What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-06-28 compared with 2021-06-29 · 652 added, 601 removed, 183 unchanged (87% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED

FINANCIAL STATEMENTS

of Independent Registered Accounting Firm –

Farber Hass Hurley LLP

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Accounting Firm – Farber Hass Hurley LLP

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee and

Stockholders of Modular Medical, Inc.

on the Financial Statements

audited the accompanying consolidated balance sheets of Modular Medical, Inc.

(the “Company”) as of March 31, 2021

and 2020, and the related consolidated statements of operations, stockholders’

equity, and cash flows for the years then

ended, and the related notes (collectively referred to as the financial statements).

In our opinion, the consolidated financial

statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and

the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally

accepted in the United States of America.

of Matter –

Going Concern

The accompanying

consolidated financial statements have been prepared to assume the Company will continue as a going concern.

As discussed in Note

1 to the financial statements, the Company expects to continue to incur operating losses for the foreseeable future and incur

cash outflows from operations as it continues to invest in the development and subsequent commercialization of its product.

Company expects that its research and development and general and administrative expenses will continue to increase, and, as a

result, it will eventually need to generate significant product revenues to achieve profitability.

These circumstances raise substantial

doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

the Financial Statements

We have audited

the accompanying consolidated balance sheets of Modular Medical, Inc.

(the “Company”) as of March 31, 2022 and 2021, and

the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and

the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and

the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted

in the United States of America.

These consolidated

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the

Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audits to obtain reasonable

assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

Our audits included

performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that

were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are

material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgment.

communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken

as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit

matters or on the accounts or disclosures to which they relate.

further in Note 1 to the financial statements, the Company has incurred losses since inception, and expects to continue to incur

operating losses for the foreseeable future and incur cash outflows from operations as it continues to invest in the development

and subsequent commercialization of its product.

The Company expects that its research and development and general and administrative

expenses will continue to increase, and, as a result, it will eventually need to generate significant product revenues to achieve

profitability.

These circumstances raise substantial doubt about the Company’s ability to continue as a going concern within

one year after the date that these consolidated financial statements are issued.

Critical Audit

critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements

that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are

material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments.

The communication

of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are

not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts

or disclosures to which they relate.

further in Note 1 to the financial statements, the Company has incurred losses since inception, and expects to continue to incur operating

losses for the foreseeable future and incur cash outflows from operations as it continues to invest in the development and subsequent

commercialization of its product.

The Company expects that its research and development and general and administrative expenses will

continue to increase, and, as a result, it will eventually need to generate significant product revenues to achieve profitability.

of March 31, 2022, the Company had cash balances of approximately $9,076,000, as a result of the capital raised in the public offering

in February 2022.

In addition, subsequent to March 31, 2022, the Company raised net proceeds from an equity offering of approximately

The Company has concluded that these plans alleviate the doubt related to its ability to continue as a going concern.

We identified

management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter due to

inherent complexities and uncertainties related to the Company’s projections of operations.

Auditing management’s

going concern assessment involved a high degree of auditor judgment and audit effort due to the impact of these assumptions on

the determination of the degree of doubt regarding the ability of the entity to continue as a going concern.

The primary procedures

we performed to address this critical audit matter included:

evaluated the reasonableness of key assumptions underlying management’s conclusion.

evaluated that the disclosures included in the Form 10-K were complete and accurate and

in accordance with accounting principles generally accepted in the United States of America.

evaluated the impact of the Company’s existing financing arrangements on their

ability to continue as a going concern.

of Stock Options

in Note 5, during the year ended March 31, 2021, the Company granted 490,476 options to purchase shares of its common stock with

10-year terms and a grant-date fair value of $1,101,737 to employees, directors and consultants.

Management is required to analyze

the fair value of each option granted and amortize it over its vesting period.

management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter due to inherent

complexities and uncertainties related to the Company’s projections of operations.

Auditing management’s going concern assessment

involved a high degree of auditor judgment and audit effort due to the impact of these assumptions on the determination of the degree

of doubt regarding the ability of the entity to continue as a going concern.

The primary procedures we performed to address this critical

audit matter included:

evaluated the reasonableness of key assumptions underlying management’s conclusion.

evaluated that the disclosures included in the Form 10-K were complete and accurate and in

accordance with accounting principles generally accepted in the United States of America.

evaluated the impact of the Company’s existing financing arrangements and future capital

needs over the next 12 months on its ability to continue as a going concern.

Based Compensation

in Note 8, during the year ended March 31, 2022, the Company granted 827,427 options to purchase shares of its common stock with 10-year

terms and a grant-date fair value of $8,507,311 to employees, directors and consultants.

Management is required to analyze the fair value

of each option granted and amortize it over its vesting period.

We identified

the grant of stock options as a critical audit matter.

Management’s estimates regarding fair value of options

result in the application of a high degree of auditor judgment.

procedures we performed to address this critical audit matter included the following:

gained an understanding of Company’s processes and controls in place for determining

Management’s estimates regarding fair value of options result

in the application of a high degree of auditor judgment.

The primary procedures

we performed to address this critical audit matter included the following:

gained an understanding of Company’s processes and controls in place for determining

the fair value of each granted option.

evaluated the option price model the management selected to determine the fair value,

and analyzed the underlying data used in the calculations.

evaluated the option price model the management selected to determine the fair value, and

analyzed the underlying data used in the calculations.

also recalculated the fair value of each option granted.

/s/ Farber Hass Hurley

We have served as the Company’s

auditor since 2018.

Chatsworth, California

June 29, 2021

Modular Medical,

Hass Hurley LLP

have served as the Company’s auditor since 2018.

Medical, Inc.

Balance Sheets

8 unchanged sentences

TOTAL NON-CURRENT ASSETS

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

9 unchanged sentences

Commitments and Contingencies (Note 11)

STOCKHOLDERS’

EQUITY (DEFICIT)

STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock, $ 0.001 par value, 5,000,000 shares authorized, none issued and outstanding

1 unchanged sentence

Additional paid-in capital

Common stock issuable

Accumulated deficit

( 34,579,771 )

TOTAL STOCKHOLDERS’

EQUITY (DEFICIT)

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

The accompanying

notes are an integral part of these audited consolidated financial statements

Modular Medical,

( 15,947,010 )

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

( 1,275,149 )

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

The accompanying notes

are an integral part of these audited consolidated financial statements

Medical, Inc.

Statements of Operations

Year ended March 31,

Twelve Months Ended

Operating expenses

Research and development

General and administrative expenses

General and administrative

Total operating expenses

Loss from operations

Interest income

( 14,926,402 )

( 7,336,715 )

Interest expense

( 2,752,229 )

Loss on debt extinguishment

( 1,321,450 )

Loss before income taxes

( 18,631,161 )

( 7,376,376 )

Provision for income taxes

5 unchanged sentences

Basic and diluted

The accompanying

notes are an integral part of these audited consolidated financial statements

Modular Medical,

Statements of Stockholders’

Equity (Deficit)

Stockholders’

The accompanying notes

are an integral part of these audited consolidated financial statements

Medical, Inc.

Statements of Stockholders’ Equity (Deficit)

Stockholders’

Equity (Deficit)

4 unchanged sentences

Stock-based compensation

( 7,377,976 )

Balance as of March 31, 2021

$ ( 15,947,010 )

$ ( 1,275,149 )

Issuance of common stock upon public offering, net of issuance costs

Issuance of common stock in settlement of convertible notes and accrued interest

Placement of common stock

Warrants issued with convertible notes

Shares issued for services

Shares issued for reverse stock split

Issuance of common stock under equity incentive plan

Stock-based compensation

Balance as of March 31, 2021

( 18,632,761 )

The accompanying

notes are an integral part of these audited consolidated financial statements

Modular Medical,

Balance as of March 31, 2022

$ ( 34,579,771 )

The accompanying notes

are an integral part of these audited consolidated financial statements

Medical, Inc.

