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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the quarterly period ended June 30, 2021

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
  For the transition period from ______________ to ______________

 

Commission file number: 001-38362

 

PROLUNG, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   20-1922768

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

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

 

(801) 736–0729

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 16, 2021 the issuer had 4,122,130 shares of common stock, $0.001 par value, outstanding.

 

 

 

 
 

 

PROLUNG, INC.

 

TABLE OF CONTENTS

 

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

 

2
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ProLung, Inc.

Condensed Balance Sheets

(Unaudited)

 

   June 30,   December 31, 
   2021   2020 
Assets          
Current Assets          
Cash  $1,572,917   $185,126 
Prepaid expenses   -    5,427 
Total Current Assets   1,572,917    190,553 
           
Property and equipment, net   47,329    71,160 
Intangible assets, net   122,710    127,491 
           
Total Assets  $1,742,956   $389,204 
           
Liabilities and Stockholders’ Deficit          
Current Liabilities          
Accounts payable  $68,019   $206,658 
Accrued liabilities   1,357,995    1,078,755 
Short term loans payable   -    105,000 
Payable for research and development - current   315,000    340,000 
Convertible notes payable, related party, net - current   371,743    - 
Convertible notes payable - current, net   9,699,747    - 
Total Current Liabilities   11,812,504    1,730,413 
           
Long-Term Liabilities          
Payable for research and development - long term   -    25,000 
Convertible notes payable, related party, net - long-term   -    364,967 
Convertible notes payable, net, long-term   -    7,113,962 
Total Long-Term Liabilities   -    7,503,929 
           
Total Liabilities   11,812,504    9,234,342 
           
Stockholders’ Deficit:          
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding   -    - 
Common stock, $0.001 par value; 120,000,000 shares authorized; 4,122,130 and 4,084,916 shares issued and outstanding   4,122    4,085 
Additional paid-in capital   28,035,822    27,662,507 
Accumulated deficit   (38,109,492)   (36,511,730)
Total Stockholders’ Deficit   (10,069,548)   (8,845,138)
           
Total Liabilities and Stockholders’ Deficit  $1,742,956   $389,204 

 

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

 

3
 

 

ProLung, Inc.

Condensed Statements of Operations

(Unaudited)

 

   2021   2020   2021   2020 
   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2021   2020   2021   2020 
Revenues:                    
Revenue  $-   $-   $-   $- 
Total revenue   -    -    -    - 
Cost of revenue:   -    -         - 
Gross margin   -    -    -    - 
Operating expenses:                    
Research and development expense   214,055    198,289    393,364    389,939 
Selling, general and administrative expense   456,244    431,028    746,321    810,168 
Total operating expenses   670,299    629,317    1,139,685    1,200,107 
Loss from operations   (670,299)   (629,317)   (1,139,685)   (1,200,107)
Other income (expense):                    
Interest expense   (336,053)   (177,423)   (592,216)   (319,509)

Gain on settlement of liabilities

   

134,139

    -    

134,139

    - 
Total other expense   (201,914)   (177,423)   (458,077)   (319,509)
Net loss  $(872,213)  $(806,740)   (1,597,762)   (1,519,616)
                     
Basic and diluted loss per share  $(0.21)  $(0.20)   (0.39)   (0.37)
                     
Weighted-average common shares outstanding, basic and diluted   4,104,785    4,075,150    4,096,618    4,071,854 

 

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

 

4
 

 

ProLung, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

   2021   2020 
   For the Six Months Ended 
   June 30, 
   2021   2020 
Cash flows from operating activities:          
Net loss  $(1,597,762)  $(1,519,616)
Adjustments to reconcile net loss to net cash flows from operating activities:          
Depreciation and amortization   30,749    43,259 
Stock-based compensation   194,976    314,310 
Amortization of loan discount   200,286    56,120 

Gain on settlement of liabilities

   

(134,139

)   - 
Change in assets and liabilities:          
Prepaid expenses   5,427    - 
Accounts payable   (32,524)   (181,694)
Accrued liabilities   361,506    140,934 
Net cash flows used in operating activities   (971,481)   (1,146,687)
           
