What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-06-26 compared with 2022-06-28 · 591 added, 614 removed, 221 unchanged (85% of the section changed)

1 unchanged sentence

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’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

of Independent Registered Accounting Firm – Farber Hass Hurley LLP

Balance Sheets

Statements of Operations

Statements of Stockholders’ Equity (Deficit)

Statements of Cash Flows

to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Audit Committee and

Stockholders of Modular Medical, Inc.

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.

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 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.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Modular Medical, Inc.

(the “Company”) as of March 31, 2023 and 2022, 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, 2023 and 2022, 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.

Substantial Doubt about the Company's Ability

to Continue as a 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 consolidated financial statements,

the Company has incurred losses from operations and needs to raise additional funds to meet its obligations and sustain its future operations

until profitability is achieved.

These circumstances raise substantial doubt about its ability to continue as a going concern.

plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

Basis for Opinion

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.

We conducted 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 or fraud.

The Company 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.

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.

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 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.

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.

also recalculated the fair value of each option granted.

Hass Hurley LLP

have served as the Company’s auditor since 2018.

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.

Critical Audit Matters

The 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

Going Concern

As described further in Note 1, 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, the Company will 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.

We identified management’s assessment of

the Company’s ability to continue as a going concern as a critical audit matter due to the inherent complexities and uncertainties

related to the Company’s projections of operations.

The primary procedures we performed to address

this critical audit matter included:

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

- We 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.

- We 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.

Stock-Based Compensation

As discussed in Note 8, during the year ended

March 31, 2023, the Company granted options to purchase shares of its common stock to employees, directors and consultants.

is required to analyze the fair value of each option granted and amortize it over its vesting period.

We identified the recognition of stock options

as a critical audit matter due to the significant judgments made by management when developing underlying assumptions regarding the fair

value of the options.

The primary procedures we performed to address

this critical audit matter included:

- We gained an understanding of Company’s processes and controls in place for determining the fair

value of each granted option.

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

underlying data used in the calculations.

- We also recalculated the fair value of each option granted.

/s/ Farber Hass Hurley LLP

We have served as the Company’s auditor

Chatsworth, California

June 26, 2023

Medical, Inc.

Balance Sheets

and cash equivalents

expenses and other

CURRENT ASSETS

Cash and cash equivalents

Prepaid expenses

Other current assets

TOTAL CURRENT ASSETS

Property and equipment, net

Right of use asset, net

Security deposit

TOTAL NON-CURRENT ASSETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

and equipment, net

of use assets, net

NON-CURRENT ASSETS

AND STOCKHOLDERS’ EQUITY

lease liabilities

CURRENT LIABILITIES

Accounts payable

Accrued expenses

Short-term lease liability

PPP note payable

Convertible notes payable

TOTAL CURRENT LIABILITIES

Long-term lease liability

Bonus payable

TOTAL LIABILITIES

Commitments and Contingencies (Note 11)

STOCKHOLDERS’ EQUITY (DEFICIT)

lease liabilities

and Contingencies (Note 11)

STOCKHOLDERS’

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, 10,461,898 shares and 6,302,050 shares issued and outstanding as of March 31, 2022 and 2021, respectively

Additional paid-in capital

Accumulated deficit

( 34,579,771 )

Common Stock, $ 0.001 par value, 50,000,000 shares authorized, 10,949,389 shares and

10,461,898 shares issued and outstanding as of March 31, 2023 and 2022, respectively

paid-in capital

( 48,458,707 )

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

( 34,579,771 )

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

The accompanying notes

are an integral part of these audited consolidated financial statements

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying notes are an integral part of these audited consolidated financial statements.

Medical, Inc.

Statements of Operations

Twelve Months Ended

Operating expenses

19 unchanged sentences

Basic and diluted

The accompanying notes

are an integral part of these audited consolidated financial statements

accompanying notes are an integral part of these audited consolidated financial statements.

Medical, Inc.