Statements of Cash Flows

4 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Gain on PPP note forgiveness

Loss on debt extinguishment

Stock-based compensation expense

Depreciation and amortization

Shares for services

Accrued interest

Shares issued for services

Amortization of lease right-of-use asset

3 unchanged sentences

Other assets and prepaid expenses

Security deposits

Accounts payable and accrued expenses

Net cash used in operating activities

( 10,259,528 )

( 5,908,662 )

Cash flows from investing activities

2 unchanged sentences

Cash flows from financing activities

Proceeds from private placement, net of issuance costs

Proceeds from issuance of convertible notes

Proceeds from private placements, net of issuance costs

Proceeds from issuance of convertible notes, net of placement fees

Proceeds from issuance of promissory note

Repayment of promissory note

( 2,100,000 )

Proceeds from issuance of PPP note payable

Proceeds from issuance of common stock upon public offering, net of issuance costs

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

( 1,653,669 )

Cash and cash equivalents, at beginning of year

1 unchanged sentence

Supplemental disclosure:

Noncash investing and financing activities:

Fair value of detachable warrants issued with convertible notes

Conversion of convertible notes and accrued interest into common stock

Cash paid for:

The accompanying

notes are an integral part of these audited consolidated financial statements

MODULAR MEDICAL,

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Note 1 –

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical,

Interest paid

The accompanying notes

are an integral part of these audited consolidated financial statements

MEDICAL, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

– THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical, Inc.

(the Company) was incorporated in Nevada in October 1998 under the name Bear Lake Recreation, Inc.

The Company had no material

business operations from 2002 until approximately 2017 when it acquired all of the issued and outstanding shares of Quasuras,

Inc., a Delaware corporation (Quasuras).

As the major shareholder of Quasuras retained control of both the Company and Quasuras,

the share exchange was accounted for as a reverse merger.

As such, the Company recognized the assets and liabilities of Quasuras,

acquired in the merger, at their historical carrying amounts.

Prior to the acquisition of Quasuras and, since at least 2002, the

Company was a shell company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act).

In June 2017, the Company changed its name from Bear Lake Recreation, Inc.

The Company had no material business

operations from 2002 until approximately 2017 when it acquired all of the issued and outstanding shares of Quasuras, Inc., a Delaware

corporation (Quasuras).

As the major shareholder of Quasuras retained control of both the Company and Quasuras, the share exchange was

accounted for as a reverse merger.

As such, the Company recognized the assets and liabilities of Quasuras, acquired in the merger, at

their historical carrying amounts.

Prior to the acquisition of Quasuras and, since at least 2002, the Company was a shell company, as

defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act).

In June 2017, the Company changed its

name from Bear Lake Recreation, Inc.

to Modular Medical, Inc.

is a development-stage medical device company focused on the design, development and eventual commercialization of an innovative

insulin pump to address shortcomings and problems represented by the relatively limited adoption of currently available pumps

for insulin-dependent people with diabetes.

The Company has developed a hardware technology allowing people with insulin-dependent

diabetes to receive their daily insulin in two ways, through a continuous “basal”

delivery allowing a small amount

of insulin to be in the blood at all times and a “bolus”

delivery to address meal time glucose input and to address

when the blood glucose level becomes excessively high.

By addressing the time and effort required to effectively treat their condition,

the Company believes it can address the less technically savvy, less motivated part of the market.

The consolidated

financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United

States of America.

The following summarizes the more significant of such policies:

Accounting Standards Board (FASB) Accounting Standard Update (ASU) No.

2014-15 (ASU 2014-15), Going Concern,

requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt

about the entity’s ability to continue as a going concern within one year after the date that the financial statements are

If management identifies conditions or events that raise substantial doubt about an entity’s ability to continue

as a going concern, management must consider if there are plans that are probable to be implemented, and whether it is probable

that the plans will mitigate the conditions or events raising the substantial doubt about the entity’s ability to continue

as a going concern.

If the substantial doubt is not alleviated after consideration of management’s plans, the entity

must include a statement in the notes to the financial statements indicating that there is substantial doubt about the entity’s

ability to continue as a going concern within one year after the date that the financial statements are issued including:

principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, 2)

management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet

its obligations, and 3) management’s plans to attempt to mitigate the conditions or events causing the substantial doubt

about the entity’s ability to continue as a going concern.

expects to continue to incur operating losses for the foreseeable future and incur cash outflows from operations as it continues

to invest in the development and subsequent commercialization of its product.

The Company expects that its research and development

and general and administrative expenses will continue to increase, and, as a result, it will eventually need to generate significant

product revenues to achieve profitability.

These circumstances raise substantial doubt about the Company’s ability to continue

as a going concern within one year after the date that these consolidated financial statements are issued.

Implementation of the

Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to raise additional

capital, through the sale of additional equity or debt securities, to support its future operations.

There can be no assurance

that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available,

that such capital will be offered on terms and conditions acceptable to the Company.

As discussed in notes 3 and 11, in

February 2021, the Company commenced a private placement of its convertible promissory notes to investors to fund its operations.

In addition, during fiscal 2021, the Company obtained additional equity financing through a private placement of its common stock

(see note 6), and the Company obtained a loan from Silicon Valley Bank in April 2020 (see notes 3 and 12).

The Company’s

operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital

expenditures.

The Company’s future capital requirements and the adequacy of its available funds will depend on many factors,

including the Company’s ability to successfully commercialize its product, competing technological and market developments,

and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement

its product offering.

If the Company is unable to secure additional capital, it may be required to curtail its research and development

initiatives and take additional measures to reduce costs in order to conserve its cash.

These consolidated financial statements

do not include any adjustments that might result from this uncertainty.

is a development-stage medical device company focused on the design, development and eventual commercialization of an innovative insulin

pump to address shortcomings and problems represented by the relatively limited adoption of currently available pumps for insulin-dependent

people with diabetes.

The Company has developed a hardware technology allowing people with insulin-dependent diabetes to receive their

daily insulin in two ways, through a continuous “basal” delivery allowing a small amount of insulin to be in the blood at

all times and a “bolus” delivery to address meal time glucose input and to address when the blood glucose level becomes excessively

By addressing the time and effort required to effectively treat their condition, the Company believes it can address the less technically

savvy, less motivated part of the market.

discussed in Note 7, in February 2022, the Company completed a public offering of its equity securities, and its common stock was approved

to list on the Nasdaq Capital Market under the symbol “MODD” and began trading there on February 10, 2022.

The accompanying financial statements

have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal

course of business.

The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on,

among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing

arrangements to support its working capital requirements.

At issuance of the Company’s

financial statements for the year ended March 31, 2021, management had determined that there was significant doubt as to the ability

of the Company to meet its obligations and continue as a going concern.

As a result of the Offering (see Note 7), which was completed

in February 2022, and the Registered Offering (see Note 13), which was completed in May 2022, and resulting improved financial position,

the Company believes it has sufficient liquidity to meet its obligations as they come due and conduct its business for a period of at

least 12 months from the date of issuance of these financial statements.

The Company’s

operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures.

The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s

ability to successfully commercialize its product, competing technological and market developments, and the need to enter into collaborations

with other companies or acquire other companies or technologies to enhance or complement its product offering.

If the Company is unable

to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to

reduce costs in order to conserve its cash.

of Presentation

The consolidated

financial statements include the accounts of the Company and its wholly-owned subsidiary, Quasuras.

All significant intercompany

transactions and balances have been eliminated in consolidation.

The Company’s fiscal year ends on March 31 of each calendar

Certain prior year amounts have been reclassified for consistency with the current period presentation.

reclassifications had no effect on the reported results of operations or cash flows.

Use of Estimates

The preparation

of the accompanying consolidated financial statements in conformity with U.S.

generally accepted accounting principles (GAAP)

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues

and expenses during the reporting period.

Estimates may include those pertaining to accruals, stock-based compensation and income

Actual results could differ from those estimates.

Reportable Segment

The Company operates in one business

segment and uses one measurement of profitability for its business.

financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States

The Company’s fiscal year ends on March 31 of each calendar year.

reference to a fiscal year in these notes to the consolidated financial statements refers to the fiscal year ended March 31 of the calendar

year indicated (for example, fiscal 2022 refers to the fiscal year ending March 31, 2022).

The consolidated financial statements include

the accounts of the Company and its wholly-owned subsidiary, Quasuras.

All significant intercompany transactions and balances have been

eliminated in consolidation.

November 24, 2021, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary

of State of the State of Nevada to effect a 1-for-3 reverse stock split of the Company’s shares of common stock.

