

Our future profitability will depend, in part, on our ability to commercialize our ProLung Test in foreign markets for which we intend to rely on collaborations with third parties. As we commercialize our ProLung Test in foreign markets, we will be subject to additional risks and uncertainties, including:

Foreign sales of our ProLung Test could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.

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 have limitedno experience commercializing the ProLung ScanIONIQ System and ProLung Test. In addition, we currently have one central product, ourIONIQ ProLung Test. We currently have no other product under development orproducts available for sale. If the IONIQ ProLung Test isor our other products in development are not successful at a level sufficient to generate a profit and we are unable to develop additional products, our business will not succeed.

The ability to add to the product suite is subject to the availability of additional funds and certain factors not in our control, such as government policy. We may eventually want to expand the IONIQ ProLung Test to other cancer targets. ProLung does not have clinical data suggesting that the IONIQ ProLung Test is effective in other cancers and the IONIQ ProLung Test may not be effective in other cancers.

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

The nature of the IONIQ ProLung Test as a medical technology platform and the general litigious environment of the market should be regarded as potential risks that could significantly and adversely affect our financial condition and results of operations in the future. If the IONIQ ProLung Test does not perform as demonstrated in well controlled clinical trials and as reviewed by the FDA, there could be significant, even life-threatening, adverse consequences. We may be subject to claims against us as a result of the failure of the IONIQ ProLung Test or other devices. We may also be subject to claims even though the injury is due to the actions of others, such as manufacturers or medical personnel. If we are sued, we may not have the resources to defend any such lawsuit or pay any related judgments. In addition, even the existence of a lawsuit will divert management’s attention from the development and commercialization of the IONIQ ProLung Test. Any insurance obtained by us may not adequately cover the amount or nature of any claim asserted against us and we are exposed to the risk that claims may be excluded from insurance coverage and that insurers may become insolvent. Moreover, there may not be any insurance available that would adequately cover all such risks.

We are subject to litigation risk as result of recent our prior offering activities.

We recently experienced a very public proxy battle for control of the board of directors. In that process, both sides of the proxy battle made numerous allegations of wrongdoing by former officers and directors of ProLung. The allegations have led to expressions of frustration and anger by existing shareholders, certain of which have threatened to file lawsuits against ProLung, its former executives and various current and former directors. Complaints by shareholders and former employees have also led to an investigation being opened by the Utah Division of Securities related to the Company’s and individuals’ activities. If any of the threats, allegations and investigations lead to legal actions against the Company or its current or former officers and directors, we will be significantly limited in our ability to raise capital and will be required to expend management time and financial resources on such legal actions. It is unlikely that we would be able to continue as a going concern following any such legal actions.

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 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, ProLung and Bauer, agree to promptly file a stipulation and joint motion to dismiss ProLung and Bauer from this administrative action, with respect to Count 1 against ProLung 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 582,102 (72,763 post-split) ProLung stock certificates to select members of the ProLung Board of Directors in connection with “financing services provided” by those members; 5) In or about April 2014, ProLung issued stock grants of 216,000 (27,000 post-split) shares to Robert W. Raybould, 16,350 (2,044 post-split) shares to Steve Eror, 63,750 (7,968 post-split) shares to Treu; 193,500 (24,118 post-split) shares to Campbell; and 97,500 (12,188 post-split) shares to 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. ProLung 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.

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

Our business exposes us to potential liability risks that are inherent in the testing, manufacturing and marketing of medical products. We may face liability to our distributors and customers if our products are not manufactured as per specifications or if such specifications cause the products to become unsafe or fail to function as marketed.marketed or sold. We may also face substantial liability for damages if our products produce adverse side effects or defects are identified with any of our products that harm patients and other users. Any such failures or defects may lead to a breakdown in our relationships with distributors and purchasers leading to a substantial decline in or collapse of our market. In addition, if any judgments or liabilities are material in size, we may be unable to satisfy such liabilities. Any product liability could harm our operations and a large judgment could force us to discontinue our operations.

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

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture that could affect patient safety. In the case of the FDA, the authority to require a recall must be based on an FDA finding where there is a reasonable probability that the device would cause serious adverse health consequences or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found or suspected. A government-mandatedgovernment- mandated recall or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects, or other issues. Recalls, which include corrections as well as removals, of any of our products would divert managerial and financial resources and could have an adverse effect on our financial condition, harm our reputation with customers, and reduce our ability to achieve expected revenues and continue as a going concern.

revenues.

Lack of adequate third-party coverage and reimbursement for our customers could delay or limit the adoption of our products.

We may experience limited or no sales growth resulting from limitations on coverage and reimbursement for the diagnostic procedures performed with our products by third-party payors, and we cannot assure you that our sales will not be impeded and our business harmed if third-party payors fail to provide reimbursement for such procedures that customers view as adequate.