1 unchanged sentence

Stockholders’

Equity (Deficit)

Balance as of March 31, 2020

as of March 31, 2021

$ ( 15,947,010 )

Placement of common stock

Shares issued for services

Stock-based compensation

$ ( 1,275,149 )

of common stock upon public offering, net of issuance costs

of common stock in settlement of convertible notes and accrued interest

of common stock

issued with convertible notes

issued for services

issued for reverse stock split

of common stock under equity incentive plan

( 18,632,761 )

Balance as of March 31, 2021

( 18,632,761 )

as of March 31, 2022

$ ( 34,579,771 )

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

of common stock and warrants in equity offering, net

issued for services

of common stock under equity incentive plan

( 13,878,936 )

Balance as of March 31, 2022

as of March 31, 2023

$ ( 48,458,707 )

The accompanying notes

are an integral part of these audited consolidated financial statements

accompanying notes are an integral part of these audited consolidated financial statements.

Medical, Inc.

11 unchanged sentences

Shares issued for services

Amortization of lease right-of-use asset

Change in lease liability

Amortization of debt issuance costs

Changes in assets and liabilities:

Other assets and prepaid expenses

Prepaid expenses and other assets

Lease right-of-use assets

Accounts payable and accrued expenses

Change in lease liabilities

Net cash used in operating activities

3 unchanged sentences

Purchases of property and equipment

( 1,637,751 )

Net cash used in investing activities

( 1,637,751 )

Cash flows from financing activities

Proceeds from private placements, net of issuance costs

Proceeds from issuance of convertible notes, net of placement fees

Proceeds from private placement, net

Proceeds from issuance of convertible notes, net

Proceeds from issuance of promissory note

1 unchanged sentence

( 2,100,000 )

Proceeds from issuance of PPP note payable

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

Proceeds from issuance of common stock and warrants, net

Net cash provided by financing activities

5 unchanged sentences

Noncash investing and financing activities:

Right of use asset obtained in exchange for lease liabilities

Fair value of detachable warrants issued with convertible notes

2 unchanged sentences

Interest paid

The accompanying notes

are an integral part of these audited consolidated financial statements

accompanying notes are an integral part of these audited consolidated financial statements.

MEDICAL, INC.

1 unchanged sentence

1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical, Inc.

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

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.

Company is a development stage medical device company focused on the design, development and eventual 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, our MODD1 product candidate, or MODD1, 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, we seek to expand the wearable insulin delivery device market

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

The product candidate seeks to serve

both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets.

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.

and Going Concern

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.

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 revenue to achieve profitability.

The Company’s expected

operating losses and cash burn 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.

These consolidated financial statements do not include any adjustments that

might result from this uncertainty.

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.

In May 2022 and May

2023, the Company completed offerings of its common stock and warrants.

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

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

United States of America.

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.

Each 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 2023 refers to the fiscal year ending March 31, 2023).

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

5 unchanged sentences

were combined and reclassified into one share of common stock.

Proportionate voting rights and other rights of common stock holders were

Proportionate voting rights and other rights of common stockholders were

not affected by the reverse stock split.

4 unchanged sentences

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

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

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 taxes.

Actual results could differ from

those estimates.

The Company operates in one business segment

and uses one measurement of profitability for its business.

Actual results could

differ from those estimates.

Company operates in one business segment and uses one measurement of profitability for its business.

and Development

5 unchanged sentences

of Credit Risk

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.

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

The Company maintains its

cash at a high credit quality financial institution within the United States, which is 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 the U.S.

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.

Economic Disruptions

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

government in March 2020.

This has negatively affected the U.S.

This negatively affected the U.S.

and global economy, disrupted global supply chains, significantly

1 unchanged sentence

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.