Cash flows from investing activities:          
Purchase of property and equipment   (2,137)   (3,588)
Net cash flows used in investing activities   (2,137)   (3,588)
           
Cash flows from financing activities:          
Payment for placement of convertible notes payable   (259,086)   (213,575)
Payment on convertible notes payable   (864,284)   - 
Proceeds from exercise of warrants   36,000    - 
Proceeds from convertible notes payable - related party   -    82,000 
Proceeds from convertible notes payable   3,448,779    1,738,500 
Net cash flows provided by financing activities   2,361,409    1,606,925 
           
Net increase in cash   1,387,791    456,650 
Cash at beginning of period   185,126    207,421 
Cash at end of period  $1,572,917   $664,071 
Supplemental disclosure of cash flow information:          
Cash paid for interest  $30,504   $96,582 
Supplemental disclosure of non-cash investing and financing activities:          
Discount recorded on convertible debt issuance  $292,401   $311,574 

Non-cash partial settlement of research and development liability

  $

50,000

   $- 
Transfer of accrued interest to convertible notes payable  $43,931   $- 
Conversion of debt to equity  $87,085   $- 
Transfer of short term loans payable to convertible note payable  $100,181   $- 

 

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

 

5
 

 

ProLung, Inc.

Condensed Statement of Stockholders’ Deficit

For the Three and Six Months Ended June 30, 2020 and 2021

(Unaudited)

 

   Shares   Amount   Capital   Deficit   Deficit 
   Common Stock   Additional Paid-in   Accumulated   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Deficit 
Balance, December 31, 2019   4,068,557   $4,069   $27,083,391   $(33,784,114)  $(6,696,654)
Warrants issued to convertible debt placement agent   -    -    71,489    -    71,489 
Stock-based compensation   -    -    162,320    -    162,320 
Net loss   -    -    -    (712,876)   (712,876)
Balance, March 31, 2020   4,068,557    4,069    27,317,200    (34,496,990)   (7,175,721)
Shares issued for services   15,000    15    37,035    -    37,050 
Warrants issued to convertible debt placement agent   -    -    70,635    -    70,635 
Stock-based compensation   -    -    114,940    -    114,940 
Net loss   -    -    -    (806,740)   (806,740)
Balance, June 30, 2020   4,083,557   $4,084   $27,539,810   $(35,303,730)  $(7,759,836)
                          
Balance, December 31, 2020   4,084,916   $4,085   $27,662,507   $(36,511,730)  $(8,845,138)
Exercise of warrants for common stock   10,000    10    35,990    -    36,000 
Warrants issued to convertible debt placement agent   -    -    49,871    -    49,871 
Stock-based compensation   -    -    50,803    -    50,803 
Net loss   -    -    -    (725,549)   (725,549)
Balance, March 31, 2021   4,094,916   $4,095   $27,799,171   $(37,237,279)  $(9,434,013)
Conversion of notes payable to common stock   27,214    27    87,058    -    87,085 
Warrants issued to convertible debt placement agent   -    -    5,420    -    5,420 
Stock-based compensation   -    -    144,173    -    144,173 
Net loss   -    -    -    (872,213)   (872,213)
Balance, June 30, 2021   4,122,130   $4,122   $28,035,822   $(38,109,492)  $(10,069,548)

 

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

 

6
 

 

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1 – Organization and Summary of Significant Accounting Policies

 

Organization

 

ProLung, Inc. (the “Company”), is a Delaware corporation that was incorporated on November 22, 2004 and is doing business as (dba) “IONIQ Sciences” and “ProLung.” The Company’s headquarters are located in Salt Lake City, Utah. The Company’s business is the development, marketing and sales of precision predictive analytical medical devices specializing in lung cancer. The Company’s principal activities are primarily developing and testing of products, seeking FDA clearance for its products, developing markets and securing strategic alliances and obtaining financing.

 

Basis of Presentation

 

The accompanying condensed financial statements have been prepared by management in accordance with rules and regulations promulgated by the U.S. Securities and Exchange Commission and therefore certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed financial statements contain all adjustments necessary for them to be presented fairly, with those adjustments consisting only of normal recurring adjustments. These interim financial statements should be read in conjunction with the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three and six months ended June 30, 2021 may not be indicative of the results to be expected for the year ending December 31, 2021.

