What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-13 compared with 2023-08-14 · 311 added, 265 removed, 233 unchanged (71% of the section changed)

Financial Statements

Modular Medical, Inc.

1 unchanged sentence

(In thousands, except par value)

September 30,

CURRENT ASSETS

19 unchanged sentences

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

21,095 and 10,949 shares issued and outstanding as of June 30, 2023 and March 31, 2023, respectively

21,124 and 10,949 shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively

Additional paid-in capital

2 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral

part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed

consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Condensed Consolidated Statements

of Operations

(In thousands, except per share

Three Months Ended

Six Months Ended

September 30,

Operating expenses

3 unchanged sentences

Loss from operations

Loss before income taxes

Provision for income taxes

Net loss per share

2 unchanged sentences

Basic and diluted

The accompanying notes are an integral part of

these condensed consolidated financial statements.

The accompanying notes are an integral

part of these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Condensed Consolidated Statements

of Stockholders’ Equity

(In thousands)

5 unchanged sentences

Balance as of June 30, 2023

Shares issued for services

Issuance of common stock under equity incentive plan

Stock-based compensation

Balance as of September 30, 2023

Stockholders’

5 unchanged sentences

Balance as of June 30, 2022

The accompanying notes are an integral part of

these condensed consolidated financial statements.

Issuance of common stock under equity Incentive plan

Stock-based compensation

Balance as of September 30, 2022

The accompanying notes are an integral

part of these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Cash Flows

Condensed Consolidated Statements

of Cash Flows

(In thousands)

Three Months Ended

Six Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

18 unchanged sentences

Cash and cash equivalents at end of period

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

MODULAR MEDICAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical, Inc.

(the Company) was incorporated

in Nevada in October 1998 under the name Bear Lake Recreation, Inc.

The Company had no material business operations from 2002 until approximately

2017 when it acquired all of the issued and outstanding shares of Quasuras, Inc., a Delaware corporation (Quasuras).

As the major shareholder

of Quasuras retained control of both the Company and Quasuras, the share exchange was accounted for as a reverse merger.

Company recognized the assets and liabilities of Quasuras, acquired in the merger, at their historical carrying amounts.

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).

(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

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,

The 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,

Modular Medical, Inc.

The 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,

or MODD1, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access to the higher standards of care

3 unchanged sentences

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.

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”

The product seeks to serve both the type 1 and the rapidly growing, especially in terms

of device adoption, type 2 diabetes markets.

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.

and Going Concern

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

in the development and subsequent commercialization of its product.

The Company expects that its research and development and general

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

Liquidity 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

2 unchanged sentences

As discussed in Note 4, in May 2023, the Company completed an offering of its common stock and warrants.

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

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

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.

3 unchanged sentences

Basis of Presentation

The Company’s fiscal year ends on March

31 of each calendar year.

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

the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ending March 31, 2024).

The Company’s fiscal year ends

on March 31 of each calendar year.

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

to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ending March 31,

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

All significant

intercompany transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial

statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States (GAAP)

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

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

The accompanying condensed consolidated

financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States

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

The condensed consolidated balance sheet as of March 31, 2023 has been derived from the audited consolidated financial statements at that

3 unchanged sentences

the Company’s consolidated financial statements and notes thereto included in its most recent annual report on Form 10-K filed with

In the opinion of management, the accompanying

unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary

to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented.

operating results for the three months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the

year ending March 31, 2024 or for any other future period.

In the opinion of management, the

accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments)

necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented.

The operating results for the six months ended September 30, 2023 are not necessarily indicative of the results that may be expected for

the year ending March 31, 2024 or for any other future period.

Use of Estimates

The preparation of the accompanying condensed

consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial

statements and the reported amount of revenues and expenses during the reporting period.

Estimates may include those pertaining to accruals,

stock-based compensation and income taxes.

The preparation of the accompanying

condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated

financial statements and the reported amount of revenues and expenses during the reporting period.

Estimates may include those pertaining

to accruals, stock-based compensation, and income taxes.

Actual results could differ from those estimates.

Reportable Segment

The Company operates in one business segment and

uses one measurement of profitability for its business.

The Company operates in one business segment

and uses one measurement of profitability for its business.

Research and Development

2 unchanged sentences

General and Administrative

General and administrative expenses consist primarily

of payroll and benefit costs, rent, stock-based compensation, legal and accounting fees, and office and other administrative expenses.

General and administrative expenses

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

Concentration 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 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

Financial 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

No reserve has been made in the financial statements for any possible loss due to financial institution failure.