While the U.S.

national emergency expired in May 2023 and substantially all closures and “shelter-in-place”

orders have ended, there can be no assurance that the COVID-19 pandemic will not impact the Company’s operational and financial

performance in the future, as the duration and spread of the pandemic and related actions taken by U.S.

and foreign government agencies

to prevent disease spread are uncertain, out of our control, and cannot be predicted.

continued spread of COVID-19 has also led to disruption and volatility in the global capital markets.

The Russian invasion of Ukraine

in February 2022 has led to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively

impacted the global economy.

Since mid-2022, the U.S.

Federal Reserve has addressed elevated inflation by increasing interest rates,

as inflation remains elevated.

While the Company was recently able to access the capital markets, in the future, the Company may be unable

to access the capital markets, and additional capital may only be available to the Company on terms that could be significantly detrimental

to its existing stockholders and to our business.

and Cash Equivalents

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 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

Property 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.

and equipment are recorded at historical 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.

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.

Construction-in-process

includes machinery and equipment and is stated at cost and not depreciated.

Depreciation on construction-in-process commences when the

assets are ready for their intended use and placed into service.

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.

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 measurement.

to their 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.

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.

Company’s right-of-use assets consist of leased assets recognized in accordance with FASB ASC No.

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 consolidated

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

The Company determines the lease term by agreement with the 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.

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.

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

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

Potentially dilutive

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

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

1 unchanged sentence

Options to purchase common stock

Reclassification

Common stock warrants

Reclassifications

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

1 unchanged sentence

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.

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.

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

Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740, Income Taxes .

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,

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.

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.

Company files U.S.

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

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, 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.

The Company’s historical net operating

loss and credit carryforwards may be adjusted by the federal and state tax authorities until the statute closes on the year in which

such tax attributes are utilized.

Comprehensive

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

Accordingly, comprehensive

4 unchanged sentences

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.

2016-13, Financial Instruments—Credit Losses .

added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred

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 adoption of this ASU is not expected to have a material impact on the Company’s

results of operations and financial position.

2 – CONSOLIDATED BALANCE SHEET DETAIL

Property and equipment, net:

Property and equipment,

Machinery and equipment

Computer equipment and software

Construction-in-process

Leasehold improvements

Office equipment

Computer equipment and software

Machinery and equipment

Property and equipment, gross

accumulated depreciation and amortization

Property and equipment, net

Total property and equipment,

Accrued Expenses

Accrued wages and bonus

Accrued placement fees

Accrued interest

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%.

Bernardo Drive, San Diego, CA

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.

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.

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

measure the lease asset and liability.

The 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.

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

Road, San Diego, CA

48 -month lease term commenced February 1, 2023, and the lease provides for an initial base monthly rent of $ 36,000 with annual rent increases

of approximately 4 %.

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

operating costs.

A discount rate of 8 %, which approximated the Company’s incremental borrowing rate, was used to measure the lease

asset and liability.

The Company obtained a right-of-use asset of $ 1,560,101 in exchange for its obligations under the operating lease.

minimum payments under the facility operating leases, as of March 31, 2023, are listed in the table below.

Fiscal year ending March 31,

Total future lease payments

Imputed interest

Present value of lease liabilities

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

Cash paid for amounts included in the measurement

of lease liabilities was $ 230,028 and $ 153,432 for the years ended March 31, 2023 and 2022, respectively.

Rent expense was $ 237,425 and

$ 107,820 for the years ended March 31, 2023 and 2022, respectively.

April 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).

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.

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.

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.

May 2021, the Lender and the U.S.

1 unchanged sentence

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.

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

the amount forgiven was recorded as a gain on extinguishment and recognized in the other income line of the consolidated statements of

5 – CONVERTIBLE PROMISSORY NOTES

4 unchanged sentences

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:

30, 2021 were replaced with $ 2,360,550 aggregate principal amount of 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.

During the three months ended June 30, 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) 1.25.

connection 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 .

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.

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.

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.

In October 2021, the Company issued a secured promissory

note (the Bridge Note) to Manchester Explorer, L.P.

(Explorer) 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.