 

Going Concern

 

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

 

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

 

Basic and Diluted Loss Per Share

 

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

 

   June 30, 
   2021   2020 
Warrants to purchase shares   1,315,010    1,289,521 
Stock options   736,894    631,022 
Convertible notes   3,044,570    2,361,398 
           
    5,096,474    4,281,941 

 

7
 

 

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Recent Accounting Pronouncements

 

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

 

Leases – In February 2016, the FASB issued ASU No. 2016-02: Leases ASU 2016-02 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. ASU 2016-02 would be effective for the Company’s 2019 fiscal year; however, since the Company is an Emerging Growth Company and has made the election to adopt certain accounting standards when they would be applicable for private companies which is the fiscal year beginning January 1, 2022. The Company will use the modified retrospective basis. The Company entered into a three-year lease agreement in May 2019 and management is evaluating how the implementation of this standard will affect its balance sheet and statement operations.

 

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

 

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

 

Note 2 – Accrued Liabilities

 

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

 

   June 30,   December 31, 
   2021   2020 
         
Accrued interest  $1,296,777   $1,017,537 
Accrued royalties   17,873    17,873 
Accrued payroll and payroll taxes   43,345    43,345 
           
Accrued liabilities  $1,357,995   $1,078,755 

 

Note 3 –Notes Payable

 

Convertible Notes Payable

 

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

 

2015 Convertible Notes (Ensign Note)

 

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

 

8
 

 

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

2021 Other Convertible Note Issuances

 

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

 

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

 

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

 

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

 

The total loan costs incurred of $292,401 were included with other loan costs incurred and will be amortized as a component of interest expense over the term of the convertible notes. During the three and six months ended June 30, 2021, the Company recognized interest expense of $200,286 and $126,632 related to the amortization of the loan costs, respectively. During the three and six months ended June 30, 2020, the Company recognized interest expense of $37,001 and $56,120 related to the amortization of the loan costs, respectively. As of June 30, 2021, the unamortized balance loan costs is $385,532.

 

Notes payable are summarized as follows:

 

   June 30,   December 31, 
   2021   2020 
         
$3.20 Convertible notes payable; unsecured; interest at 8%; due March 2022 (includes related party amount of $347,282)  $7,640,324   $7,552,498 
           
$10.53 Convertible notes payable; unsecured; interest at 8%; due March 2022 (includes related party amount of $34,718)   2,816,698    219,767 
           
Unamortized discount and loan costs (includes related party amounts of $10,257 and $17,033, respectively)   (385,532)   (293,336)
           
Notes payable, net  $10,071,490   $7,478,929 
           
Less: current portion, net   (10,071,490)   - 
           
Convertible notes payable - long term, net  $-   $7,478,929 

 

9
 

 

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 4 – Common Stock Options

 

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

 

As part of an agreement for their service during the six months ended June 30, 2021 current Board members and advisors accepted the issuance of 33,200 options to Board members at exercise prices of $2.47 (16,600 options) and $6.73 (16,600 options) per option. These options vested upon issuance. The fair value of these options was $4.26 per option or $141,500 and was expensed upon grant. The fair value was computed using the Black Scholes method.

 

In May 2021, the Board’s approved the issuance of 40,678 options to employees of the Company at an exercise price of $6.73 per option. These options quarterly over four years. The fair value of these options was $6.37 per option or $259,104 and will be expensed over the relative vesting period.

 

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

 

Weighted Average Expected life  5.6 years 
Weighted Average Exercise price  $5.77 
Expected volatility   140% to 188%
Weighted average volatility   182%
Expected dividends   n/a 
Risk-free interest rate   0.36% to 1.29%

 

A summary of option activity for the six months ended June 30, 2021 is presented below:

 

           Weighted  Aggregate 
       Weighted   Average  Intrinsic 
   Shares   Average   Remaining  Value of 
   Under   Exercise   Contractual  Vested 
   Options   Price   Life  Options 
Outstanding at December 31, 2020   663,016   $5.16   8.1 years     
Issued   73,878   $5.77         
Exercised   -   $-         
Forfeited/Expired   -   $-         
Outstanding at June 30, 2021   736,894   $5.22   7.7 years  $1,424,854 
Vested at June 30, 2021   651,419   $5.35   7.5 years  $1,208,459 

