What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-11 compared with 2022-02-14 · 352 added, 505 removed, 165 unchanged (84% of the section changed)

4 unchanged sentences

Cash and cash equivalents

Prepaid expenses

Other current assets

Prepaid expenses and other

TOTAL CURRENT ASSETS

3 unchanged sentences

TOTAL NON-CURRENT ASSETS

LIABILITIES AND STOCKHOLDERS’ DEFICIT

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES

2 unchanged sentences

Short-term lease liability

PPP note payable

Promissory note payable

Convertible notes payable

TOTAL CURRENT LIABILITIES

1 unchanged sentence

Long-term lease liability

Bonus payable

TOTAL LIABILITIES

Commitments and Contingencies (Note 8)

STOCKHOLDERS’ DEFICIT

STOCKHOLDERS’ EQUITY

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

Common Stock, $ 0.001 par value, 50,000,000 shares authorized;

6,373,706 and 6,302,050 shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively

10,914,348 and 10,461,898 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively

Additional paid-in capital

Common stock issuable

Accumulated deficit

1 unchanged sentence

( 34,579,771 )

TOTAL STOCKHOLDERS’ DEFICIT

( 8,246,635 )

( 1,275,149 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying

3 unchanged sentences

Three Months Ended

Nine Months Ended

Operating expenses

5 unchanged sentences

( 3,373,587 )

( 10,899,063 )

( 5,603,957 )

Interest expense

( 1,010,247 )

( 2,204,917 )

Loss on debt extinguishment

( 1,321,450 )

Loss before income taxes

$ ( 3,498,791 )

$ ( 4,835,091 )

( 14,056,554 )

( 5,603,831 )

Provision for income taxes

$ ( 4,841,307 )

$ ( 1,870,545 )

$ ( 14,058,155 )

$ ( 5,605,431 )

Net loss per share

5 unchanged sentences

Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

Condensed Consolidated Statements of Stockholders’ Equity

Stockholders’

1 unchanged sentence

$ ( 34,579,771 )

$ ( 1,275,149 )

Shares issued for services

Warrants issued with convertible notes

Issuance of common stock and warrants in equity offering, net

Issuance of common stock under equity incentive plan

Stock-based compensation

3 unchanged sentences

$ ( 38,078,562 )

$ ( 1,581,488 )

Stock-based compensation

( 4,381,757 )

Balance as of September 30, 2021

$ ( 25,163,858 )

$ ( 5,100,814 )

Private placement of common stock

Shares issued for services

Shares issuable for services

Shares issued for reverse stock split

Stock-based compensation

( 4,841,307 )

Balance as of December 31, 2021

( 30,005,165 )

( 8,246,635 )

Stockholders’

1 unchanged sentence

$ ( 15,947,010 )

Private placement of common stock

Stock-based compensation

$ ( 1,275,149 )

( 1,874,157 )

Balance as of June 30, 2020

$ ( 10,443,191 )

Shares issued for services

Warrants issued with convertible notes

Issuance of common stock under equity incentive plan

Stock-based compensation

1 unchanged sentence

( 4,835,091 )

Balance as of September 30, 2020

$ ( 12,303,920 )

Private placement of common stock

Stock-based compensation

( 1,870,545 )

Balance as of June 30, 2021

$ ( 20,782,101 )

Balance as of December 31, 2020

$ ( 1,581,488 )

3 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

Three Months Ended

Cash Flows from operating activities

$ ( 3,498,791 )

5 unchanged sentences

Depreciation and amortization

Shares issued for services

Shares issuable for services

Amortization of lease right-to-use asset

Shares for services

Amortization of lease right-of-use asset

Change in lease liability

1 unchanged sentence

Changes in assets and liabilities:

Prepaid expenses and other assets

Other assets and prepaid expenses

Accounts payable and accrued expenses

6 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from private placement, net of issuance costs

Proceeds from issuance of convertible notes, net of placement fees

Proceeds from issuance of promissory note

Proceeds from issuance of PPP note payable

Proceeds from issuance of common stock and warrants, net.

Proceeds from issuance of convertible notes, net

Net cash provided by financing activities

Net decrease in cash and cash equivalents

( 1,264,367 )

( 2,525,592 )

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

MEDICAL, INC.

F/K/A BEAR LAKE RECREATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Medical, Inc.