Such amendment

and ratio were previously approved by a majority of the Company’s stockholders and the board of directors.

As a result of the reverse

stock split, which was effective November 29, 2021, every three shares of the Company’s pre-reverse split outstanding common stock

were combined and reclassified into one share of common stock.

Proportionate voting rights and other rights of common stock holders were

not affected by the reverse stock split.

Any fractional shares of common stock resulting from the Reverse Split were rounded up to the

nearest whole share.

All stock options outstanding and common stock reserved for issuance under the Company’s equity incentive

plans and warrants outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of

common stock by three and, as applicable, multiplying the exercise price by three, as a result of the reverse stock split.

share numbers, share prices, exercise prices and per share amounts have been adjusted, on a retroactive basis to reflect this 1-for-3

reverse stock split.

The preparation of

the accompanying consolidated financial statements in conformity with U.S.

generally accepted accounting principles (GAAP) requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting

Estimates may include those pertaining to accruals, stock-based compensation and income taxes.

Actual results could differ from

those estimates.

The Company operates in one business segment

and uses one measurement of profitability for its business.

and Development

Company expenses research and development expenditures as incurred.

and Administrative

and administrative expenses consist primarily of payroll and benefit costs, rent, stock-based compensation, legal and accounting fees,

and office and other administrative expenses.

Concentration

1 unchanged sentence

Financial instruments

that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents.

cash equivalents are deposited with high credit-quality institutions within the United States, which are insured by the Federal

Deposit Insurance Corporation (FDIC) up to limits of approximately $250,000.

Uncertainties

is subject to risks from, among other things, competition associated with the industry in general, other risks associated with

financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public

that potentially subject the Company to concentration of credit risk consist primarily of cash.

The Company maintains its cash at high

quality financial institutions within the United States, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to

limits of approximately $250,000.

No reserve has been

made in the financial statements for any possible loss due to financial institution failure.

and Uncertainties

The Company is subject

to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity

requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

The global outbreak

of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by

of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S.

government in March 2020.

This has negatively affected the U.S.

and global economy, disrupted global supply

chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place”

and created significant disruption of the financial markets.

The full extent of the COVID-19 impact on the Company’s operational

and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions

taken by U.S.

and foreign government agencies to prevent disease spread, all of which are uncertain, out of the Company’s

control, and cannot be predicted.

and global economy, disrupted global supply chains, significantly

restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place” and created significant

disruption of the financial markets.

The full extent of the COVID-19 impact on the Company’s operational and financial performance

will depend on future developments, including the duration and spread of the pandemic and related actions taken by U.S.

and foreign government

agencies to prevent disease spread, all of which are uncertain, out of the Company’s control, and cannot be predicted.

and Cash Equivalents

Cash and cash equivalents

Cash and cash

equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with

original maturities of three months or less.

include cash on hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities

of three months or less.

and Equipment

Property and equipment

equipment are originally recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful lives

of the assets, generally three to five years.

Depreciation is recorded in operating expenses in the consolidated statements of

Leasehold improvements and assets acquired through capital leases are amortized over the shorter of their estimated

useful life or the lease term, and amortization is recorded in operating expenses in the consolidated statements of operations.

Fair Value of Financial Instruments

measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques

used to measure fair value into three broad levels:

· Level 1 inputs to the valuation

methodology are quoted prices for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation

methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the

asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 inputs to the valuation

methodology are unobservable and significant to the fair value measurement.

their short-term nature, the carrying values of cash equivalents, accounts payable and accrued expenses, approximate fair value.

and Development

expenses research and development expenditures as incurred.

Administrative

administrative expense consists primarily of payroll and benefit related costs, rent, office expenses, equipment supplies and

meetings and travel.

recognizes stock-based compensation for stock options granted to employees and non-employees on a straight-line basis over the

requisite service period, usually the vesting period, based on the grant-date fair value.

The Company estimates the value of stock

options on the date of grant using the Black-Scholes pricing model.

The determination of fair value of share-based payment awards

on the date of grant using an option-pricing model is affected by the option price, as well as assumptions regarding a number

of highly complex and subjective variables.

These variables include, but are not limited to, the expected stock price volatility

over the term of the awards, and projected stock option exercise behaviors.

Basic net loss

per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding

during the period.

are originally recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets,

generally three to five years.

Depreciation is recorded in operating expenses in the consolidated statements of operations.

improvements and assets acquired through capital leases are amortized over the shorter of their estimated useful life or the lease term,

and amortization is recorded in operating expenses in the consolidated statements of operations.

Value of Financial Instruments

The Company measures

the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure

fair value into three broad levels:

1 inputs to the valuation methodology are quoted prices for identical assets or liabilities

in active markets.

2 inputs to the valuation methodology include quoted prices for similar assets and liabilities

in active markets, and inputs that are observable for the asset or liability, either directly

or indirectly, for substantially the full term of the financial instrument.

3 inputs to the valuation methodology are unobservable and significant to the fair value

short-term nature, the carrying values of cash equivalents, accounts payable and accrued expenses, approximate fair value.

Modifications and Extinguishments

When the Company modifies

or extinguishes debt, it does so in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)

Topic 470-50, Debt— Modifications and Extinguishments, which

requires modification to debt instruments to be evaluated to assess whether the modifications are considered “substantial modifications.”

A substantial modification of terms shall be accounted for like an extinguishment.

Based on the guidance relied upon and the analysis

performed, if the Company believes the embedded conversion feature has no fair value on the date of issuance (measurement date) and the

embedded conversion feature has no beneficial conversion feature, the embedded conversion feature does not meet the criteria in ASC 470-50-40-10

or 470-20-25 and the issuance of the convertible note payable is considered a modification, and not an extinguishment that would require

the recognition of a gain or loss.

If the Company determines the change in terms meet the criteria for substantial modification under

ASC 470 it will treat the modification as extinguishment and recognize a loss from debt extinguishment.

Effective April 1, 2019,

the Company adopted ASC No.

842, Leases (ASC 842).

842 requires an entity to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months.

The Company adopted ASC 842 utilizing the modified retrospective transition method.

The Company elected the practical expedient afforded

in ASC 842 in which the Company did not reassess whether any contracts that existed prior to adoption have or contain leases or the classification

of its existing leases.

The Company recognizes

stock-based compensation for stock options granted to employees and non-employees on a straight-line basis over the requisite service

period, usually the vesting period, based on the grant-date fair value.

The Company estimates the value of stock options on the date

of grant using the Black-Scholes pricing model.

The determination of fair value of share-based payment awards on the date of grant using

an option-pricing model is affected by the option price, as well as assumptions regarding a number of highly complex and subjective variables.

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and projected

stock option exercise behaviors.

Basic net loss per

share is computed by dividing loss for the period by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period.

For the years ended March 31, 2021 and 2020, 3,591,755 and 3,177,945 outstanding options to purchase common stock were excluded

from the calculation of diluted net loss per share because their effect would be anti-dilutive.

determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the

Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to

affect taxable income.

A valuation allowance is established for any deferred tax assets for which it is more likely than not that

all or a portion of the deferred tax assets will not be realized.

Based on the available information and other factors, management

believes it is more likely than not that its federal and state net deferred tax assets will not be fully realized, and the Company

has recorded a full valuation allowance.

accounts for uncertain tax positions in accordance with FASB Accounting Standards Codification (ASC) Topic 740, Income

Potentially dilutive

common shares consist of incremental shares of common stock issuable upon the exercise of stock options and exercise of warrants.

following table sets forth securities outstanding which were excluded from the computation of diluted net loss per share as their inclusion

would be anti-dilutive:

Options to purchase common stock

Reclassification

prior year amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no effect

on the reported results of operations or cash flows.

The Company determines

deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets

and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income.

allowance is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets

will not be realized.

Based on the available information and other factors, management believes it is more likely than not that its federal

and state net deferred tax assets will not be fully realized, and the Company has recorded a full valuation allowance.

The Company accounts

for uncertain tax positions in accordance with FASB ASC Topic 740, Income

When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing

authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that

would be ultimately sustained.