 

The above intrinsic value is based on an assumed fair value of the Company’s stock of $6.73 per share. The Company recorded an expense of $144,173 and $107,985 for the three months ended June 30, 2021 and 2020 related to the amortization of options issued under the plan. The Company recorded an expense of $194,976 and $257,021 for the six months ended June 30, 2021 and 2020 related to the amortization of options issued under the plan. The remaining unrecognized expense of $357,659 will be recognized through June 2025 with a weighted average term of 3.9 years.

 

10
 

 

ProLung, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

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

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2021   2020   2021   2020 
                 
Research and development expense  $32,176   $11,045   $35,289   $23,541 
Selling, general and administrative expense   111,997    140,945    159,687    290,769 
                     
Total share-based compensation  $144,173   $151,990   $194,976   $314,310 

 

Note 5 – Common Stock Warrants

 

The Company has issued warrants to purchase its common stock for equity, debt and compensation reasons. See Note 3 for 22,515 warrants issued as part of loan issuance costs during the six months ended June 30, 2021. Certain warrant holders exercised 10,000 warrants for cash proceeds of $36,000.

 

A summary of warrant activity for the six months ended June 30, 2021 is presented below:

 

           Weighted  Aggregate 
       Weighted   Average  Intrinsic 
   Shares   Average   Remaining  Value of 
   Under   Exercise   Contractual  Vested 
   Warrants   Price   Life  Warrants 
Outstanding at December 31, 2020   1,305,595   $5.02    1.7 years     
Issued   22,515   $10.53    5.0 years     
Exercised   (10,000)  $3.60         
Expired/Forfeited   (3,125)  $3.60         
Outstanding at June 30, 2021   1,314,985   $5.13    1.4 years  $2,235,767 
Vested at June 30, 2021   1,314,985   $5.13    1.4 years  $2,235,767 

 

During the six months ended June 30, 2020, the Company issued warrants as part of a consulting agreement. The Company recorded a $20,238 expense during the six month period and $6,954 during the three months ended June 30, 2020, respectively.

 

Note 6 – Commitments and Contingencies

 

Lease Agreement

 

In May 2019 the Company entered into a new lease agreement for its office space. The lease amount is $3,600 per month and expires in April 2022. The Company inhabited the office in September 2019 and incurred $21,600 for both the six months ended June 30, 2021 and 2020.

 

Research and Development Agreement

 

On July 29, 2019, the Company amended a license agreement dated April 10, 2013 between the Company and ProLung Biotech Wuxi / ProLung China (Wuxi). The original agreement allowed Wuxi to utilize the Company’s technology in China in return for royalty payments based on Wuxi’s revenues. Wuxi has yet to earn any revenue but has been conducting clinical trials. The license agreement was amended whereby Wuxi will provide the Company its clinical trial data, know-how and improvements which the Company will use outside the greater China area. This amendment further requires full collaboration (i.e., protocols and methodologies) between the two entities. In consideration for such trial data and know-how, the Company will make cash payments to Wuxi of up to $575,000 and issue up to 347,566 shares of common stock upon the completion of certain events.

 

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

 

Settlement of Liabilities

 

During the six months ended June 30, 2021, the company recorded $134,139 in gains from settlement of liabilities. Write-down of accounts payable related to agreed-to settlement accounted for $84,139 with the remaining $50,000 attributed to the agreed to value of equipment transferred to Wuxi. This equipment had previously been written off against inventory.

 

Note 7 – Subsequent Events

 

None

 

11
 

 

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

 

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

 

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

 

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

 

12
 

 

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

 

13
 

 

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

 

In addition, please review the other, and more detailed, risk factors discussed in our 2020 Form 10-K.