During 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 2022 Offering (see Note 7), the Bridge Note and accrued interest was paid in full.

7 – STOCKHOLDERS’ EQUITY

February 2022 Public Offering

On February 9, 2022, the Company entered into an underwriting agreement

with Oppenheimer & Co.

Inc., who acted as the representative of the several underwriters (the Underwriters), in a firm commitment

underwritten public offering (the 2022 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 2022 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 14, 2027 .

The gross proceeds from the 2022 Offering were $ 15,000,000 , before deducting approximately $ 1,465,000

of underwriting discounts and commissions and other offering expenses.

of Common Stock and Warrants

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, 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 of $ 4.44 .

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.

In 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.

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 .

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 .

of Common Stock and Warrants

the years ended March 31, 2023 and 2022, the Company issued 11,264 and 90,000 shares of common stock to service providers, respectively,

with fair values of approximately $ 21,727 and $ 594,400 , respectively.

of March 31, 2023, the Company had the following warrants outstanding:

January - February 2027

February 2027

November 2027

of March 31, 2022, the Company had the following warrants outstanding:

January - February 2027

February 2027

8 – STOCK-BASED COMPENSATION

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.

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.

In January 2023, the Company’s stockholders approved an increase in the number of

shares reserved for issuance under the Plan by an additional 2,000,000 shares.

Under the Plan, eligible employees, directors and consultants

3 unchanged sentences

Compensation Expense

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

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, 2023, was $ 3,268,600 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, 2023, the Company granted options to

purchase 1,006,074 shares of its common stock to employees, directors and consultants.

The options had 10 -year terms and 123,407 options

vested immediately when granted.

The weighted-average grant date fair value of stock options granted

during the years ended March 31, 2023 and 2022 was $ 2.85 and $ 10.28 , respectively.

The following assumptions were used in the fair-value

method calculations:

Ended March 31,

Risk-free interest rates

2.82 % - 4.06 %

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.

In accordance with ASU No.

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.

volatility is based on the historical volatility of the Company’s stock price.

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 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

summary of stock option activity under the Plan is presented below:

Options Outstanding

Weighted Average

Exercise Price

Balance at March 31, 2021

Additional shares authorized under the Plan

Options granted

3 unchanged sentences

Options granted

( 1,006,074 )

Options cancelled and returned to the Plan

Balance at March 31, 2023

There were no

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

were no stock options exercised during the years ended March 31, 2023 and 2022.

The Company issued 26,789 shares to its non-employee

directors under the Company’s outside director compensation plan and approximately $ 86,048 was recorded as stock-based compensation

expense for these share awards during the year ended March 31, 2023.

following table summarizes the range of outstanding and exercisable options as of March 31, 2023:

Options Outstanding

2 unchanged sentences

$ 1.44 – $3.95

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.

$ 4.18 - $7.51

$ 8.61 - $17.70

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, 2023.

9 – INCOME TAXES

The income tax provision consisted

of the following:

Schedule of Income tax provision

income tax provision consisted of the following:

Year Ended March 31,

6 unchanged sentences

( 4,400,000 )

( 5,409,000 )

Change in valuation allowance

Provision for income taxes

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

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

March 31, 2023, the Company had net operating loss carryforwards (NOLs) of approximately $ 29,500,000 for federal income tax purposes

and $ 36,600,000 for state income tax purposes.

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

from 2037 through 2043, except federal NOLs from fiscal 2018 and later, which will never expire.

Company also had federal research and development tax credit carryforwards of approximately $ 1,300,000 , which will begin expiring at

various times from 2038 through 2042, and state research and development credits of approximately $ 400,000 , which do not have an expiration

reconciliation of income taxes provided at the federal statutory rate to the actual income tax provision is as follows:

Year Ended March 31,

1 unchanged sentence

State tax rate, net of federal benefit

Permanent differences

Research and development tax credits

Section 179 assets

Change in valuation allowance

Effective income tax rate

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

losses before income tax provision for the years ended March 31, 2023 and 2022 were solely attributable to US operations.

components of the Company’s deferred tax assets and liabilities were:

Net operating loss carryforwards

2 unchanged sentences

Reserves, accruals & other

Research and development tax credits

Research and development

Total deferred tax assets

4 unchanged sentences

( 10,422,000 )

Deferred tax assets, net

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.