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

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 commercialization of an innovative insulin

pump using modernized technology to increase pump adoption in the diabetes marketplace.

Through the creation of a novel two-part,

patch pump product, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access to the higher

standards of care that presently available insulin pumps provide.

By simplifying and streamlining the user experience from introduction,

prescription, reimbursement, training and day-to-day use, the Company seeks to expand the wearable insulin delivery device market

beyond the highly motivated “super users” and expand the category into the mass market.

The Company’s pump product

seeks to serve both the type 1 and type 2 diabetes markets.

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 issued.

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.

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:

1) the 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.

The Company’s expected operating losses and cash burn and the need to repay the

convertible promissory notes and accrued interest in the first half of 2022 raise substantial doubt about the Company’s

ability to continue as a going concern within one year after the date that these 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 disclosed in note 9, the

Company recently sold shares of its common stock to two of its officers, obtained access to a credit facility and filed a registration

statement to offer shares of its common stock.

The Company’s operating needs include the planned costs to operate its business,

including amounts required to repay its convertible promissory notes (if not converted), 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 condensed consolidated financial

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

The Company 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.

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

condensed consolidated 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.

As a result of the

equity offerings completed in February 2022 and 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 condensed consolidated 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.

These condensed consolidated financial statements do not include any adjustments that might

result from this uncertainty.

of Presentation

1 unchanged sentence

fiscal year ends on March 31 of each calendar year.

Each reference to a fiscal year in these notes to the condensed 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 condensed consolidated financial statements include the accounts of the Company

and its wholly-owned subsidiary, Quasuras.

Each reference to a fiscal year in these notes to the condensed consolidated financial

statements refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2023 refers to the fiscal year

ending March 31, 2023).

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary,

All significant intercompany transactions and balances have been eliminated in consolidation.

The accompanying

condensed consolidated financial statements of the Company have been prepared without audit.

The condensed consolidated balance

sheet as of March 31, 2021 has been derived from the audited consolidated financial statements at that date.

Certain information

and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted

in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations of the Securities and

Exchange Commission (SEC).

opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting

only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations

and cash flows for the interim periods presented.

The operating results for the three months ended December 31, 2021 are not necessarily

indicative of the results that may be expected for the year ending March 31, 2022 or for any other future period.

Reverse Stock Split

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 (3) and, as applicable, multiplying the exercise price by three

(3), as a result of the reverse stock split.

The accompanying condensed

consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in

the United States (GAAP) and with the rules and regulations of the United States Security and Exchange Commission (SEC) regarding interim

financial reporting.

The condensed consolidated balance sheet as of March 31, 2022 has been derived from the audited consolidated financial

statements at that date.

Certain information and disclosures normally included in financial statements prepared in accordance with GAAP

have been condensed or omitted in accordance with these rules and regulations of the SEC.

The information in this report should be read

in conjunction with the Company’s consolidated financial statements and notes thereto included in its most recent annual report

on Form 10-K filed with the SEC.

In the opinion

of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal

recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for

the interim periods presented.

The operating results for the three months ended June 30, 2022 are not necessarily indicative of the results

that may be expected for the year ending March 31, 2023 or for any other future period.

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.

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

The preparation

of the accompanying consolidated financial statements in conformity with 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.

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

of the accompanying condensed consolidated financial statements in conformity with 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 condensed

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 taxes.

Actual results could differ from those estimates.

3 unchanged sentences

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.

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

office and other administrative expenses.

Concentration

of Credit Risk

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

The Company maintains

its cash balances at high-quality financial institutions within the United States, which are insured by the Federal Deposit Insurance

Corporation 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.

Financial instruments

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

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

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

of public markets.

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

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 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

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

with original maturities of three months or less.

and 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 condensed consolidated

statements of operations.

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 condensed consolidated

statements of operations.

Cash and cash

equivalents 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

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 operations.

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.

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:

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

1 unchanged sentence

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.

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

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

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.

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

Company’s right-of-use assets consist of leased assets recognized in accordance with Financial Accounting Standards Board (FASB) Accounting

Standards Codification (ASC) 842, Leases which requires

lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts.

Right-of-use assets represent

the Company’s right to use an underlying asset for the lease term and the lease liability represents the Company’s obligation to make

lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over

the lease term at the commencement date.