In the US, if we obtain marketing approval from the FDA, of which there can be no assurance, theIONIQ ProLung Test will be purchased primarily by medical institutions, which will perform the diagnostic procedure using our product and bill various third-party payors, such as Medicare and other government programs and private insurance plans, for the health care services provided to their patients. Acute care hospitals are generally reimbursed by Medicare for items and services provided to hospital inpatients under the Medicare hospital inpatient prospective payment system. Under the Medicare hospital inpatient prospective payment system, acute care hospitals receive a fixed payment amount for each covered hospitalized patient admission based upon the Diagnosis-RelatedDiagnosis- Related Group (“DRG”) to which the inpatient stay is assigned, regardless of the actual cost of the services provided during that admission. If hospitals do not receive sufficient reimbursement from Medicare during an encounter in which our product is used, then a medical institution would have to absorb the cost of our products. At this time, we do not know the extent to which medical institutions would consider current Medicare inpatient payment levels adequate to cover the cost of our products, and we cannot assure you that such amounts are adequate. Failure by hospitals to receive an amount that they consider to be adequate reimbursement for the patient admissions during which our products are used could deter them from purchasing our products and limit our revenue growth. Moreover, DRG-based payments may decline over time, which could deter medical institutions from purchasing our products in the future. If medical institutions are unable to justify the costs of our products, they may refuse to purchase them, which would significantly harm our business.

Under current Medicare hospital inpatient reimbursement policies, the Centers for Medicare & Medicaid Services (“CMS”) offers a process whereby manufacturers may apply for temporary add-on payment for a new medical technology when the applicable DRG-based inpatient prospective payment rate is inadequate to cover the cost of a new product. To obtain add-on payment, a technology must be considered “new,” represent an advance in medical technology that substantially improves, relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries, and data reflecting the cost of the new technology must not yet be available in the data used to recalibrate the DRGs and the sponsor much show that admissions involving the furnishing of the technology exceed cost thresholds established by CMS for each applicable DRG. If an application is approved, “new technology” add-on payments are made to hospitals for no less than two years and no more than three years. Provisions exist for four years of automatic CMS reimbursement for Breakthrough Devices though the reimbursement landscape may change in ways the Company cannot predict. We must demonstrate the safety and effectiveness of our technology to the FDA in addition to CMS requirements before add-onadd- on payments can be made, and cannot assure you that CMS will agree to provide such incremental payments for the IONIQ ProLung Test. Even if the IONIQ ProLung Test receives FDA and other required regulatory clearances or approvals, the diagnostic procedure performed with the test may not receive incremental reimbursement in the foreseeable future, if at all.

Moreover, many private payors look to Medicare in setting their reimbursement policies and amounts. If Medicare does not offer adequate reimbursement for the services offered using our products, this may affect reimbursement determinations by certain private payors.

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

The cost of a significant portion of healthcare is funded by governmental, and other third-party, insurance programs. It is possible that our products will not be covered or adequately reimbursed by governments or insurance providers, which will seriously harm our ability to generate revenue. In addition, even if payers cover our products (or the services in which our products are used), limits on reimbursement imposed by such programs may adversely affect the ability of hospitals and others to purchase our products. In addition, limitations on reimbursement for procedures which utilize our products could adversely affect our business.

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

Patients may be unwilling to depart from the current standard of care and opt not to undergo the IONIQ ProLung Test. In addition, physicians tend to be slow to change their medical treatment practices because of perceived liability risks arising from the use of new products. Physicians may not recommend or order the IONIQ ProLung Test until there is long-term clinical evidence to convince them to alter their existing patient management methods, there are recommendations from prominent physicians that the IONIQ ProLung Test is safe, effective, and clinically useful, and that reimbursement or insurance coverage is available. We cannot predict when, if ever, physicians and patients may adopt the use of the IONIQ ProLung Test. If the IONIQ ProLung Test does not achieve an adequate level of acceptance by patients, physicians and healthcare payors, we may not generate significant product revenue and we may not become profitable.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by early commercial stage companies. We havePotential investors should carefully consider the risks and uncertainties that a company with a limited operating history andwill face. In particular, potential investors should consider that we cannot assure you that we will be able to:

If we cannot successfully execute any one of the foregoing, our business may not succeed and your investment will be adversely affected.

We are a small company and may be unable to compete with larger or better-funded companies that promote competitive technologies.

There are a number of competitive technologies currently being developed as well as refinements being made to existing competitive technologies. Technologies being developed or obtaining limited commercialization for the same intended use as our test include, methylated DNA tests, micro RNA tests, panels of proteins and minimally invasive biopsy. These include the current standard of care for the indication to be claimed for the IONIQ ProLung Test; the use of serial chest CT views over a period often ranging from three months to three and one-half years. To the extent that any of these technologies or refinements result in products that successfully address some of the shortcomings of existing products, or result in quality products that are less expensive, safer or outperform existing tests and the IONIQ ProLung Test, future demand for the IONIQ ProLung Test may be reduced or eliminated.