Risks and Uncertainties

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

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

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.

Economic Disruptions

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

The global outbreak of the coronavirus

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

government in March

This negatively affected the U.S.

and global economy, disrupted global supply chains, significantly

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

disruption of the financial markets.

and global economy, disrupted global supply chains, significantly restricted travel, and transportation,

resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the financial markets.

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.

The 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

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 its business.

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.

Wars and acts of terrorism have led to further

economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy.

Since mid-2022,

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 its

Cash 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

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.

Property and Equipment

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.

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.

Property 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.

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.

Fair 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

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active

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

active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term

of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Due to their short-term nature, the carrying values

of cash equivalents, accounts payable and accrued expenses, approximate fair value.

The 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 loss.

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.

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:

● Level 1 inputs to the valuation methodology are quoted prices

for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted

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

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

● Level 3 inputs to the valuation methodology are unobservable

and significant to the fair value measurement.

Due to their short-term nature, the

carrying values of cash equivalents, accounts payable and accrued expenses, approximate fair value.

The 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 loss.

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

Stock-Based Compensation

9 unchanged sentences

Per-Share Amounts

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

(WASO) during the period.

In addition, the Company includes the number of shares of common stock issuable under pre-funded warrants as

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

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

Prior to April 1, 2023, the Company excluded pre-funded

warrants from the computation of WASO.

Basic net loss per share is computed by

dividing loss for the period by the weighted-average number of shares of common stock outstanding (WASO) during the period.

the Company includes the number of shares of common stock issuable under pre-funded warrants as outstanding.

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.

Prior to April 1, 2023, the Company excluded

pre-funded warrants from the computation of WASO.

The pre- funded warrants are now included in the computation of WASO.

Prior period amounts have

been conformed to the current-period presentation.

The impact of the change reduced the previously reported loss per share by $ 0.03 and

increased WASO by approximately 844,000 shares for the three months ended June 30, 2022.

The reclassification had no impact on the Company's

net loss or cash flows for the three months ended June 30, 2022.

For the three months ended June 30, 2023 and 2022,

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

inclusion would be anti-dilutive (in thousands).

Three Months Ended

Prior period amounts

have been conformed to the current-period presentation.

The impact of the change reduced the previously reported loss per share by $ 0.04

and $ 0.06 , respectively, and increased WASO by approximately 1,348,000 and 1,098,000 shares, respectively, for the three and six months

ended September 30, 2022.

The reclassification had no impact on the Company’s net loss or cash flows for the three or six months ended

September 30, 2022.

For the six months ended September 30,

2023 and 2022, the following table sets forth securities outstanding which were excluded from the computation of diluted net loss per

share as their inclusion would be anti- dilutive (in thousands).

Six Months Ended

September 30,

Options to purchase common stock

Unvested restricted stock units

Common stock purchase warrants

4 unchanged sentences

Comprehensive Loss

Comprehensive loss represents the changes in equity

of an enterprise, other than those resulting from stockholder transactions.

Accordingly, comprehensive loss may include certain changes

in equity that are excluded from net loss.

For the three months ended June 30, 2023 and 2022, the Company’s comprehensive loss was

the same as its net loss.

Comprehensive loss represents the changes

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

Accordingly, comprehensive loss may include certain

changes in equity that are excluded from net loss.

For the three and six months ended September 30, 2023 and 2022, the Company’s

comprehensive loss was the same as its net loss.

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued Accounting Standards

Update (ASU) No.

In 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.

The Company adopted

2016-13 effective April 1, 2023, and the adoption had no impact on the Company’s results of operations and financial position.

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

than incurred losses.

Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies

to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments.

The CECL model

does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets

that have a low risk of loss.

This update is effective for fiscal years beginning after December 15, 2022, including interim periods within

those fiscal years for smaller reporting companies.

The Company adopted ASU No.

2016-13 effective April 1, 2023, and the adoption had

no impact on the Company’s results of operations and financial position.

NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL

(in thousands)

September 30,

Property and equipment, net

(in thousands)

Machinery and equipment

5 unchanged sentences

Total property and equipment, net

(in thousands)

September 30,

Accrued expenses

(in thousands)

Accrued wages and employee benefits

2 unchanged sentences

The 39 -month lease term expired on June

and, upon expiration, the Company had a $ 100,000 security deposit receivable from the landlord.

30, 2023 , and, upon expiration, the Company had a $ 100,000 security deposit receivable from the landlord, which was refunded to the Company

during the three months ended September 30, 2023.