The benefit of a tax position is recognized in the consolidated financial statements in the period

during which, based on all available evidence, management believes it is more likely than not that the position will be sustained

upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated

with other positions.

Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount

of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority.

portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as

a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and

penalties that would be payable to the taxing authorities upon examination.

Interest associated with unrecognized tax benefits

is classified as interest expense and penalties are classified in selling, general and administrative expenses in the consolidated

statements of operations.

authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would

be ultimately sustained.

The benefit of a tax position is recognized in the consolidated financial statements in the period during which,

based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,

including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more

than 50 percent likely of being realized upon settlement with the applicable taxing authority.

The portion of the benefits associated

with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits

in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing

authorities upon examination.

Interest associated with unrecognized tax benefits is classified as interest expense and penalties are

classified in general and administrative expenses in the consolidated statements of operations.

The Company files U.S.

federal and state income tax returns in jurisdictions with varying statutes of limitations.

All tax returns

from 2016 to 2020 may be subject to examination by the U.S.

All tax returns from 2016 to 2021

may be subject to examination by the U.S.

federal and state tax authorities.

As of March 31, 2021, the

Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

As of March 31, 2022 and 2021, the Company had not

recorded any liability for unrecognized tax benefits related to uncertain tax positions.

Comprehensive Loss

Comprehensive

loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions.

comprehensive loss may include certain changes in equity that are excluded from net loss.

For the years ended March 31, 2021 and

2020, the Company’s comprehensive loss was the same as its net loss.

NOTE 2 –

BALANCE SHEET DETAIL

Comprehensive loss

represents the changes in equity of an enterprise, other than those resulting from stockholder transactions.

Accordingly, comprehensive

loss may include certain changes in equity that are excluded from net loss.

For the years ended March 31, 2022 and 2021, the Company’s

comprehensive loss was the same as its net loss.

Issued Accounting Pronouncement

June 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-13, Financial

Instruments—Credit Losses .

This ASU added a new impairment model (known as the current

expected credit loss (CECL) model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes

an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial

guarantee contracts, and other loan commitments.

The CECL model does not have a minimum threshold for recognition of impairment losses

and entities will need to measure expected credit losses on assets that have a low risk of loss.

This update is effective for fiscal

years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies.

is still evaluating the impact of this accounting guidance on its results of operations and financial position.

– CONSOLIDATED BALANCE SHEET DETAIL

Property and equipment, net:

3 unchanged sentences

Machinery and equipment

Property and equipment, gross

accumulated depreciation and amortization

Property and equipment, net

Accrued expenses:

2 unchanged sentences

Accrued interest

NOTE 3 –

NOTES PAYABLE

2020, the Company received a $368,780 unsecured loan (the PPP Note) under the Paycheck Protection Program (the PPP), which was

established under the U.S.

government’s Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

to the Company was made through Silicon Valley Bank (the Lender), and the Company entered into a U.S.

Small Business Administration

Paycheck Protection Program Note (the Agreement) with the Lender evidencing the PPP Note.

The full amount

of the PPP Note is due in April 2022.

Interest will accrue on the outstanding principal balance of the PPP Note at a fixed rate

of 1.0% per annum, which shall be deferred for 10 months after the covered period during which the Company used the proceeds.

The Company may prepay principal of the PPP Note at any time in any amount without penalty.

The Agreement contains customary events

of default relating to, among other things, payment defaults, breach of representations and warranties or provisions of the PPP

The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts

owing from the Company, and/or filing suit and obtaining judgment against the Company.

applied to the Lender for forgiveness of the PPP Note in October 2020, and the amount which may be forgiven will be equal to the

sum of the payroll and benefit costs and covered rent and utility payments incurred by the Company, as calculated in accordance

with the terms of the CARES Act.

Promissory Notes

February and March 2021, the Company sold $2,210,000 of convertible promissory notes (the Notes), at par in a private placement

transaction effected pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended

(the 2021 Placement).

The Notes bear interest at an annual rate of 12%, and interest is accrued or payable monthly in cash.

Notes mature on September 30, 2021 (the Maturity Date) and may be prepaid prior to the Maturity Date.

aggregate principal amount of the Notes plus accrued but unpaid interest thereon shall automatically convert upon the closing

of an offering of the Company’s equity securities to investors or a strategic corporate investor resulting in aggregate

gross proceeds to the Company of at least $5,000,000 (excluding conversion of the Notes or other convertible securities issued

for capital raising purposes) (a Qualified Financing).

In the event of a Qualified Financing, all such outstanding principal and

accrued interest shall convert into the same equity securities purchased by and on the same terms and conditions as the other

investors in such Qualified Financing at a conversion price equal to 80% (a 20% discount) of the lowest price paid per unit or

share by investors in the Qualified Financing.

In the event that additional bridge financing is obtained by the Company, the Notes

shall convert into the same securities and on the same terms and conditions as the other investors therein and all such purchases

will be treated as one, single round of financing going forward.

As of March 31, 2021, the Notes could be converted into 770,305

shares of common stock, excluding the effects of any payments of interest in kind.

any time on or following the Maturity Date, the holders of the Notes may demand repayment of the Notes, and the Company shall

repay the outstanding aggregate principal amount plus accrued but unpaid interest thereon.

The holders of the Notes, however,

retain the right for 30 days after the Maturity Date to convert all or part of the aggregate principal amount plus accrued but

unpaid interest on the Notes into the Company’s common stock at the conversion price of $2.87 per share or at a 20% discount

to any financing consummated during the 30-day period following the Maturity Date.

a Qualified Financing has not occurred immediately prior to the consummation of a Change of Control (as defined below), the Note

holders shall have the option of either (i) converting all or any portion of the aggregate principal amount of the Notes plus

accrued but unpaid interest thereon into common stock of the Company at a conversion price equal to $2.87 per share or (ii) having

the Company repay the aggregate principal amount of the Notes and accrued but unpaid interest.

The term “Change of Control”

means (i) a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other

corporate reorganization, other than any such consolidation, merger or reorganization in which the shares of capital stock of

the Company immediately prior to such consolidation, merger or reorganization continue to represent a majority of the voting power

of the surviving entity immediately after such consolidation, merger or reorganization;

(ii) any transaction or series of related

transactions to which the Company is a party in which in excess of 50% of the Company’s voting power is transferred;

the sale or transfer of all or substantially all of the Company’s assets, or the exclusive license of all or substantially

all of the Company’s material intellectual property;

or (iv) the dissolution and winding up of the Company.

The Company incurred debt issuance

costs of $88,800, which were recorded as a debt discount and are being amortized to interest expense over the term of the Notes

using the effective interest rate method.

The interest expense related to the debt discount during the year ended March

31, 2021 was approximately $13,000.

NOTE 4 –

Effective April

1, 2019, the Company adopted ASC No.

842, as amended, using the alternative transition method, which allowed the Company to initially

apply the new lease standard at the adoption date (the “effective date method”).

In January 2020, the Company executed

a lease for a new, larger corporate facility in San Diego, California and paid a $100,000

security deposit.

The 39-month lease term commenced on April 1, 2020, and the lease provides for an initial monthly

rent of approximately $12,400 with annual rent increases of approximately 3%.

addition to the minimum lease payments, the Company is responsible for property taxes, insurance and certain other operating costs.

The right-to-use asset and corresponding liability for the facility lease have been measured at the present value of the future

minimum lease payments.

A discount rate of 11%, which approximated the Company’s incremental borrowing rate, was used to

measure the lease asset and liability.

Accrued expenses

Company accounts for the lease for its corporate facility in San Diego, California in accordance with ASC 842.

The 39-month lease

term commenced April 1, 2020, and the lease provides for an initial monthly rent of approximately $12,400 annual rent increases

of approximately 3%.

In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and

certain other operating costs.

The right-to-use asset and corresponding liability for the facility lease have been measured at the present

value of the future minimum lease payments.

A discount rate of 11%, which approximated the Company’s incremental borrowing rate,

was used to measure the lease asset and liability.

Lease expense is recognized on a straight-line basis over the lease term.

obtained a right-of-use asset of $270,950 in exchange for is obligations under the operating lease.

Company obtained a right-of-use asset of $ 270,950 in exchange for its obligations under the operating lease.

The landlord also provided

a lease incentive of approximately $139,000, which was paid to the Company in June 2020, for the Company to make improvements

to the leased space.