The future market for our products is characterized by rapidly changing technology. Our future financial performance will, in part, be dependent on our ability to develop and manufacture new products or improvements to existing products on a cost-effective basis, to introduce them to the market on a timely basis, and to have them accepted by physicians. We may not be able to keep pace with technological change or to develop viable new products in a timely fashion. Factors that could delay the release of potential products or even cancellation of our plans to produce and market these new products could include delays in research and development, delays in securing future regulatory authorizations, or changes in the competitive landscape.

Many competitors offer a range of products in areas other than those in which we propose to compete, which may make such competitors and their products more attractive to surgeons, hospitals, group purchasing organizations, and other potential customers. Many competitors also have significantly more financial resources than us. Competitive pricing pressures or the introduction of new products by competitors could have an adverse effect on our ability to establish market acceptance for the IONIQ ProLung Test. We cannot predict future markets for the IONIQ ProLung Test or other products, and we may not be able to shift production to other products in the event of a lack of market demand for the IONIQ ProLung Test, leading to an accompanying adverse effect on our profitability.

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

We have developed experience in the manufacturing of theIf we commercialize our IONIQ ProLung Test, and platform in commercial quantities anticipated in the near future. If product demand substantially exceeds our expectations therewe will be a need to establish arrangements with contract manufacturers to manufacture, package, label, and deliver our products. Our business will suffer if there are delays or difficulties in establishing relationships with manufacturers to manufacture, package, label, and deliver our products, or if the prices charged by such manufacturers are higher than anticipated. Moreover, contract manufacturers that we may use must adhere to current Good Manufacturing Practices, as required by the FDA. If any such manufacturers fail to comply with FDA requirements, they may be unable to manufacture our products. In addition, such manufacturers may fail to manufacture our products in accordance with specifications or may fail to meet delivery timelines, which may cause problems in our customer or distributor relationships and potentially lead to defaults or an obligation to pay damages. If we are unable to obtain or retain third party manufacturing on commercially acceptable terms, we may not be able to commercialize our products as planned. Our dependence upon third parties for the manufacturing of our products may harm our ability to generate significant revenues or acceptable profit margins and our ability to develop and deliver such compliant products on a timely and competitive basis.

Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our product. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of the IONIQ ProLung Test, increase our cost of goods sold and result in lost sales.

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

We have limited experience in sales, marketing and distribution of our products and are just beginning the process of developing a sales and marketing organization, which includes an establishment of a distributor network. Our lack of experience could negatively impact our ability to enter into or maintain collaborative arrangements or other third-party relationships which are important to the successful commercialization of our products and potential profitability. We may be unable to establish or maintain adequate sales and distribution capabilities.

At present, we have developed an initial sales and market timing schedule. We have also established an in-house marketing and sales department which is supported by known networking distribution groups that have been establishing active channels to market the ProLung Test in the future.

In developing a broadpreliminary commercialization plan, much of our strategy for the commercialization of the IONIQ ProLung Test will also rely on us entering into various arrangements with licensors, distributors, and other third parties. We have entered into an exclusive license agreement with BioMeridian Corporation to use technology owned by BioMeridian.BioMeridian, although such license agreement is subject to claims of breach and likely renegotiation. We have also entered into an agreement with a distributor in Europe to distribute the IONIQ ProLung Test. This distribution agreement is currently in the process of being renegotiated. We may be unable to enter into necessary distribution and licensing agreements to market the product. In addition, even if we enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of third parties. Failure to enter into or maintain these arrangements with third parties or failure to develop our own sales and marketing infrastructure could substantially impair or even eliminate our ability to market the IONIQ ProLung Test. Our reliance on collaboration with others may adversely affect our ability to continue to operate, pursue our technology development program, or to achieve profitability.

Any clinical trials that we conduct 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.

The commencement or completion of any clinical trials that we conduct may be delayed or halted for numerous reasons, including, but not limited to, the following:

Patient enrollment in clinical trials and completion of patient follow-up in clinical trials depend on many factors, including the size of the target patient population, the nature of the trial protocol, the proximity of patients to clinical sites and patient compliance. Delays in patient enrollment or failure of patients to continue to participate in a study may cause an increase in costs and delays or result in the failure of the trial.

Our clinical trial costs will increase if we have material delays in those trials or if we need to perform more or larger trials than planned. Adverse events during a clinical trial could cause us to repeat a trial, terminate a trial or cancel an entire program. Should our clinical development plan be delayed, this could have a material adverse effect on our operations and financial condition.

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

We have engaged in the past, and may continue to engage, in related party transactions. Related party transactions present difficult conflicts of interest, and could result in disadvantages to our company and may impair investor confidence, which could materially and adversely affect us. Related party transactions could also cause us to become materially dependent on related parties in the ongoing conduct of our business, and related parties may be motivated by personal interests to pursue courses of action that are not necessarily in the best interests of our company and our stockholders.

IONIQ ProLung testsTests may produce false positive and false negative results.