Leases with a lease term of 12 months or less at inception are not recorded on the condensed

consolidated balance sheets and are expensed on a straight-line basis over the lease term in the condensed consolidated statement of

operations and comprehensive loss.

The Company determines the lease term by agreement with lessor.

In cases where the lease does not

provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement

date in determining the present value of future payments.

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

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

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

For the nine months ended December 31, 2021 and 2020, outstanding options to purchase 1,967,188 and 1,170,863 shares of common

stock, respectively, were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

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.

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

For the three

months ended June 30, 2022 and 2021, the 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.

Schedule of Anti-Dilutive Shares

Three Months Ended

Options to purchase common stock

Reclassifications

Certain 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.

Comprehensive

1 unchanged sentence

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 three and nine months ended

December 31, 2021 and 2020, the Company’s comprehensive loss was the same as its net loss.

Adopted Accounting Pronouncement

2020, the FASB issued ASU No.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an

Entity’s Own Equity (ASU 2020-06) .

ASU 2020-06 simplifies the accounting for convertible instruments by removing

major separation models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single

liability instrument with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions

that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts

to qualify for it.

ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas.

The new guidance

is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years

beginning after December 15, 2020, and interim periods within those fiscal years.

The Company early adopted ASU 2020-06 effective

April 1, 2021, and the impact of the adoption was not material to the Company’s consolidated financial statements.

Effective April

1, 2019, the Company adopted ASU No.

2016-02, Leases (ASC 842), and related ASUs, 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 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.

Accordingly, comprehensive

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

For the three months ended June 30, 2022 and 2021, the Company’s

comprehensive loss was the same as its net loss.

Issued Accounting Pronouncement

In June 2016, the FASB

issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments—Credit

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.

The Company is still evaluating the impact of this accounting

guidance on its results of operations and financial position.

accounts for the lease of its corporate facility in San Diego, California in accordance with ASC No.

The 39-month lease term commenced

April 1, 2020, and the lease provides for an initial monthly rent of approximately $12,400 with

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

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.

minimum payments under the facility operating lease , as of December 31, 2021, are listed in the table below.

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.

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

Future minimum

payments under the facility operating lease, as of June 30, 2022, are listed in the table below.

Schedule of Future

minimum Lease Payment

Annual Fiscal Years

1 unchanged sentence

Present value of lease liabilities

paid for amounts included in the measurement of lease liabilities was $ 115,073 for the nine months ended December 31, 2021.

expense was $ 80,698 and $ 80,654 for the nine months ended December 31, 2021 and 2020, respectively, and $ 26,930 and $ 26,844 for

the three months ended December 31, 2021 and 2020, respectively.

24, 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.

Cash paid for

amounts included in the measurement of lease liabilities was $ 39,507 .

Rent expense was $ 26,921 and $ 26,884 for the three months ended

June 30, 2022 and 2021, respectively.

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).

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.

The full 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.

applied to the Lender for forgiveness of the PPP Note in October 2020, and, in May 2021, the Company was notified by the Lender

Small Business Administration that the outstanding principal and accrued interest for the PPP Note was forgiven in

The Company accounted for the forgiveness of the PPP Note in accordance with Accounting Standards Codification Topic 470:

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

condensed consolidated statement of operations.

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 (the Agreement) with the Lender evidencing the PPP Note.

The full 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.

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.

4 – CONVERTIBLE PROMISSORY NOTES

February through April 2021, the Company sold $2,310,000 of convertible promissory notes (each an Original Notes 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).

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.

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.

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.

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 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 by (b) 125%;

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

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.

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.

In 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.

The 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.

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 .

From 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 $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 and 2021 Warrants (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.

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 2021 Warrants).

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

its issue date and accrued interest at a rate of 12% per annum, payable on maturity.

If the Company completed 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 would 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)

In 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 are being 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 three and nine months ended December 31, 2021 was $630,323 and $1,454,762, respectively.

The $6,610,550

aggregate principal amount of Notes are due and payable in full in the first quarter of fiscal 2023.

Subsequent to the Trigger

Date, the Notes can be converted into 767,783 shares of common stock at a conversion price of $8.61 per share.

5 – PROMISSORY NOTE

October 28, 2021, the Company issued a secured promissory note (the Bridge Note) to Manchester Explorer, L.P.

(“Manchester”)

that provides 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 % is 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.