Future minimum

payments under the facility operating lease, net of the lease incentive, as of March 31, 2021, are listed in the table below.

a lease incentive of approximately $ 139,000 , which was paid to the Company in June 2020, for the Company to make improvements to the

leased space.

In addition, the Company paid a $100,000 security deposit.

minimum payments under the facility operating lease , as of March 31, 2022, are listed in the table below.

Annual Fiscal Years

1 unchanged sentence

Present value of lease liabilities

was $107,540 and $35,766 for the years ended March 31, 2021 and 2020, respectively.

NOTE 5 –

paid for amounts included in the measurement of lease liabilities was $ 153,432 for the year ended March 31, 2022.

Rent expense was

$ 107,820 and $ 107,540 for the years ended March 31, 2022 and 2021, respectively.

In April 2020, the

Company received a $ 368,780 unsecured loan (the PPP Note) under the Paycheck Protection Program (the PPP), which was established under

government’s Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

The PPP Note to the Company was made

through Silicon Valley Bank (the Lender), and the Company entered into a U.S.

Small Business Administration Paycheck Protection Program

Note with the Lender evidencing the PPP Note.

amount of the PPP Note was due in April 2022 and interest accrued on the outstanding principal balance of the PPP Note at a fixed rate

of 1.0% per annum, which was deferred for 10 months after the covered period during which the Company used the proceeds.

May 2021, the Lender and the U.S.

Small Business Administration notified the Company that the outstanding principal and accrued interest

for the PPP Note was forgiven in full.

The Company accounted for the forgiveness of the PPP Note in accordance with ASC Topic 470:

(ASC 470), and the amount forgiven was recorded as a gain on extinguishment and recognized in the other income line of the consolidated

statement of operations.

5 – CONVERTIBLE PROMISSORY NOTES

February through April 2021, the Company sold $2,310,000 of convertible promissory notes (each an Original Note and, collectively, the

Original Notes), at par in a private placement transaction effected pursuant to an exemption from the registration requirements under

the Securities Act of 1933, as amended.

Effective April 30, 2021, pursuant to a revocation and replacement agreement between each holder

of an Original Note and the Company (the Revocation Agreement), the $2,310,000 of Original Notes and accrued interest thereon as of April

30, 2021 were replaced with $2,360,550 aggregate principal amount of new Notes (as defined below).

The Company accounted for the replacement

of the Original Notes in accordance with ASC 470 and recorded a loss on extinguishment of $ 1,321,450 and interest expense of $ 70,647

for unamortized debt issuance costs as of April 30, 2021.

April and May 2021, pursuant to a securities purchase agreement by and between the Company and each investor (the SPA), the Company sold

to investors $ 4,250,000 aggregate principal amount of convertible promissory notes (the Notes) and warrants to purchase shares of

its common stock (the Warrants).

The Notes are unsecured obligations of the Company with each Note having a stated maturity date of 12

months from its issue date (the Issue Date).

The Notes bear interest at a rate of 12% per annum, payable on maturity, provided that,

if the Company fails to pay any amounts when due under a Note, the interest rate increases to the greater of 16% or the maximum amount

permitted by law.

Each Note may be prepaid at the Company’s option during the first 270 calendar days following its Issue Date

(the 270 th day, the Trigger Date), subject to a 110% prepayment penalty on outstanding principal and accrued interest

then outstanding.

No Note may be prepaid in whole or in part after the Trigger Date.

outstanding after the Trigger Date may be converted into shares of the Company’s common stock at an initial conversion price of

$8.61 per share;

provided that a Note holder may not convert any portion of its Note that would cause it to beneficially own in excess

of 4.99% of the Company’s outstanding common stock.

The conversion price and number of shares of Company common stock issuable

upon conversion of the Notes are subject to adjustment from time to time for subdivisions and consolidations of shares and other standard

dilutive and corporate events, as provided in the Notes.

Subject to certain Exempt Issuances (as defined in the Notes), if while a Note

is outstanding, the Company sells, issues or grants any shares of its common stock or other securities to acquire shares of common stock

at a price per share less than the then conversion price, such conversion price shall be reduced to such lesser price, and the number

of conversion shares issuable upon conversion of the Notes shall be increased, as provided in the Notes.

the Company completes an offering of its common stock or other securities in excess of $12,000,000 of gross proceeds (a Qualified Capital

Raise, as defined in the Notes), each Note holder will be required to convert its Adjusted Note Amount (as defined below) into the securities

of such Qualified Capital Raise.

Adjusted Note Amount equals the product of (i) the sum of all outstanding principal plus accrued interest

on a Note, multiplied by (ii) 1.25.

Notes contained a number of Company events of default (Events of Default) including, without limitation (i) failure to pay any principal

or interest thereon when due, (ii) failure to timely deliver shares upon conversions, (iii) failure to comply with SEC reporting requirements

under the Exchange Act, (iv) certain breaches of the SPA, the Notes, the Warrants, and the Registration Rights Agreement, (v) material

restatements of the Company’s consolidated financial statements filed with the SEC, (vi) a holder’s inability to rely on

Rule 144 for sales of shares underlying the Notes, (vii) the Company’s common stock is suspended or halted from trading and/or

fails to be quoted or listed (as applicable) on the OTCQB, OTCQX, any tier of the NASDAQ Stock Market, the New York Stock Exchange, or

the NYSE American within 10 days thereafter, (viii) failure to file with the SEC a registration statement covering the resale of shares

of common stock underlying the Notes and Warrants within 60 calendar days following the Issue Date, (ix) failure to cause such registration

statement to become effective within 120 calendar days following the Issue Date, or (x) certain mergers consolidations, business combinations

and sales of all or substantially all of the Company’s assets in the event the Company is not the survivor of such transaction.

an Event of Default, a Note holder may declare all amounts under its Note(s) due and payable, in which event the Company will be required

to pay such Note holder the sum of (i) the product of (a) all then outstanding principal amount and accrued interest thereon, multiplied

and (ii) all collection costs including legal fees and expenses in connection therewith.

At the option of a Note holder,

in the event the Company receives cash proceeds as a result of certain events, including, but not limited to, payments from customers,

issuances of debt or equity securities, exercise of warrants or asset sales, the Company will be required to use such proceeds to repay

all or any lesser outstanding amounts due under such holder’s Note.

Notes include covenants, representations, warranties, other payment obligations and agreements by the Company including, without limitation,

most-favored nation rights, rights of participation and first refusal and exchange rights.

connection with the issuance of the Notes, the Company issued Warrants to purchase in the aggregate 767,796 shares of its common stock

at an initial exercise price of $24.00 per share.

The Warrants may be exercised for a period of five years from the Trigger Date, provided

that, if prior to the Trigger Date, the Company (i) completes a Qualified Capital Raise, the outstanding Warrants shall be cancelled

or (ii) prepays a holder’s Note(s) in whole or in part, such holder’s pro-rata number of Warrants shall be cancelled.

fair value of the Warrants was $3,700,632, of which $2,379,182 was recorded as a debt discount, which is being amortized to interest

expense over the term of the Warrants, and $1,321,450 was recorded as a loss on debt extinguishment.

The Company calculated the fair

value of the Warrants utilizing the Black-Scholes valuation model with the following assumptions:

volatility of 88.98 % , risk-free

interest rate of 0.86 % , a term of 5.75 years and a dividend yield of zero .

connection with the April and May 2021 sales of the $4,250,000 aggregate principal amount of the Notes, the Company incurred debt issuance

costs of $116,000, which were recorded as a debt discount and were amortized to interest expense over the term of the Notes using the

effective interest rate method.

The interest expense attributable to the debt discount, comprising the debt issuance costs and Warrants,

during the year ended March 31, 2022 was $1,833,618.

the closing of the Offering (see Note 7), which was a Qualified Capital Raise, in accordance with their terms, the Notes converted into

1,511,276 shares of common stock and the holders of the Notes received 1,511,276 Offering Warrants (as defined in Note 7).

a result of the Offering, the exercise price of the 767,796 outstanding Warrants was reduced to $6.00 per share.

6 – PROMISSORY NOTE

October 2021, the Company issued a secured promissory note (the Bridge Note) to Manchester Explorer, L.P.