A patient may have a low composite risk score as measured by the IONIQ ProLung Test and still have lung cancer. A low composite risk score does not preclude risk for lung cancer. This patient, however, based upon a false negative IONIQ ProLung Test, may be subject to less stringent clinical vigilance. The IONIQ ProLung Test is to be used in conjunction with all available clinical risk factors and findings including physician/health practitioner judgment. Nonetheless, a false negative result generated from the IONIQ ProLung Test may contribute to a patient not receiving a timely diagnosis of or treatment for existing lung cancer.

By contrast, a patient may have a high composite risk score but not have lung cancer. Such a patient may be subject to greater clinical vigilance or unnecessary invasive procedures, such as biopsy, thus subjecting the patient to greater morbidity and potential mortality due to a falsely positive IONIQ ProLung Test. Again, since the IONIQ ProLung Test is to be used in conjunction with other clinical findings, and not as a stand-alone diagnostic test, such a case would be unlikely. Nonetheless, a false positive result generated from the IONIQ ProLung Test may contribute to a patient receiving unnecessary procedures such as CT Scans and lung biopsies. False positive and false negative results would likely erode market acceptance of the IONIQ ProLung Test and would thus harm our business, cash flows and operations. Unfavorable results from the current study would significantly harm our ability to continue to raise capital and continue as a going concern.

Our clinical studies may produce unfavorable results.

Unfavorable results could prevent the IONIQ ProLung Test from obtaining FDA and other regulatory authorizations. Unfavorable clinical results may also prevent the Company from adequately commercializing the IONIQ ProLung Test in foreign markets such as the European Union which would harm our business, cash flows and operations. The Company may not have a cost-effective resolution to overcome either of these obstacles.

Our success depends upon our ability to effectively market our products.

If the IONIQ ProLung Test does not achieve market acceptance, we will be unable to generate significant revenues. The commercial success of the IONIQ ProLung Test will depend primarily on convincing healthcare providers to adopt and use the IONIQ ProLung Test. To accomplish this, we, together with any other marketing or distribution collaborators, will need to convince members of the medical community the benefits of the IONIQ ProLung Test through, for example, published papers, presentations at scientific conferences, and additional clinical data. Medical providers will not use our product unless we can demonstrate that our product consistently produces results comparable or superior to existing products and has acceptable safety profiles and costs. If we are not successful in these efforts, market acceptance of the IONIQ ProLung Test could be limited. Even if we demonstrate the effectiveness of the IONIQ ProLung Test, medical practitioners may still use other products. If the IONIQ ProLung Test does not achieve broad market acceptance, we will be unable to generate significant revenues, which would have a material adverse effect on its business, cash flows, and results of operations.

We are dependent on key personnel, who may terminate their employment at any time.

Our success depends, in large part, upon the talents and skills of company management and other key personnel. To the extent that any of our key personnel are unable to, or refuse to, continue employment with the Company, suitable replacement(s) would need to be found. There can be no assurance that we would be able to find suitable replacements for all such personnel or that suitable personnel could be obtained for an amount that we could afford. In the future, a need for additional qualified personnel is expected in order to operate the business successfully. There can be no assurance that we will be able to attract employees of adequate qualification or that we would be able to afford such personnel.

Competition for skilled personnel in our market is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Members of our management, scientific and medical teams may terminate their employment with us on short notice. The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results or financial condition. In particular, we believe that the loss of the services of our Chief Executive Officer, Chief Medical Officer, Chief Operating Officer, Chief Marketing Officer and Chief Financial Officer could have a material adverse effect on our business.

Other medical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize our product would be limited.

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities or suppliers could adversely impact our business.

If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China, or other public health crisis were to affect our markets or facilities. Consequences of the coronavirus outbreak are resulting in disruptions in or restrictions on our ability to travel. If such an infectious disease broke out at our office, facilities or work site, our operations may be affected significantly, our productivity may be affected, our ability to complete projects. In response to the COVID-19 situation, federal, state and local governments (or other governments or bodies) are considering placing, or have placed, restrictions on travel and conducting or operating business activities. At this time those restrictions are very fluid and evolving. We have been and will continue to be impacted by those restrictions. Given that the type, degree and length of such restrictions are not known at this time, we cannot predict the overall impact of such restrictions on us. As such, the impact these restrictions may have on our financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material. In addition, due to the speed with which the COVID-19 situation is developing and evolving, there is uncertainty around its ultimate impact on public health, business operations and the overall economy; therefore, the negative impact on our financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material.

Risks Related to Our Regulatory and Legal Environment

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.

In many countries, we are required to obtain government clearance or approval before we can market and sell a medical device like the IONIQ ProLung Test. Obtaining the necessary clearance or approval is a complex, costly, and time-consuming process, which differs from country-to-country. Failure to comply with the premarket authorization requirements of a country can result in serious penalties, including fines, recalls, seizure of product, suspension of sales, refusal to grant other approvals or clearances, increased requirements for quality control or (in severe cases) criminal prosecution. The imposition of any of the afore-mentioned penalties would adversely affect our business.