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.

the quarter ended December 31, 2021, the Company made draws on the Bridge Note of $ 1,500,000 and incurred interest charges of

6 – STOCKHOLDERS’ DEFICIT AND STOCK-BASED COMPENSATION

the three months ended December 31, 2021, the Company sold 30,865 shares of common stock to its chief executive officer and its

chairman of the board of directors, president, chief financial officer and treasurer, issued 8,334 shares of common stock to a

service provider and issued 5,775 shares to its non-employee directors under the Company’s outside director compensation

At December 31, 2021, the Company had an obligation to issue 16,666 shares of common stock to service providers, and the

value of these shares was recorded as common stock issuable in the condensed consolidated balance sheet.

with the issuance of the Notes, the Company issued the 2021 Warrants to purchase in the aggregate 767,796 shares of its common stock

at an initial exercise price of $24.00 per share.

The fair value of the 2021 Warrants was $3,700,632, of which $2,379,182 was recorded

as a debt discount and amortized to interest expense, 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.

Upon the closing

of a public offering in February 2022, 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 an additional 1,511,276 common stock purchase warrants with an

exercise price of $6.60 per share.

In addition, as a result of the February 2022 equity offering, the exercise price of the 767,796 outstanding

2021 Warrants was reduced to $6.00 per share.

5 – STOCKHOLDERS’ EQUITY (DEFICIT)

of Common Stock

May 2, 2022, the Company entered into a securities purchase agreement (the Purchase Agreement) with an institutional investor, pursuant

to which the Company sold, in a registered direct offering (the Registered Offering), which closed on May 5, 2022, an aggregate of 449,438

shares (the Shares) of the Company’s common stock, par value $0.001 per share, 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

The Pre-Funded Warrants will be 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 to the Investor warrants (the Private Placement Warrants)

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 beginning on the six-month anniversary of the date of issuance (the Initial

Exercise Date) and will expire on the five-year anniversary of the Initial Exercise Date.

of June 30, 2022, the Company had the following warrants outstanding:

Schedule of Warrant Outstanding

Exercise Price

April 2027 - May 2027

February 2027

November 2027

During the three

months ended June 30, 2022 and 2021, the Company issued 348 and 20,000 shares of common stock, respectively.

with a fair value of approximately

$ 1,576 and $ 172,200 , respectively, to service providers.

6 – STOCK-BASED COMPENSATION

2017 Equity Incentive Plan

2017, the Company’s board of directors (the 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

In October 2017,

the Board approved the 2017 Equity Incentive Plan (the Plan), as amended, with 3,000,000 shares of common stock reserved for issuance.

In January 2020, the Board approved an increase in the number of shares reserved for issuance by 333,334 shares.

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.

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 December 31, 2021, was $ 7,419,022 related to stock

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

the nine months ended December 31, 2021, the Company granted options to purchase 723,269 shares of its common stock to employees,

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.

As of June 30, 2022, the unamortized compensation cost was $ 3,824,493 related to stock options and is expected

to be recognized as expense over a weighted-average period of approximately 2.22 years.

During the three

months ended June 30, 2022, the Company accrued stock-based compensation expense of approximately $131,000 related to services provided

by the Board in accordance with the terms of the Outside Director Compensation Plan (the OD Plan) for non-employee directors, as the

Board had not approved certain awards payable under the OD Plan as of June 30, 2022.

During the three

months ended June 30, 2022, the Company granted 2,664 shares to members of the Board in accordance with the OD Plan.

During the three

months ended June 30, 2022, the Company granted options with 10-year terms to purchase 265,634 shares of its common stock to employees,

directors and consultants.

The options had 10-year terms, and 85,484 options vested immediately when granted.

The fair value of

the options was determined to be $ 8,108,043 of which $ 1,769,805 was recorded as stock-based compensation expense and included

in the condensed consolidated statement of operations for the nine months ended December 31, 2021.

During the three months ended June 30, 2022, the fair value of awards granted and accrued was $ 1,276,706 ,

and $ 738,569 was recorded as stock-based compensation expense in the condensed consolidated statement of operations.

The following

assumptions were used in the fair value method calculations:

assumptions were used in the fair value calculations:

Schedule of Fair Value Assumptions

interest rates

Three Months Ended,

Risk-free interest rates

2.82 % - 3.25 %

2 unchanged sentences

Expected life (years)

Dividend yield

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.

of stock option activity under the Plan is presented below:

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.