Thornmint Road, San Diego, CA

1 unchanged sentence

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.

obtained a right-of-use asset of approximately $ 1,560,000 in exchange for its obligations under the operating lease.

Future minimum payments under the facility operating

lease, as of June 30, 2023, are listed in the table below (in thousands).

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

rate of 8 %, which approximated the Company’s incremental borrowing rate, was used to measure the lease asset and liability.

Company obtained a right-of-use asset of approximately $ 1,560,000 in exchange for its obligations under the operating lease.

Future minimum payments under the facility

operating lease, as of September 30, 2023, are listed in the table below (in thousands).

Annual Fiscal Years

3 unchanged sentences

Present value of lease liability

Cash paid for amounts included in the measurement

of lease liabilities was approximately $ 149,000 and $ 40,000 for the three months ended June 30, 2023 and 2022, respectively.

was approximately $ 112,000 and $ 27,000 for the three months ended June 30, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement of lease

liabilities was approximately $ 257,000 and $ 79,000 for the six months ended September 30, 2023 and 2022, respectively.

Rent expense was

approximately $ 225,000 and $ 54,000 for the six months ended September 30, 2023 and 2022, respectively and $ 113,000 and $ 27,000 for the

three months ended September 30, 2023 and 2022, respectively.

NOTE 4 – STOCKHOLDERS’ EQUITY

May 2023 Public Offering

On 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 $ 9,390,000 , 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 stock.

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

On 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 $ 9,390,000 , before deducting underwriting discounts and commissions and other offering expenses.

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

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 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.

Pursuant 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 $ 1,408,000 , before deducting underwriting discounts and commissions

and other offering expenses.

Pursuant 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 $ 1,408,000 , before deducting underwriting discounts

and commissions and other offering expenses.

The Underwriter was paid a cash fee of

1 unchanged sentence

of approximately $ 125,000 .

In addition, pursuant to the Underwriting Agreement, the Company issued to the Underwriter common stock purchase

warrants (the UW Warrants) for 617,183 and 92,577 shares dated May 15, 2023 and May, 25, 2023, respectively.

The UW warrants are exercisable

six months from the respective issuance date and have a four-year term and a per share exercise price of $ 1.32 .

In addition, pursuant to the Underwriting Agreement, the Company initially issued to the Underwriter common

stock purchase warrants (the UW Warrants) for a total of 709,760 shares.

Subsequently, the UW Warrants were reissued to the Underwriter

and its agents for a total of 604,623 shares.

The UW warrants are exercisable six months from the respective issuance dates and have a

four-year term and a per share exercise price of $ 1.32 .

The Underwriting Agreement contains customary

5 unchanged sentences

of 90 days after May 17, 2023.

As of June 30, 2023, the Company

had the following warrants outstanding (share amounts in thousands):

As of September 30, 2023, the Company had the following warrants

outstanding (share amounts in thousands):

Number of Shares

3 unchanged sentences

November 2027

The 1,348,000 pre-funded warrants

were included in the weighted average shares outstanding calculation for the three and six months ended June 30, 2023 and 2022, respectively.

As of March 31, 2023, the Company

had the following warrants outstanding (share amounts in thousands):

As of March 31, 2023, the Company had the following warrants

outstanding (share amounts in thousands):

Number of Shares

3 unchanged sentences

November 2027

During the three months ended June 30, 2022, the

Company issued 348 shares of common stock with a fair value of approximately $ 1,000 to a service provider.

During the six months ended September 30, 2023 and 2022, the Company

issued 1,429 and 348 shares of common stock with fair values of approximately $ 1,400 and $ 1,000 , respectively, to a service provider.

NOTE 5 – STOCK-BASED COMPENSATION

Amended 2017 Equity Incentive Plan

In October 2017, the Board approved the 2017 Equity

Incentive Plan (the Plan), as amended, with 1,000,000 shares of common stock reserved for issuance.

In January 2020 and August 2021, the

Board approved an increase in the number of shares reserved for issuance 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

Under the Plan, eligible employees, directors and consultants may be granted a broad range of awards, including stock options,

stock appreciation rights, restricted stock, performance-based awards and restricted stock units.

The Plan is administered by the Board

or, in the alternative, a committee designated by the Board.

In October 2017, the Company’s board

of directors (the Board) approved the 2017 Equity Incentive Plan (the Plan), as amended, with 1,000,000 shares of common stock reserved

for issuance.