(Manchester) that provided

the Company with a $ 3,000,000 revolving credit facility with all amounts being drawn down by the Company thereunder being due and

payable, subject to acceleration in the event of a default, on March 15, 2022 (the Maturity Date).

Interest at the rate of 12 % was

payable on each drawn down without regard to the draw down date or the date when interest is paid.

principal amount of the Bridge Note and interest due thereon is payable to Manchester no later than the earlier of:

(i) the Maturity

Date and (ii) the date on which the Company has received proceeds in excess of $12,000,000 from a transaction or series of related transactions

occurring prior to the Maturity Date, which such transactions constitute equity financings or other issuances of the Company’s

equity securities.

Provided that no Event of Default (as such term is defined in the Bridge Note) has occurred, on any date prior to

the Maturity Date, upon no less than three days written notice by the Company specifying the draw amount, Manchester will advance the

draw amount to the Company.

No draw amount can be in an amount less than $100,000 or exceed an amount equal to $3,000,000 minus the aggregate

principal amount outstanding under the Bridge Note at the time of such draw request.

If an Event of Default occurs and is continuing,

Manchester may declare all of the Bridge Note, including any interest and other amounts due, to be due and payable immediately.

connection with the issuance of the Note, on October 28, 2021, the Company entered into a security agreement with Manchester (the Security

Agreement) under which the Company granted Manchester a continuing and unconditional first priority security interest in and to any and

all of the Company’s property of any kind or description, tangible or intangible, wheresoever located and whether now existing

or hereafter arising or acquired.

fiscal 2022, the Company made draws on the Bridge Note of $ 2,100,000 and incurred interest charges of $ 252,000 .

In February 2022,

subsequent to the completion of the Offering (see Note 7), the Bridge Note and accrued interest was paid in full, and the Security Agreement

was terminated.

7 – STOCKHOLDERS’ EQUITY (DEFICIT)

February 9, 2022, the Company entered into an underwriting agreement (the Underwriting Agreement) with Oppenheimer & Co.

acted as the representative of the several underwriters (the Underwriters), in a firm commitment underwritten public

offering (the Offering) pursuant to which, on February 14, 2022, the Company sold to the Underwriters an aggregate of 2,500,000 shares

of the Company’s common stock and 2,500,000 warrants (the Offering Warrants and, collectively with the shares of common stock,

the Units), each to purchase one share of common stock.

The price to the public in the Offering was $6.00 per Unit, before underwriting

discounts and commissions.

The common stock and the Offering Warrants comprising the Units were immediately separable upon issuance and

were issued separately.

The Offering Warrants were exercisable immediately, have an exercise price of $6.60 per share and expire on February

The gross proceeds from the Offering were $ 15,000,000 , before deducting underwriting discounts

and commissions and other offering expenses.

of Common Stock

Between March and December

2020, the Company completed a private placement of shares of its common stock (the 2020 Placement).

The Company sold 962,387 shares of

common stock, at a purchase price of $2.87 per share, for gross proceeds of $2,762,054.

The Company paid placement agent fees on the

2020 Placement of $52,256 during fiscal 2021.

October 2021, the Company sold 30,864 shares of common stock to two officers, its i) chief executive officer and ii) the chairman of

the Company’s board of directors (the Board), president, chief financial officer and treasurer, at

a purchase price of $8.10 per share, for gross proceeds of approximately $ 250,000 .

the year ended March 31, 2022, the Company issued to service providers 90,000 shares of common stock with a fair value of approximately $ 594,400 .

8 – STOCK-BASED COMPENSATION

Equity Compensation

In October 2017,

the Company’s board of directors (the Board) approved the 2017 Equity Incentive Plan (the 2017 Plan) with 3,000,000 shares

of common stock reserved for issuance.

In January 2020, the Board approved an amendment to the 2017 Plan to increase the number

of shares reserved for issuance by 1,000,000 shares.

Under the 2017 Plan, eligible employees, directors and consultants may be

granted a broad range of awards, including stock options, stock appreciation rights, restricted stock, performance-based awards

2017 Equity Incentive Plan

October 2017, the Company’s Board approved the 2017 Equity Incentive Plan (the Plan) with 1,000,000 shares of common

stock reserved for issuance.

In January 2020 and August 2021, the Board approved increases in the number of shares reserved for issuance

under the Plan by 333,334 and 1,333,334 shares, respectively.

Under the Plan, eligible employees, directors and consultants

may be granted a broad range of awards, including stock options, stock appreciation rights, restricted stock, performance-based awards

and restricted stock units.

The Plan is administered by the Board or, in the alternative, a committee designated by the Board.

or purchase price of a stock option shall be calculated as follows:

case of an incentive stock option, (a) granted to employees, who, at the time of the grant of such incentive stock option

own stock representing more than 10% of the voting power of all classes of stock of the Company, the per share exercise price

shall be not less than 110% of the fair market value per share on the date of grant;

or (b) granted to employees, other than

to employees, described in the preceding clause, the per share exercise price shall be not less than 100% of the fair market

value per share on the date of grant;

case of a non-qualified stock option, the per share exercise price shall be not less than 100% of the fair market value per

share on the date of grant unless otherwise determined by the Board;

In the case of other

grants, such price as determined by the Board.

is responsible for determining the consideration to be paid for the shares of common stock to be issued upon exercise or purchase.

The 2017 Plan generally does not allow for the transfer of awards, and the Board may amend, suspend or terminate the 2017 Plan

Compensation Expense

relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period,

based on the grant date fair value.

The unamortized compensation cost, as of March 31, 2021 was $2,242,352 related to stock options

and is expected to be recognized as expense over a weighted-average period of approximately 2 years.

the year ended March 31, 2021, options granted to purchase shares of its common stock to employees, directors and consultants

had 10-year terms and a grant-date fair value of $1,101,737.

Options to purchase 10,476 shares vested immediately on the respective

The following assumptions were used

in the fair-value method calculations:

ended March 31,

The expense relating

to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant

date fair value.

The unamortized compensation cost, as of March 31, 2022 was $ 3,286,370 related to stock options and is expected to be

recognized as expense over a weighted-average period of approximately two years .

During the year

ended March 31, 2022, the Company granted options to purchase 827,427 shares of its common stock to employees, directors and consultants.

The options had 10-year terms and 137,292 options vested immediately when granted.

The grant-date fair value was determined to be $ 8,507,311

of which $ 2,739,490 was recorded as stock-based compensation expense and included in the consolidated statements of operations for the

year ended March 31, 2022.

The following assumptions were used in the

fair-value method calculations:

Schedule of Fair Value Assumptions

Risk-free interest rates

0.8 % - 2.42 %

Expected life (years)

Dividend yield

The fair values

of options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified methods to

establish the fair term of options as well as average volatility of three comparable organizations.

The risk-free interest rate

was derived from the Daily Treasury Yield Curve Rates, as published by the U.S.

Department of the Treasury as of the grant date

for terms equal to the expected terms of the options.

A dividend yield of zero was applied because the Company has never paid

dividends and has no intention to pay dividends in the foreseeable future.

The fair values of

options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified methods to establish

the fair term of options as well as average volatility of three comparable organizations.

The risk-free interest rate was derived from

the Daily Treasury Yield Curve Rates, as published by the U.S.

Department of the Treasury as of the grant date for terms equal to the

expected terms of the options.

A dividend yield of zero was applied because the Company has never paid dividends and has no intention

to pay dividends in the foreseeable future.

In accordance with ASU No.

2016-09, the Company accounts

for forfeitures as they occur.

A summary of stock option activity

under the 2017 Plan is presented below:

2016-09, the Company accounts for forfeitures as they occur.

A summary of stock option activity under

the 2017 Plan is presented below:

Schedule of Stock Option activity

Options Outstanding

2 unchanged sentences

Balance at March 31, 2020

Additional shares authorized under the Plan

Options granted

1 unchanged sentence

Balance at March 31, 2021

Additional shares authorized under the Plan

Options granted

3 unchanged sentences

stock options exercised during the years ended March 31, 2022 and 2021.

Company issued 26,497 shares to its non-employee directors under the Company’s outside director compensation plan and approximately

$172,100 was recorded as stock-based compensation expense for these share awards during the year ended March 31, 2022.