 

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

 

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

 

Overview

 

We are a medical technology company with a mission to dramatically improve cancer outcomes by the development of our modern screening technology for the early detection of multiple cancers, which has the potential to expand therapeutic windows, significantly improve survivability, and reduce treatment costs. Half of all Americans will be diagnosed with cancer during their lifetimes and one in five of those diagnosed with cancer will die from it. Clinical literature shows that early detection can save lives and money. The first planned product utilizing our proprietary analytic platform, the IONIQ ProLung Test™ for lung cancer, has been designated a Breakthrough Device by the U.S. FDA. We remain fully committed to gaining U.S. FDA regulatory de novo clearance and subsequently commercializing the IONIQ ProLung Test for lung cancer.

 

Lung cancer is the leading cause of cancer death in the US and the world according to American Cancer Society and World Health Organization. Current statistics reflect an average 17% survival rate at five years for those diagnosed with lung cancer. Early detection substantially improves rates of survival. Patients at high risk of lung cancer are recommended to undergo regular Computed Tomography “CT” chest scans to detect nodules. Due to the risks and costs associated with assessing malignancy by current technology, patients now normally wait from three months to 3.5 years to have the risk of malignancy assessed upon detection of a nodule by CT chest scan. Our IONIQ ProLung Test was developed to provide a non-invasive, rapid and radiation-free option for assessing the risk of malignancy in lung nodules found in the chest by CT scans.

 

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

 

14
 

 

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

 

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

 

Results of Operations

 

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

 

Three Months Ended June 30, 2021 compared to the Three Months Ended June 30, 2020

 

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

 

Operating Expenses. Total operating expense for the three months ended June 30, 2021 was $670,299 compared to the total operating expenses for the three months ended June 30, 2020 of $629,317, representing an increase of 40,982. Operating expenses have been classified by management as either research and development or selling, general and administrative based on an assignment of certain expenses directly to these classifications or based on management’s allocation of certain expenses between these classifications.

 

The overall increase in operating expense is primarily due to us having slightly higher wage expense due to additional staff.

 

Research and Development Expense. Research and development expense for the three months ended June 30, 2021, was $214,055, compared to research and development expense of $198,289 for the three months ended June 30, 2020; representing an increase of $15,766. This increase was mostly due to an increase in stock based compensation. During 2020 we a new employee for R&D and was given stock options with a four year vesting. The stock based compensation amortization for 2021 includes this individual but did not for 2020.

 

Selling, General and Administrative Expense. Selling, general and administrative expense for the three months ended June 30, 2021 was $456,244 compared to selling, general and administrative of $431,028 for the three months ended June 30, 2020; representing an increase of $25,216. The overall increase is primarily due to an increase in salary expense due to use hiring additional staff and an increase in our D&O insurance.

 

Other Expense. Other expense for the three months ended June 30, 2021 was $201,914 as compared to $177,423 for the three months ended June 30, 2020 representing an increase of $24,491. This increase is due to interest related to increased debt levels and the associated amortization of additional loan costs offset by gains on settlement of various liabilities.

 

Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020

 

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

 

Operating Expenses. Total operating expenses for the six months ended June 30, 2021 were $1,1,139,685 compared to the total operating expenses for the six months ended June 30, 2020 of $1,200,107 representing a decrease of $60,422. Operating expenses have been classified by management as either research and development or selling, general and administrative based on an assignment of certain expenses directly to these classifications or based on management’s allocation of certain expenses between these classifications.

 

The overall decrease in operating expense is primarily due to a decrease in stock based compensation.

 

Research and Development Expense. Research and development expense for the six months ended June 30, 2021, was $393,364 compared to research and development expense of $389,939 for the six months ended June 30, 2020; representing an increase of $3,425. This increase was mostly due to an increase in stock based compensation. During 2020 we a new employee for R&D and was given stock options with a four year vesting. The stock based compensation amortization for 2021 includes this individual but did not for 2020. We would expect our research and development costs to remain relatively constant for the remainder of 2020.

 

15
 

 

Selling, General and Administrative Expense. Selling, general and administrative expense for the six months ended June 30, 2021, was $746,321 compared to selling, general and administrative of $810,168 for the six months ended June 30, 2020; representing a decrease of $63,847. The overall decrease is primarily due to a decrease in stock based compensation. This was offset by an increase in salary expense due to use hiring additional staff and an increase in our D&O insurance.