We have received a CE Mark in Europe for the marketing of the IONIQ ProLung Test in the European Union. We are seeking clearance to sell the IONIQ ProLung Test in the US and plan to seek clearance in China.other markets. Each market has unique regulatory requirements. In the US, FDA marketing clearance (or approval) will be required before the IONIQ ProLung Test may be marketed in the US. We expect to be subject to the premarket notification orde novoclearance pathway, but may be subject to premarket approval, which would substantially lengthen (and substantially increase the costs associated with) the regulatory process beyond that which is currently anticipated. A similar regulatory process will be required by Chinese regulatory authorities before our products can be marketed in those countries. As with the FDA review process, there are numerous risks associated with the review of medical devices by foreign regulatory agencies. The foreign regulatory agencies may request additional data to demonstrate the clinical safety and efficacy of a product. It is possible that we may not obtain the clearance or approval required to market the IONIQ ProLung Test in the US or another significant potential market, which would harm our long-term revenue potential.

Even if marketing clearance (or approval) is granted, such clearance (or approval) may include significant limitations on the indicated use(s) for which the product may legally be marketed – i.e., the clearance may not allow us to make the type of claims that we believe we need to make for the IONIQ ProLung Test to be commercially viable. Delays in obtaining regulatory clearance(s) or approval(s) would also harm our financial condition. A failure to obtain required clearances for our desired indication(s) in a timely fashion, particularly in the US, would significantly harm our long-term ability to continue as a going concern.

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.

The commercial success of the IONIQ ProLung Test will depend on its acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance of the IONIQ ProLung Test will depend on a number of factors, including:

In addition, even if we obtain regulatory clearances or approvals, the timing or scope of any clearances or approvals may prohibit or reduce our ability to commercialize the IONIQ ProLung Test successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory clearance (or approval) we ultimately obtain may be limited or subject to restrictions or post-market commitments that render the IONIQ ProLung Test not commercially viable. For example, third-party payers may deny coverage for the test or set reimbursement for the IONIQ ProLung Test procedure at a rate that is insufficient to cover provider costs, or regulatory authorities may grant clearance or approval contingent on ProLung’s performance of costly post-marketing clinical trials. Moreover, product clearances and approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of the IONIQ ProLung Test.

If we obtain FDA clearance, or approval, we will be subject to Medical Device Reporting (“MDR”) requirements, which may lead to inquiries, injunctions, or MDRliabilities.

Under the FDA MDR regulations, medical device manufacturers are required to submit information to the FDA when they receive a report or become aware that a device has caused or may have caused or contributed to a death or serious injury or has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur. All manufacturers placing medical devices on the market in the European Economic Area are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the regulatory agency, or other Competent Authority, in whose jurisdiction the incident occurred. Were we to learn of a reportable adverse event, we would submit the required information to the relevant regulatory agency, to which the agency may respond with additional request(s) for information if the agency has any questions.

Malfunction of our products could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease distribution of the affected products, initiate voluntary recalls, and redesign the products. Regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, or seizing the affected products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

Existing US regulatory laws and cost-saving initiatives may harm our revenues and create additional expenses.

To the extent that we market the IONIQ ProLung Test in the US, federal healthcare reform may adversely affect the results of our domestic operations. The Patient Protection and Affordable Care Act, or the Affordable Care Act, was enacted in March 2010. The Affordable Care Act included several provisions intended to reduce the volume of medical procedures, which, in turn, could result in reduced demand for our products and increased downward pricing pressure. While the Affordable Care Act is intended to expand health insurance coverage to uninsured persons in the US, the impact of any overall increase in access to healthcare on potential sales of the IONIQ ProLung Test is uncertain at this time. Further, we cannot predict with any certainty what other impact the Affordable Care Act may have on our business.

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

The pricing and reimbursement environment may change in the future and become more challenging as a result of any of one several possible regulatory developments, including policies advanced by the United States government, new healthcare legislation, repeal or reform of the Affordable Care Act, or fiscal challenges faced by government health administration authorities. The US government has shown significant interest in pursuing healthcare “reform” and reducing healthcare costs. For example, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year were implemented starting in 2013. Any government-adopted reform measures that further decrease the amount of reimbursement our customers receive from governmental and other third-party payers could potentially adversely affect our business.

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

Our operations may be directly or indirectly affected by various broad federal, state or foreign healthcare fraud and abuse laws. In particular, the US federal Anti-Kickback Statute prohibits any person from knowingly and willfully soliciting, receiving or providing any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for referring an individual for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or in return for the ordering, leasing, purchasing, or arranging for or recommending the ordering, purchasing or leasing of any good, facility, item or service, for which payment may be made in whole or in part under federal healthcare programs, such as the Medicare and Medicaid programs. We are also subject to the fraud and abuse provisions of the US federal HIPAA statute, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program, willfully obstructing a criminal investigation of a health care offense, or making false statements or concealing a material fact relating to payment for health-care benefits, items or services, and federal “sunshine” laws that require transparency regarding financial arrangements with healthcare providers, such as the reporting and disclosure requirements imposed by the Affordable Care Act on certain medical device manufacturers regarding any “transfer of value” made or distributed to prescribers and other healthcare providers.