The following

table summarizes the range of outstanding and exercisable options as of March 31, 2022:

Outstanding and Exercisable Option, Range

Options Outstanding

2 unchanged sentences

$ 1.98 - $ 17.70

The intrinsic

value per share is calculated as the excess of the closing price of the common stock on the Company’s principal trading

market over the exercise price of the option.

is required to present the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise

of stock options as financing cash flows in the consolidated statements of cash flows.

For the years ended March 31, 2021 and

2020, there were no such tax benefits associated with the exercise of stock options.

NOTE 6 –

STOCKHOLDERS’

Private Placement

Between March

and December 2020, the Company completed a private placement of shares of its common stock (the 2020 Placement).

The Company sold

962,387 shares of common stock, at a purchase price of $2.87 per share, for gross proceeds of $2,762,054.

The Company paid placement

agent fees on the 2020 Placement of $52,256 during fiscal 2021.

Under the terms of the common stock purchase agreements between

the Company and the investors, the Company must use commercially reasonable efforts to file a registration statement with the

SEC to register for resale the shares of common stock sold.

NOTE 7 –

The income tax provision (benefit)

consisted of the following:

The intrinsic value per share is calculated

as the excess of the closing price of the common stock on the Company’s principal trading market over the exercise price of the

option at March 31, 2022.

The Company is required

to present the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise of stock options

as financing cash flows in the consolidated statements of cash flows.

For the years ended March 31, 2022 and 2021, there were no such

tax benefits associated with the exercise of stock options.

9 – INCOME TAXES

The income tax provision consisted

of the following:

Schedule of Income tax provision

Year Ended March 31,

1 unchanged sentence

Deferred portion:

( 4,109,000 )

( 1,931,390 )

( 1,300,000 )

( 5,409,000 )

( 2,508,258 )

Change in valuation allowance

Provision for income taxes

As of March 31,

At March 31, 2022,

the Company had net operating loss carryforwards (NOLs) of approximately $ 27,600,000 for federal income tax purposes and $ 27,800,000

for state income tax purposes.

These NOLs are available to reduce future taxable income and will expire at various

times from 2037 through 2041, except federal NOLs from fiscal 2018, 2019 and 2020 which will never expire.

also had federal research and development tax credit carryforwards of approximately $535,000, which will begin expiring at various

times from 2038 through 2040, and state research and development credits of approximately $141,000, which do not have an expiration

A reconciliation

of income taxes provided at the federal statutory rate (21% for fiscal 2021 and 2020) to the actual income tax provision is as

These NOLs are available to reduce future taxable income and will expire at various times from 2037 through

2042, except federal NOLs from fiscal 2018, 2019, 2020, 2021 and 2022, which will never expire.

also had federal research and development tax credit carryforwards of approximately $ 800,000 , which will begin expiring at various times

from 2038 through 2041, and state research and development credits of approximately $ 200,000 , which do not have an expiration date.

A reconciliation of

income taxes provided at the federal statutory rate (21% for each of fiscal 2022 and 2021) to the actual income tax provision is as follows:

Schedule of Income Tax Provisions

Year Ended March 31,

6 unchanged sentences

Effective income tax rate

Significant components of the Company’s

The losses before income tax provision for the years ended March 31, 2022 and 2021 were solely attributable to US operations.

Significant components of the Company’s

deferred tax assets and liabilities were:

Schedule of Deferred Tax Assets

Net operating loss carryforwards

4 unchanged sentences

Total deferred tax assets

Section 179 assets

Total deferred tax liabilities

valuation allowance

( 10,422,000 )

( 5,012,705 )

Deferred tax assets, net

available information and other factors, management believes it is more likely than not that the net deferred tax assets at March

31, 2021 and 2020, will not be fully realizable.

Accordingly, management has recorded a full valuation allowance against its net

deferred tax assets at March 31, 2021 and 2020.

Management has

evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated

financial statements at March 31, 2021 and 2020.

The Company does not expect any significant changes in its unrecognized tax benefits

within twelve months of the reporting date.

NOTE 8 –

Based on the available

information and other factors, management believes it is more likely than not that the net deferred tax assets at March 31, 2022 and

2021, will not be fully realizable.

Accordingly, management has recorded a full valuation allowance against its net deferred tax assets

at March 31, 2022 and 2021.

Management has evaluated

and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial

statements at March 31, 2022 and 2021.

The Company does not expect any significant changes in its unrecognized tax benefits within twelve

months of the reporting date.

10 – ROYALTY AGREEMENT

In July 2017,

the Company entered into a royalty agreement with its founder, chief executive officer and major shareholder (the Founder).

to the agreement, the Founder assigned and transferred all of his rights in the intellectual property of Quasuras in return for

future royalty payments on the Company’s product.

The Company is obligated to make royalty payments under the agreement

to the Founder on any sales of the royalty product sold or otherwise commercialized by the Company equal to (a) $0.75 on each

sale of a royalty product or (b) 5% of the gross sale price of the royalty product, whichever is less.

The royalty payments will

cease, and the agreement will terminate, at such time as the total sum of royalty payments actually paid to the Founder, pursuant

to the agreement, reaches $10,000,000.

The Company has the option to terminate the agreement at any time upon payment, to the

Founder, of the difference between total royalty payments actually made to him to date and the sum of $10,000,000.

of the royalties, if due, for the preceding quarter, will be made by the Company to the Founder within thirty days after the end

of each calendar quarter.

NOTE 9 –

RETIREMENT SAVINGS

Effective March

2020, the Company adopted the Modular Medical, Inc.

401(k) Plan (the Savings Plan), which qualifies as a thrift plan under Section 401(k)

of the Internal Revenue Code.

Full-time and part-time employees who are at least 21 years of age are eligible to participate

in the Savings Plan at the time of hire.

Participants may contribute up to 15% of their earnings to the Savings Plan.

became effective and began accepting participant contributions in April 2020.

NOTE 10 –

In July 2017, the Company

entered into a royalty agreement with its founder, then-chief executive officer, president and major shareholder (the Founder).

to the agreement, the Founder assigned and transferred all of his rights in the intellectual property of Quasuras in return for future

royalty payments on the Company’s product.

The Company is obligated to make royalty payments under the agreement to the Founder

on any sales of the royalty product sold or otherwise commercialized by the Company equal to (a) $0.75 on each sale of a royalty product

or (b) 5% of the gross sale price of the royalty product, whichever is less.

The royalty payments will cease, and the agreement will

terminate, at such time as the total sum of royalty payments actually paid to the Founder, pursuant to the agreement, reaches $10,000,000.

The Company has the option to terminate the agreement at any time upon payment, to the Founder, of the difference between total royalty

payments actually made to him to date and the sum of $10,000,000.

All payments of the royalties, if due, for the preceding quarter, will

be made by the Company to the Founder within thirty days after the end of each calendar quarter.

11 – COMMITMENTS AND CONTINGENCIES

Claims and Assessments

In the normal

course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of

The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable

In the normal course

of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business.

Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.

Indemnification

In the ordinary

course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties

from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims

and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising

from litigation or claims relating to past performance.

In the ordinary course

of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses

incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from

certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating

to past performance.

Such indemnification clauses may not be subject to maximum loss clauses.

The Company has also entered into indemnification agreements with its officers and directors.

No amounts were reflected in the

Company’s consolidated financial statements for the years ended March 31, 2021 and 2020 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited

history of prior claims and the unique facts and circumstances applicable to each particular agreement.

To date, the Company has

not made any payments related to these indemnification agreements.

The Company has also entered into indemnification

agreements with its officers and directors.

No amounts were reflected in the Company’s consolidated financial statements for the

years ended March 31, 2022 and 2021 related to these indemnifications.

The Company has not estimated the maximum potential amount

of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances

applicable to each particular agreement.

To date, the Company has not made any payments related to these indemnification agreements.

– RELATED PARTY TRANSACTIONS

During the year

ended March 31, 2020, the Company entered into consulting agreements with a member of its board of directors.

Under the consulting

agreements, during the year ended March 31, 2020, the Company paid the director consulting fees of $140,625 in

cash, and the director was granted stock options with a fair value of $76,875.