Deferred tax assets,

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

31, 2023 and 2022, will not be fully realizable.

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

tax assets at March 31, 2023 and 2022.

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

financial statements at March 31, 2023 and 2022.

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, 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.

July 2017, the Company entered into a royalty agreement with its founder, then-chief executive officer, president and major shareholder

(the Founder).

Pursuant 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 30 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 business.

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

the 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

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.

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, 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.

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, 2023 and 2022 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

Company’s primary purchase obligations include purchase orders for machinery and equipment.

At March 31, 2023, the Company had

outstanding purchase orders for machinery and equipment and related expenditures of approximately $ 833,000 .

12 – RELATED PARTY TRANSACTIONS

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, 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.

Manchester Management Company, LLC (MMC), as the general

partner of Explorer, combined with the holdings of its affiliates, JEB Partners LP, James Besser and Morgan Frank, owned approximately

25 % of the Company’s outstanding shares of common stock as of March 31, 2023.

Besser is the Company’s chief executive

officer and a managing member of MMC.

Frank is one of our directors and serves as the portfolio manager of Explorer and as a managing

member of MMC.

daughter of the Founder is an employee of the Company.

During the years ended March 31, 2023 and 2022, the Company paid her $ 201,275

and $ 169,589 , respectively, which includes the aggregate grant date fair value, as determined pursuant to FASB ASC Topic 718, of stock

options granted to her.

In 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 and 45,586 Offering Warrants.

February 2021, Explorer, which is represented by Mr.

Frank, and the Founder (the Related Party Holders) purchased $ 1,000,000 and $ 100,000 , 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 aggregate principal amount of Original Notes and accrued

interest were replaced with Notes.

On February 14, 2022, the Related Party Holders 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, the Related Party Holders received 234,274 and 23,429 shares of common stock, respectively,

and 234,274 and 23,429 Offering Warrants, respectively.

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.

May 15, 2023, the Company entered into an underwriting agreement (the Underwriting Agreement) with Newbridge Securities Corporation

(the Underwriter), with respect to the issuance and sale in a firm commitment underwritten offering (the 2023 Offering) by the Company

of units of its securities for aggregate gross proceeds of approximately $ 9,400,000 , before deducting underwriting discounts and commissions

and other offering expenses.

The Company sold 8,816,900 shares of its common stock and warrants to purchase 4,408,450 shares of its common

The securities were sold as a unit, with each unit consisting of two shares of common stock of the Company and one warrant (the

2023 Warrant) to purchase one share of common stock, at a public offering price of

$ 2.13 per unit.

The 2023 Warrants were immediately separable and exercisable, had a per share exercise price of $ 1.22 and expire

five years from the date of issuance.

The 2023 Offering closed on May 18, 2023.

to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 1,322,534 shares

of common stock and an additional 661,267 of the 2023 Warrants to cover over-allotments, if any.

On May 25, 2023, the Underwriter

exercised in full this option and purchased the additional securities for aggregate gross proceeds to the Company of approximately

$ 1,400,000 , before deducting underwriting discounts and commissions and other offering expenses.

Underwriter was paid a cash fee of 7.0 % of the aggregate gross proceeds of the Offering and reimbursed certain out-of-pocket expenses

of $ 125,000 .

Pursuant to the Underwriting Agreement, the Company issued to the Underwriter a five-year warrant to purchase 709,760 shares

of common stock a per share exercise price of $ 1.22 .

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

indemnification obligations of the Company and the Underwriter, 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 Underwriter 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 90 days after May 17, 2023.

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