In January 2020 and August 2021, the Board approved an increase in the number of shares reserved for issuance 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 may be granted

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

stock units (RSUs).

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

Stock-Based Compensation Expense

1 unchanged sentence

on a straight-line basis over the requisite service period, usually the vesting period, based on the grant date fair value.

As of September

30, 2023, the unamortized compensation cost was approximately $ 2,645,000 related to stock options and is expected to be recognized as

expense over a weighted-average period of approximately 1.7 years.

During the three months ended June 30, 2023, the

Company granted 6,375 shares to members of the Board in accordance with the OD Plan and recorded

approximately $ 6,000 of stock-based compensation expense for these grants .

During the three months ended June 30, 2023, the

Company granted options with 10 -year terms to purchase 373,375 shares of its common stock to employees, directors and consultants.

During the three months ended September 30, 2023,

the Company issued 6,265 shares to members of the Board in accordance with its outside director compensation plan and recorded approximately

$ 7,000 of stock-based compensation expense for these share awards.

The weighted-average grant date fair value of

options granted was $ 1.00 and $ 4.26 per share for the three months ended June 30, 2023 and 2022, respectively.

The following assumptions

were used in the fair-value method calculations:

Months Ended, June 30,

options granted was $ 1.00 and $ 4.17 per share for the six months ended September 30, 2023 and 2022, respectively, and $ 1.02 and $ 4.06

for the three months ended September 30, 2023 and 2022, respectively.

The following assumptions were used in the fair-value method calculations:

September 30,

Six Months Ended

September 30,

Risk-free interest rates

1 unchanged sentence

126.7 % - 127.4 %

156 % - 159 %

82.6 % - 152.2 %

156 % - 223 %

Expected life (years)

8 unchanged sentences

for forfeitures as they occur.

A summary of stock option activity under the Plan

is presented below:

The following table summarizes the activity in

the shares available for grant under the Plan during the six months ended September 30, 2023:

Options Outstanding

3 unchanged sentences

Balance at June 30, 2023

There were no stock options exercised during the

three months ended June 30, 2023 and 2022.

The following table summarizes the range of outstanding

and exercisable options as of June 30, 2023:

Options granted

Options cancelled and returned to the Plan

Balance at September 30, 2023

There were no stock options exercised during the six months

ended September 30, 2023 and 2022.

A summary of RSU activity under the Plan is presented below.

Balance at March 31, 2023

Non-vested shares as of September 30, 2023

The total intrinsic value of the RSUs

outstanding as of September 30, 2023 was approximately $ 266,000 .

The unamortized compensation cost at September 30, 2023 was

approximately $ 209,000 related to RSUs and is expected to be recognized as expense over a period of approximately 2.75 years.

The following table summarizes the range of outstanding and

exercisable options as of September 30, 2023:

Options Outstanding

Options Exercisable

Range of Exercise Price

of Exercise Price

$0.93 - $2.00

2 unchanged sentences

$0.93 - $17.70

The intrinsic value per share is calculated as

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

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

NOTE 6 – INCOME TAXES

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.

A valuation allowance is established

for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized.

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

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

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.

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

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 files U.S.

federal and state income

tax returns in jurisdictions with varying statutes of limitations.

All tax returns for fiscal 2016 to fiscal 2023 may be subject to examination

federal and state

income tax returns in jurisdictions with varying statutes of limitations.

All tax returns for fiscal 2016 to fiscal 2023 may be subject

to examination by the U.S.

federal and state tax authorities.

As of June 30, 2023, the Company has not recorded any liability for unrecognized tax benefits

related to uncertain tax positions.

As of September 30, 2023, the Company has not recorded any liability for

unrecognized tax benefits related to uncertain tax positions.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Litigations, 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.

The Company records legal costs

associated with loss contingencies as incurred and accrues for all probable and estimable settlements.

In the normal course of business, the

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

The Company records legal

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

Indemnification

In the ordinary course of business, the Company

enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach

of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined

within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance.

In the ordinary course of business, the

Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating

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

outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance.

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

1 unchanged sentence

with its officers and directors.

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

ended June 30, 2023 and 2022 related to these indemnifications.

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

ended September 30, 2023 and 2022 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification

5 unchanged sentences

include purchase orders for machinery and equipment.

At June 30, 2023, the Company had outstanding purchase orders for machinery and equipment

and related expenditures of approximately $ 566,000 .

At September 30, 2023, the Company had outstanding purchase orders for machinery

and equipment and related expenditures of approximately $ 996,000 .

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

What changed 10-Q

Item 1. Financial Statements