The options were for a total of 47,062 shares of

common stock, were fully vested on the grant dates and have terms of 10 years.

The most recent consulting agreement,

which was entered into between the Company and the director in September 2019, was terminated in March 2020.

At March 31, 2020,

the Company had an outstanding payable to the director of $5,585, which was included in accounts payable in the consolidated balance

The Company paid the $5,585 to the director during fiscal 2021.

2021 Placement

Company’s chief executive officer and an existing investor, which is represented by a member of the Company’s board

of directors, purchased $100,000 and $1,000,000, respectively, aggregate principal amount of the Notes (the Related Party Notes)

in the 2021 Placement.

As of March 31, 2021, $1,677 and $16,767 of interest was payable by the Company on the Related Party Notes

to its chief executive officer and to the investor, respectively.

NOTE 12 –

SUBSEQUENT EVENTS

Promissory Notes

Subsequent to

March 31, 2021, the Company issued an additional $4,250,000 of the Notes in the 2021 Placement pursuant to a Securities Purchase

Agreement between the Company and each investor (the SPA) and warrants to purchase shares of its common stock (the Warrants).

The Notes are unsecured obligations of the Company with each Note having a stated maturity date of 12 months from its issue date

(the Issue Date).

The Notes bear interest at a rate of 12% per annum, payable on maturity, provided that, if the Company fails

to pay any amounts when due under a Note, the interest rate increases to the greater of 16% or the maximum amount permitted by

Each Note may be prepaid at the Company’s option during the first 270 calendar days following its Issue Date (the 270 th day,

the Trigger Date), subject to a 110% prepayment penalty on all principal and accrued but unpaid interest then outstanding.

Notes may be prepaid in whole or in part after the Trigger Date.

remain outstanding after the Trigger Date, the Notes may be converted into shares of the Company’s common stock at an initial

conversion price of $2.87 per share;

provided, that a Note holder may not convert any portion of its Note that would cause it

to beneficially own in excess of 4.99% of the Company’s outstanding common stock.

The conversion price and number of shares

of Company common stock issuable upon conversion of the Notes will be subject to adjustment from time to time for any subdivision

or consolidation of shares and other standard dilutive and certain other corporate events, as provided in the Notes.

certain Exempt Issuances (as defined in the Notes), if at any time while a Note is outstanding, the Company sells, issues or grants

any shares of its common stock or other securities entitling the holder to acquire shares of the Company’s common stock

at a price per share less than the then conversion price, such conversion price shall be reduced to such lesser price, and the

number of shares of the Company’s common stock issuable upon conversion of the Notes shall be increased, as provided in

If the Company

completes an offering of its common stock or other securities in excess of $12,000,000 of gross proceeds (a Qualified Capital

Raise), each Note holder will be required to convert its Adjusted Note Amount into the securities of such Qualified Capital Raise.

For purposes hereof, Adjusted Note Amount equals the product of (i) the sum of all outstanding principal plus accrued but unpaid

interest on a Note, multiplied by (ii) 1.25.

The Notes contain

a number of Company events of default (Events of Default) including, without limitation (i) failure to pay any principal or interest

thereon when due, (ii) failure to timely deliver shares upon conversions, (iii) failure to comply with SEC reporting requirements

under the Exchange Act, (iv) certain breaches of the SPA, the Notes, the Warrants, and the Registration Rights Agreement, (v)

material restatements of the Company’s consolidated financial statements filed with the SEC, (vi) a holder’s inability

to rely on Rule 144 for sales of shares underlying the Notes, (vii) the Company’s common stock is suspended or halted from

trading and/or fails to be quoted or listed (as applicable) on the OTCQB, OTCQX, any tier of the NASDAQ Stock Market, the New

York Stock Exchange, or the NYSE American within 10 days thereafter, (viii) failure to file with the SEC a registration statement

covering the resale of shares of common stock underlying the Notes and Warrants within 60 calendar days following the Issue Date,

(ix) failure to cause such registration statement to become effective within 120 calendar days following the Issue Date, or (x)

certain merger consolidations, business combinations and sales of all or substantially all of the Company’s assets in the

event the Company is not the survivor of such transaction.

Upon an Event

of Default, a Note holder may declare all amounts under its Note(s) due and payable, in which event the Company will be required

to pay such Noteholder the product of (i) all then outstanding principal amount and accrued but unpaid interest thereon, multiplied

by (ii) 125%;

and all collection costs including legal fees and expenses in connection therewith.

At the option of a Note holder,

in the event the Company receive cash proceeds as a result of certain events including, but not limited to, from customers, issuances

of debt or equity securities, exercise of warrants or asset sales, the Company will be required to use such proceeds to repay

all or any lesser outstanding amounts due under such holder’s Note.

The Notes also

includes various covenants, including negative covenants, representations, warranties, other payment obligations and agreements

by the Company including, without limitation, most-favored nation clauses, rights of participation and first refusal and exchange

In connection with the issuance of the Notes, the Company issued Warrants to purchase 2,285,736 shares of its common stock

(Warrant Shares) at an initial exercise price of $8.00 per share.

The Warrants may be exercised for a period of 5 years from the

Trigger Date.

that, prior to the Trigger Date, the Company (i) completes a Qualified Capital Raise, the outstanding Warrants shall be cancelled

or (ii) prepays a holder’s Note(s) in whole or in part, such holder’s pro-rata number of its Warrants shall be cancelled.

February 2021, the Company’s chairman of the Board and president and Manchester, which is represented by a member of the Company’s

board of directors, purchased $100,000 and $1,000,000, aggregate principal amount of the Original Notes, respectively.

Effective April

30, 2021, each of the holders of the $2,210,000 of Notes outstanding at March 31, 2021 entered into a revocation and replacement

agreement with the Company (the Revocation Agreement).

Under the terms of the Revocation Agreement, the $2,210,000 of Notes and

accrued interest of $50,091 were replaced with new Notes consistent with the terms described above.

a member of the Board purchased $200,000 of the Notes.

of the Company’s request for loan forgiveness, on May 29, 2021, the Company was notified that the outstanding principal

and accrued interest for the PPP Note was forgiven in full by the U.S.

Small Business Administration.

30, 2021, the related party holders entered into revocation agreements with the Company pursuant to which their aggregate principal amount

of Original Notes and accrued interest were replaced with Notes.

On February 14, 2022, Manchester and the executive officer held Notes

in an aggregate principal amount of $ 1,026,630 and

$ 102,663 , respectively, with $ 97,881 and $ 9,788 of interest payable thereon.

In connection with the Offering, Manchester and

the executive officer received 234,274 and 23,429 shares of common stock, respectively, and 234,274 and 23,429 Offering Warrants, respectively.

May 2021, a member of the Board purchased $ 200,000 aggregate principal amount of Notes (the Director Note).

On February 14, 2022,

in connection with the Offering, the Director Note and $ 18,805 of accrued interest thereon were converted into 45,586 shares of common

stock 45,586 Offering Warrants .

The daughter of the

Company’s president, chief financial officer, treasurer and chairman of the Board is an employee of the Company.

During fiscal

2022, the Company paid her $ 169,589 , which includes the aggregate grant date fair value, as determined pursuant to FASB ASC Topic 718,

of a stock option granted in November 2021.

13 – SUBSEQUENT EVENT

On May 2, 2022, the

Company entered into a securities purchase agreement (the Purchase Agreement) with an institutional investor (the Investor) pursuant

to which the Company sold, in a registered direct offering (the Registered Offering), for gross proceeds of $8,000,000 an aggregate

of 449,438 shares (the Shares) of the Company’s common stock, at a purchase price per Share of $4.45 and pre-funded warrants (the

Pre-Funded Warrants) to purchase an aggregate of 1,348,314 shares of common stock at a purchase price per Pre-Funded Warrant of $4.44.

The Pre-Funded Warrants were exercisable immediately on the date of issuance at an exercise price of $0.01 per share and may be exercised

at any time until all of the Pre-Funded Warrants are exercised in full.

a concurrent private placement under the Purchase Agreement, the Company issued warrants (the Private Placement Warrants) to the Investor

to purchase an aggregate of 1,438,202 shares of common stock at an exercise price of $6.60 per share.

The Private Placement Warrants

will be exercisable commencing November 5, 2022 and have a five-year term.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data