In addition, the US federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.

Many states and other countries have also adopted laws similar to each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, as well as laws that restrict our marketing activities with physicians, and require us to report consulting and other payments to physicians. Some states and other countries mandate implementation of commercial compliance programs to ensure compliance with these laws. We also are subject to foreign fraud and abuse laws, which vary by country.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

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.

The U.S. and many other countries in which we conduct our operations have adopted laws and regulations protecting certain data, including medical and personal data, and requiring data holders and controllers to implement administrative, logical and technical controls and procedures. In addition, regulatory authorities around the world are considering a number of additional proposals concerning data protection. These laws and regulations have been, and may continue to be, inconsistent with each other, requiring different approaches in different jurisdictions. In addition, the interpretation and application of medical and personal data protection laws in the U.S., Europe, China and elsewhere are often uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. These legislative and regulatory proposals, if adopted, and such interpretations could, in addition to the possibility of fines, result in an order requiring that we change our data practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Recent legal developments in Europe have created additional compliance obligations and risks. The EU General Data Protection Regulation, or GDPR, scheduled to come into application in the EU on May 25, 2018, will apply to all of our activities conducted from an establishment in the EU or related to products and services that we offer to EU users. The GDPR will create a range of new compliance obligations, which could cause us to change our business practices, and will significantly increase financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).

ProLung clinical study designs have not been reviewed by the FDA.

Our currentPL-208 and PLW-216 clinical study wasstudies were designed without input from the FDA. We have received significant comments from the FDA, some but not all of which have been resolved. There can be no assurance that the FDA will approve the design of PL-208 and PLW-216 or any future study, or agree that the dataresults generated in our PL-208 and PLW-216 trial areis sufficient for FDA to approve or clear the IONIQ ProLung Test for our desired indication for use. Even if our clinical studies produce favorable results, the FDA may refuse regulatory clearance and or require additional research causing delays in the launch and commercialization of the IONIQ ProLung Test in the US.theUS.

Our clinical studies have resulted in statistically significant variability and the results may be insufficient to gain marketing clearance from the FDA.

Our clinical studies may produce unfavorable results which could prevent or delay ProLung from obtaining FDA and other regulatory clearances. In November 2018, we reported our PL-209 study results indicating day-to-day variability is repeatable; however, same-day variability is statistically significant with a 2% difference in scores though the clinical impact is unclear. In January 2019, we announced preliminary results for our PL-208 study. In the Validation Set (n=174 subjects), the IONIQ ProLung Test demonstrated a sensitivity of 68%, specificity of 49%, Positive Predictive Value (PPV) of 70%, Negative Predictive Value (NPV) of 47% and an Accuracy of 61%. In, the fall of 2019 we announced the results of PLW-216. In the study of 486 subjects with 418 effective, the IONIQ ProLung Test returned results of 84% sensitivity, 73% specificity, 78% Positive Predictive Value (PPV) and 80% Negative Predictive Value (NPV). The performance from PL-208, PL-209 and PLW-216 are unlikely to be sufficient to gain marketing clearance from the FDA.

Risks Related to Our Intellectual Property

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

We have obtained patent protection, through ownership and licensing, for aspects of the IONIQ ProLung Test in a limited number of jurisdictions, and there is no guarantee that such protection will be available for the IONIQ ProLung Test in all jurisdictions, or, that once obtained, we would be able to enforce such rights. Disputes may arise between us and others as to the scope, validity and ownership rights of patents. Any defense of patents could prove to be costly and time consuming and we may not be in a position, or may deem it unadvisable, to carry on such a defense. In addition, the owner of patented technology that we license may fail to maintain underlying patents or may breach its obligations to us.

There can be no assurance that any patent applications that we or our licensors file will result in patents being issued or that, if issued, the patents will afford protection against competitors with similar technology. There can also be no assurance that any patents issued to us or that we license will not be infringed on or circumvented by others, or that others will not obtain patents that we would need to license or circumvent. Our patents may not contain claims that are sufficiently broad to prevent others from using our technologies or developing competing products. Competitors may be able to use technologies in competing products that perform substantially the same as our technologies but avoid infringing on our patent claims. Under these circumstances, our patents would be of little commercial value.

Additionally, there can be no assurance that patents, even after issuance, will be upheld by applicable courts. There can be no assurance that licenses, which might be required for our processes or products, would be available on reasonable terms, or that patents issued to others would not prevent us from developing and marketing its products. To the extent that we also rely on un-patented trade secrets, there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology. Disclosure of our trade secrets would impair our competitive position and adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. Further, to the extent that our employees, consultants or contractors use trade secret technology or know-how owned by others in their work for us, disputes may arise as to the ownership of related inventions.