 

Other Expense. Other expense for the six months ended June 30, 2021 was $458,077 as compared to $319,509 for the six months ended June 30, 2020 representing an increase of $138,568. This increase was primarily due to debt levels and the associated amortization of additional loan costs. This is offset by gains on settlement of various liabilities.

 

Liquidity and Capital Resources

 

The following is a summary of our key liquidity measures at June 30, 2021 and December 31, 2020:

 

   June 30.   December 31, 
   2021   2020 
         
Cash  $1,572,917   $185,126 
           
Current assets   1,572,917    190,553 
Current liabilities   (11,812,504)   (1,730,413)
           
Working (deficit) capital  $(10,239,587)  $(1,539,860)

 

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

 

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

 

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

 

16
 

 

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

 

Cash provided by (used in) operating, investing and financing activities for the six months ended June 30, 2021 and 2020 is as follows:

 

   Six Months Ending June 30, 
   2021   2020 
         
Operating activities  $(971,481)  $(1,146,687)
Investing activities   (2,137)   (3,588)
Financing activities   2,361,409    1,606,925 
           
Net increase in cash  $1,387,791   $456,650 

 

Operating Activities

 

For the six months ended June 30, 2021, the differences between our net loss and net cash used in operating activities were due to net non-cash charges totaling $291,872 for stock-based compensation, amortization of debt discount, a gain on settlement of R&D, and depreciation. We also had a large increase in our accrued interest due to increased debt levels offset by a decrease in accounts payable due to payment and settlement.

 

For the six months ended June 30, 2020, the differences between our net loss and net cash used in operating activities were due to net non-cash charges totaling $413,689 for stock-based compensation, amortization of debt discount and depreciation.

 

Investing Activities

 

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

 

Financing Activities

 

During the six months ended June 30, 2021, cash flows from financing activities totaled $2,361,409. The cash flows were related to proceeds received from the issuance and payment of convertible notes and the exercise of stock warrants.

 

During the six months ended June 30, 2020, cash flows from financing activities totaled $1,606,925. Part of the cash flows were related to proceeds received from the issuance of convertible notes net of offering costs. Also, the Company entered into a SBA Loan pursuant to the Paycheck Protection Program (the “PPP”) under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. SBA. The Company received total proceeds of $126,000 from the SBA Loan.

 

Critical Accounting Policies and Estimates

 

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

 

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

 

17
 

 

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

 

Emerging Growth Company – We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Although we have not delayed the adoption of any accounting standards, we may choose to take advantage of the extended transition period for complying with new or revised accounting standards in the future.

 

Off Balance Sheet Arrangements

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2021. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

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

 

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

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred in the six months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

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

 

18
 

 

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

 

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

 

During the six months ended June 30, 2021, we issued 37,214 unregistered common shares for the conversion of debt and the exercise of stock warrants.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

19
 

 

ITEM 6. EXHIBITS

 

Exhibit

Number

  Description
3.1   Third Amended and Restated Certificate of Incorporation, as amended by Certificate of Amendment dated October 10, 2017(1)
3.2   Amended and Restated By-Laws(1)
31.1   Certification Pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Amended*
32.1   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101 INS   XBRL Instance Document*
101 SCH   XBRL Schema Document*
101 CAL   XBRL Calculation Linkbase Document*
101 LAB   XBRL Labels Linkbase Document*
101 PRE   XBRL Presentation Linkbase Document*
101 DEF   XBRL Definition Linkbase Document*

 

* Filed herewith

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

 

20
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    PROLUNG, Inc.
       

August 16, 2021

  By: /s/ Jared Bauer
Date     Jared Bauer,
      Chief Executive Officer

 

21

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jared Bauer, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of ProLung, Inc.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 16, 2021 /s/ Jared Bauer
 

Jared Bauer, Chief Executive Officer

(Principal Executive Officer)

 

 

 

EX-32.1 3 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of ProLung, Inc. (the “Company”) for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Jared Bauer, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     
  2. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: August 16, 2021 /s/ Jared Bauer
  Jared Bauer
 

Chief Executive Officer

(Principal Executive Officer and Financial Officer)

 

 

 

 

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