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

The Company accounts for forfeitures as they occur.

stock option activity under the Plan is presented below:

Schedule of Stock Option activity

4 unchanged sentences

Balance at June 30, 2022

Additional shares authorized under the Plan

Options granted

Options cancelled and returned to the Plan

Balance at September 30, 2021

Options granted

Options cancelled and returned to the Plan

Balance at December 31, 2021

were no stock options exercised during the nine months ended December 31, 2021 and 2020.

There were no

stock options exercised during the three months ended June 30, 2022 and 2021.

The following

table summarizes the range of outstanding and exercisable options as of December 31, 2021:

table summarizes the range of outstanding and exercisable options as of June 30, 2022:

Outstanding and Exercisable Option, Range

4 unchanged sentences

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 December 31, 2021.

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 nine months ended December 31,

2021 and 2020, there were no such tax benefits associated with the exercise of stock options.

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.

7 – INCOME TAXES

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.

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.

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

2 unchanged sentences

federal and state tax authorities.

As of December 31, 2021, the

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

8 – RELATED PARTY TRANSACTIONS

February 2021, the Company’s chairman of the board of directors and president and an existing investor, who 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, the related party holders entered into revocation agreements with the Company

pursuant to which their collective $ 1,100,000

aggregate principal amount of Original Notes and accrued interest of $ 50,091

were replaced with Notes.

At December 31, 2021, the investor and executive officer held Notes in an aggregate principal amount of

$ 1,026,630 and

respectively, with $ 82,693 and

interest payable thereon.

For the three months ended December 31, 2021, the Company incurred interest expense of approximately

and $ 3,105 ,

respectively, and for the nine months ended December 31, 2021, the Company incurred interest expense of approximately $ 82,693

and $ 8 ,269,

respectively, on the related party holder Notes.

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

For the three and nine

months ended December 31, 2021, the Company incurred expense of approximately $ 6,049 and $ 16,110 , respectively, on the Director

At December 31, 2021, approximately $ 16,110 of interest was payable by the Company on the Director Note.

October 2021, the Company entered into purchase agreements with Ellen O’Connor (Lynn) Vos , the Company’s chief executive

officer, and Paul DiPerna , the chairman of the Company’s board of directors and its president, chief financial officer and

treasurer, providing for the sale and issuance by the Company of 30,864 shares of the Company’s common stock, par value

$0.001 per share at the closing market price on October 28, 2021 of $8.10 per share.

The Company received proceeds of approximately

$250,000 from the sale of the shares, comprising $ 150,000 from Ms.

Vos and $ 100,000 from Mr.

As of June 30, 2022, the Company has not

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

8 – COMMITMENTS AND CONTINGENCIES

Claims and Assessments

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

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.

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

Indemnification

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 nine months ended December 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, and no claims for payment have been made under such agreements.

10 – SUBSEQUENT EVENTS

to December 31, 2021, the Company made additional draws totaling $ 600,000 under the Bridge Note.

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

which acted as the representative of the several underwriters (the “Representative”), in a firm commitment underwritten

public offering (the Offering) pursuant to which the Company agreed to sell to the Representative an aggregate of 2,500,000 shares

of the Company’s common stock, par value $0.001 per share (the Common Stock), and 2,500,000 warrants (Warrants and, collectively

with the Common Stock, the Units), each to purchase one share of Common Stock, at a public offering price of $6.00 per Unit.

Warrants included in the Units are exercisable immediately, have an exercise price of $6.60 per share and expire five years from

the date of issuance.

The Common Stock was approved to list on the Nasdaq Capital Market under the symbol “MODD” and

began trading there on February 10, 2022.

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

discounts and commissions and other offering expenses.

The Units were

offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No.

333-260682), initially

filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities

Act), on November 2, 2021, and declared effective on February 9, 2022.

The Underwriting

Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification

obligations of the Company and the Representative, including for liabilities under the Securities Act of 1933, as amended,

other obligations of the parties and termination provisions.

In addition, pursuant to the terms of the Underwriting Agreement and

related “lock-up” agreements, the Company, each director and executive officer of the Company, and certain stockholders

have agreed with the Representative not to offer for sale, issue, sell, contract to

sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 180 days

after February 9, 2022, the date of the final prospectus.

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 three months ended June 30, 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,

and no claims for payment have been made under such agreements.

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-Q

Item 1. Financial Statements