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 currently have one exclusive license to US patents. We rely on the licensor to maintain these patents and otherwise protect the intellectual property covered by this license. We have limited control over these activities or over any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that activities by the licensor have been or will be conducted in compliance with applicable laws and regulations. We may have no control or input over whether, and in what manner, our licensor may enforce or defend the patents against a third-party. The licensor may enforce or defend the patent less vigorously than if we had enforced or defended the patents ourselves. Further, the licensor may not necessarily seek enforcement in scenarios in which we would feel that enforcement was in our best interests. For example, the licensor may not enforce the patents against a competitor of ours who is not a direct competitor of the licensor. If our in-licensed intellectual property is found to be invalid or unenforceable, then the licensor may not be able to enforce the patents against a competitor of ours. If we fail to meet our obligations under the license agreement, then the licensor may terminate the license agreement. If the license agreement is terminated, the former licensor may seek to enforce the intellectual property against us. We may choose to terminate the license agreement, and doing so would allow a third party to seek and obtain an exclusive license to the patents. If a third party obtains an exclusive license to intellectual property formerly licensed to us, then the third party may seek to enforce the intellectual property against us.

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

We may incur significant liability if we infringe the patents and other proprietary rights of third parties, including damages, inability to sell or license the IONIQ ProLung Test without obtaining a license from the patent holder. The licenseholder, which may not be available at commercially reasonable terms or at all. We wouldall, and we may have to redesign the IONIQ ProLung Test so that it does not infringe on the third-party patent, which redesign may not be possible or could require substantial funds or time. Although no third party has asserted a claim of infringement against us, ifin the event that our technologies infringe or violate the patent or other proprietary rights of third parties, we may be prevented from pursuing product development, manufacturing or commercialization of any product that uses these technologies. There may be patents held by others of which we are unaware that contain claims that our product or operations infringe. In addition, given the complexities and uncertainties of patent laws, there may be patents of which we may ultimately be held to infringe, particularly if the claims of the patent are determined to be broader than we believe them to be. Even if we are ultimately successful in our defense of an infringement case, the costs of litigation would significantly harm our business.

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

We are aware of a company that markets an assay to be used as a liquid biopsy test for lung cancer detection under the name Epi proLung, which is trademarked in the EU. If we market the IONIQ ProLung Test in the EU, we may be subject to the risk of infringement. If we determine, at the time we choose to market the IONIQ ProLung Test in the EU, that we may infringe on this trademark, we might need to change the name under which we market the IONIQ ProLung Test in the EU.

Parts, components, and software incorporated in the IONIQ System may become obsolete.

The IONIQ System consists of both custom and off the shelf parts and software. As off the shelf components age they may become obsolete requiring ProLung to procure, test and validate replacement components, parts and software for the IONIQ System.

Risks Related to capital stockCapital Stock

Our SEC Reports contain projections and forward-looking statements that may not prove to be accurate.

If outstanding warrants

Our SEC Reports, including those delivered herewith, contain projections that are exercised,based on our assumptions and judgments as of the date of such reports concerning future events and are subject to significant uncertainties and contingencies, many of which are beyond our control. Our actual results may materially differ from the results we have projected. In addition, our SEC Reports contain forward-looking statements that involve known and unknown risks and uncertainties. All statements other than those of historical facts, including those regarding business strategy, plans and objectives of management, projected costs, and expected benefits are forward-looking statements. These forward-looking statements are based on information and expectations as of the date of the respective SEC Report. Important factors that could cause our results to differ materially from expectations include those set forth in this “Risk Factors” section and elsewhere in our SEC Reports. We disclaim any obligation or Convertible Debentures are converted, stockholders will be diluted.intent to update these forward- looking statements.

AsMany of December 31, 2017, we had outstanding warrantsour directors have failed to purchase 1,184,998 sharestimely file required reports with the SEC.

Section 16(a) of the Securities Exchange Act requires our officers, directors and persons who own more than 10% of our common stock to file reports concerning their ownership of common stock at a weighted average exercise price of $9.16 per sharewith the SEC and notes convertible into 201,155 shares of common stock. The exerciseto furnish us copies of such warrantsreports. We believe that several of our directors have not timely filed all stock ownership and the conversiontrading reports required by SEC rules. However, we believe that all of such convertible debt instruments will be dilutive to existing stockholders.

Ourour officers and directors have significant voting power and may take actions that may not be incurrently filed all such required reports. The failure of the best interests of other stockholders.

Our executive officers and directors beneficially own approximately 18%to file such reports could lead to legal action by the SEC or third parties against the directors and potentially against the Company. Any such legal actions would be disruptive, consume financial and personnel resources, and harm the reputation of our outstanding common stock. These executive officers and directors have a significantthe Company including its ability to influence all matters requiring approval bycontinue to raise capital. This may inhibit the stockholders, including any determination with respectability of the Company to the acquisition or disposition of assets, future issuances of securities,execute its business plan and the election of directors. This concentration of ownership may also delay, defer, or preventcontinue as a change in control and otherwise prevent stockholders, other than our affiliates, from influencing our direction and future.going concern.

OurThere is no trading market for our common stock, is not quoted or traded in any market, limiting liquidity opportunities for investors.

Our common stock is not quoted on any market or exchange;and it is possible that no trading market will develop.

There is currently no public trading market for the Company’s common stock, and there is no assurance that a public market for the Company’s common stock will exist in the future. We do not currently meet the listing requirements of the Nasdaq Stock Market or any other exchange. We do meet the requirements for listing on an over- the-counter market; however, an application for quotation in the over-the-counter market must be submitted by one or more market makers who: 1) are approved by the Financial Industry Regulatory Authority, 2) who agree to sponsor the security, and 3) who demonstrate compliance with SEC Rule 15(c)2-11 before initiating a quote in a security on the over-the-counter market.

If our common stock commences trading in the over-the-counter market, it will neverlikely be quoted or listed on any market or exchange. In 2017, we started a process for an initial public offering and applicationsubject to the Nasdaq Stock Market. That process did not result in an offering or listing and has been suspended. Even ifpenny stock rules, which may restrict liquidity.

If our common stock becomes listedtradable in the secondary market, it may be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of the Company’s common stock, which in all likelihood would make it difficult for our shareholders to sell their securities. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or commencesquoted on the Nasdaq Stock Market). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the volume tradingsecondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell the Company’s common stock and may be insufficient for stockholdersaffect the Purchaser’s ability to liquidateresell the common stock at a profit, or at all. As a result, an investor in our common stock may find it difficult to dispose of shares of our common stock or obtain a fair price for our common stock in the market if one develops. Investors in our common stock should expect to hold our common stock indefinitely.

stock.

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.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could significantly reduce the value of our shares to a potential acquirer or delay or prevent changes in control or changes in our management without the consent of our Board of Directors. The provisions in our charter documents include the following:

In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the Board of Directors has approved the transaction.

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.

In light of our status as a reporting company and the early stage of our business, we are subject to a variety of laws and regulatory regimes in addition to those applicable to all businesses generally. For example, we are subject to the reporting requirements applicable to U.S. reporting issuers, such as the Sarbanes-Oxley Act of 2002, and certain state and provincial securities laws. In addition, because we are in an early stage of development and intend on issuing securities to raise capital and use acquisitions for growth, our actions will be governed by state and federal securities laws and laws governing the issuance of securities, which are complex. In connection with such laws, we may be subject to periodic audits, inquiries, and investigations. Any such audits, inquiries, and investigations may divert considerable financial and human resources and adversely affect the execution of our business plan.

Through such audits, inquiries, and investigations, we, or a regulator, may determine that we are out of compliance with one or more governing rules or laws. Remedying such non-compliance diverts additional financial and human resources. In addition, in the future, we may be subject to a formal charge or determination that we have materially violated a governing law, rule, or regulation. We may also be subject to lawsuits as a result of alleged violation of the securities laws or governing corporate laws. Any charge or allegation, and particularly any determination, that we had materially violated a governing law would harm our ability to enter into business relationships, recruit qualified officers and employees, and raise capital.

If a market develops for our common stock, we expect the market price to be volatile.

The market prices of securities of smaller companies tend to be highly volatile. If a market develops for our common stock, of which there can be no assurance, our stock price may change dramatically as the result of announcements of our quarterly results, slow revenue growth, absence of profits, the rate of our expansion, significant litigation or other factors or events that would be expected to affect our business or financial condition, results of operations, and other factors specific to our business and future prospects. In addition, the market price for our common stock may be affected by various factors not directly related to our business, including the following:

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

We have never declared nor paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. It is unlikely that investors will derive any current income from ownership of our stock. This means that the potential for economic gain from ownership of our stock depends on appreciation of our stock price and will only be realized by a sale of the stock at a price higher than the purchase price.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We currently maintain a corporate office at 757 East South Temple,350 W. 800 N., Suite 150,214, Salt Lake City, Utah 84102.84103. We currently lease this property for $4,140$3,600 a month. The term of the lease expires on July 31, 2018. We have the option to renew the lease for an additional three years. If we exercise this option, our rental expense will escalate 3% per year. This location is approximately 4,6573,635 square feet of office space. The Company believes this space is satisfactory for our current needs and our needs in the immediate future.

Item 3. Legal Proceedings

We know of no existing or pending legal proceedings against us, nor are we involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of our directors, officers or any of their respective affiliates, or any beneficial stockholder is an adverse party or has a material interest adverse to our interest.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchasers of Equity Securities

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

(a) Market Information

Our common stock is not listed or traded on any exchange or other market.

(b) Holders

As of December 31, 2017,April 30, 2021, there are 3,861,8484,094,916 shares outstanding held by approximately 800 stockholders of record.

(c) Dividends

We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends.

(d) Securities Authorized for Issuance under Equity Compensation Plans

In April 2017 the Board of Directors 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, employees and non-employee agents, consultants, advisers, and independent contractors of the Company or any parent or subsidiary of the Company. The following table sets forth certain information with respect to the Plan and any other plans plan as of December 31, 2017:2020: