What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-02-13 · 318 added, 407 removed, 167 unchanged (81% of the section changed)

Financial Statements

Medical, Inc.

Consolidated Balance Sheets

Modular Medical, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value)

and cash equivalents

expenses and other

CURRENT ASSETS

and equipment, net

of use asset, net

NON-CURRENT ASSETS

AND STOCKHOLDERS’ EQUITY

lease liabilities

Cash and cash equivalents

Prepaid expenses and other

TOTAL CURRENT ASSETS

Property and equipment, net

Right of use asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

lease liabilities

and Contingencies (Note 7)

STOCKHOLDERS’

Accounts payable

Accrued expenses

Short-term lease liabilities

TOTAL CURRENT LIABILITIES

Long-term lease liabilities

TOTAL LIABILITIES

Commitments and Contingencies (Note 7)

STOCKHOLDERS’ EQUITY

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

Common Stock, $ 0.001 par value, 100,000 shares authorized;

21,299 and 10,949 shares issued and outstanding as of December 31, 2023 and March 31, 2023, respectively

paid-in capital

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

Medical, Inc.

Consolidated Statements of Operations

thousands, except per share data)

32,561 and 32,464 shares issued and outstanding as of June 30, 2024 and March 31, 2024, respectively

Additional paid-in capital

Accumulated deficit

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

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)

Three Months Ended

Nine Months Ended

Operating expenses

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Loss from operations

Loss before income taxes

Provision for income taxes

Net loss per share

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Basic and diluted

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

Medical, Inc.

Consolidated Statements of Stockholders’ Equity

The accompanying notes are an integral part of

these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

Stockholders’

of March 31, 2023

of common stock and warrants in equity offering, net

of common stock under equity incentive plan

Balance as of June 30,

issued for services

of common stock under equity incentive plan

Balance as of September 30,

Balance as of March 31, 2024

Shares issued for services

Exercise of warrants

of common stock under equity incentive plan

as of December 31, 2023

Issuances under equity incentive plan

Stock-based compensation

Balance as of June 30, 2024

Stockholders’

Balance as of March 31, 2023

Shares issued for services

Issuance of common stock and warrants in equity offering, net

Issuance of common stock under equity incentive plan

Issuances under equity incentive plan

Stock-based compensation

Balance as of June 30, 2023

Issuance of common stock under equity incentive plan

Stock-based compensation

Balance as of September 30, 2022

Issuance of common stock under equity incentive plan

Stock-based compensation

Balance as of December 31, 2022

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

Medical, Inc.

Consolidated Statements of Cash Flows

Nine Months Ended

The accompanying notes are an integral part of

these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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Stock-based compensation expense

Loss on asset disposal

Depreciation and amortization

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Changes in assets and liabilities:

Other assets and prepaid expenses

Prepaid expenses and other assets

Lease right-of-use asset

Accounts payable and accrued expenses

Lease liabilities

Change in lease liability

Net cash used in operating activities

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of common stock purchase warrants

Proceeds from issuance of common stock and warrants, net

Exercise of common stock warrants

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

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

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

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

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

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

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 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.

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

or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable

to the Company.

As discussed in 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

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.

(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), and changed its name

from Bear Lake Recreation, Inc.

to Modular Medical, Inc.

The Company is a pre-revenue, medical device company

focused on the design, development and eventual commercialization of innovative insulin pumps using modernized technology to increase

pump adoption in the diabetes marketplace.

Through the creation of an innovative two-part patch pump, its initial product, the MODD1,

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

considerable motivation that presently available insulin pumps provide.

By simplifying and streamlining the user experience from introduction,

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

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

The product seeks to serve both the type

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

In January 2024, the Company submitted a 510(k)

premarket notification to the United States Food and Drug Administration (FDA) for the MODD1.

In March 2024, the Company received comments

from the FDA on its submission, and the Company responded to those comments in August 2024.

and Going Concern

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 products.

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

In addition, the Company’s independent registered public accounting firm, in its report on the consolidated financial

statements as of and for the year ended March 31, 2024, expressed substantial doubt about the Company’s ability to continue as

a going concern.

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

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

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.

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.

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,

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 2025 refers to the fiscal year ending March 31, 2025).

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, 2024 has been derived from the audited consolidated financial statements at that

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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.

The operating results for the nine months ended December 31, 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.

operating results for the three months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the

year ending March 31, 2025 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

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expenditures as incurred.

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

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

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

Financial instruments that potentially subject

the Company to concentration of credit risk consist primarily of cash held in demand deposit accounts.

The Company maintains a portion

of its cash in demand deposit accounts at high credit 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.

Risks 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.

Economic Disruptions

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.

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.

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

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, pandemics, wars and acts of terrorism and the volatility of public markets.

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.

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

Cash and cash equivalents include cash held in

demand deposit and money market accounts, certificates of deposit and all highly liquid debt instruments with original maturities of three

months or less.

Property and Equipment

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 .

Property and equipment are recorded at historical

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.

Leasehold improvements and assets acquired

through finance 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 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 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 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 Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 842,

of leased assets recognized in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No.

842, Leases , which requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts.

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Stock-Based Compensation

The Company issues stock awards, stock options and restricted stock

units to employees and non-employees.

The Company accounts for such awards based on FASB ASC 505 and ASC 718, whereby the value of the

award is measured on the date of award.

The Company recognizes stock-based compensation for equity awards on a straight-line basis over

the requisite service period, usually the vesting period, after assessing the probability of achieving the requisite performance criteria

with respect to performance-based awards.

The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton

Option Pricing (Black Scholes) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected

life of the options, and future dividends.

Compensation expense is recorded based upon the value derived from the Black-Scholes model.

The assumptions used in the Black-Scholes model could materially affect compensation expense recorded in future periods.

The Company periodically issues stock options,

restricted stock units and stock awards to employees and non-employees.

The Company accounts for such awards based on FASB ASC Topic 718,

whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the

requisite service period, usually the vesting period.

With respect to performance-based awards, the Company assesses the probability of

achieving the requisite performance criteria before recognizing compensation expense.

The fair value of the Company’s stock options

is estimated using the Black-Scholes-Merton Option Pricing (Black Scholes) model, which uses certain assumptions related to risk-free

interest rates, expected volatility, expected life of the options, and future dividends.

Compensation expense is recorded based upon the

value derived from the Black-Scholes model.

The assumptions used in the Black-Scholes model could materially affect compensation expense

recorded in future periods.

Per-Share Amounts

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In addition, 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 $ 0.04

and $ 0.09 , respectively, and increased WASO by approximately 1,348,000 and 1,182,000 shares, respectively, for the three and nine months

ended December 31, 2022.

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

ended December 31, 2022.

For the nine months ended December 31,

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).

Nine Months Ended

includes the number of shares of common stock issuable under pre-funded warrants as outstanding for purposes of the WASO calculation.

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.

For the three months ended June 30, 2024 and 2023,

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

Options to purchase common stock

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Reclassifications

Certain prior year amounts have been reclassified for consistency

with the current period presentation.

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

Certain prior year amounts have been reclassified

for consistency with the current period presentation.

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

Comprehensive Loss

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in equity that are excluded from net loss.

For the three and nine months ended December 31, 2023 and 2022, the Company’s comprehensive

loss was the same as its net loss.

Recently Adopted Accounting Pronouncement

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 ASU No.

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

and financial position.

For the three months ended June 30, 2024 and 2023, the Company’s comprehensive loss was

the same as its net loss.

Recently Issued Accounting Pronouncements

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NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL

Property and equipment, net

(in thousands)

Property and equipment, net

Machinery and equipment

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accumulated depreciation and amortization

Total property and equipment, net

Accrued expenses

(in thousands)

Accrued expenses

Accrued wages and employee benefits

NOTE 3 – LEASES

Bernardo Drive, San Diego, CA

The 39 -month lease term expired on June

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 nine months ended December 31, 2023.

Thornmint Road, San Diego, CA

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2023, and the lease provides for an initial base monthly rent of $ 36,000 with annual rent increases of approximately 4 %.

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 December 31, 2023, are listed in the table below (in thousands).

In addition to

the minimum lease payments, the Company is responsible for property taxes, insurance and certain other 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, 2024, are listed in the table below (in thousands).

Annual Fiscal Years

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Present value of lease liability

Cash paid for amounts included in the measurement of lease

liabilities was approximately $ 365,000 and $ 119,000 for the nine months ended December 31, 2023 and 2022, respectively.

Rent expense was

approximately $ 337,000 and $ 81,000 for the nine months ended December 31, 2023 and 2022, respectively and $ 112,000 and $ 27,000 for the

three months ended December 31, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement

of lease liabilities was approximately $ 112,000 and $ 149,000 for the three months ended June 30, 2024 and 2023, respectively.

was approximately $ 112,000 for each of the three month periods ended June 30, 2024 and 2023, respectively.

NOTE 4 – STOCKHOLDERS’ EQUITY

ATM Agreement

On November 22, 2023, the Company entered into

a Sales Agreement (the ATM Agreement) with Leerink Partners LLC (Leerink) under which the Company may offer and sell, from time to time

at its sole discretion, shares of its common stock, for aggregate gross proceeds of up to $ 6,500,000 through an “at the market offering”

In November 2023, the Company entered into a Sales

Agreement (the ATM Agreement) with Leerink Partners LLC (Leerink) under which the Company may offer and sell, from time to time at its

sole discretion, shares of its common stock, for aggregate gross proceeds of up to $ 6,500,000 through an “at the market offering”

program under which Leerink will act as sales agent or principal.

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no obligation to sell any shares under the ATM Agreement and may, at any time, suspend solicitation and offers under the ATM Agreement.

As of December 31, 2023, no shares had been sold under the ATM Agreement.

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 Warrants) 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.

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 7.0 % of

the aggregate gross proceeds of the 2023 Offering (including the over-allotment option) and reimbursed certain out-of-pocket expenses

of approximately $ 125,000 .

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

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

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

outstanding (share amounts in thousands):

As of June 30, 2024, the Company

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

Shares Exercise

Price Expiration

Balance as of March 31, 2024 12,521

Issuance of common stock warrants

Warrants exercised ( 55 ) $ 1.22 May 2028

Balance as of June 30, 2024 12,466

Balance as of September 30, 2023

Warrants exercised

Balance as of December 31, 2023

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

outstanding (share amounts in thousands):

January 2027 – February 2027

February 2027

November 2027

During the nine months ended December 31, 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.

As of March 31, 2024, the Company had the following warrants outstanding (share amounts in thousands):

Type Number of

Shares Exercise

Price Expiration

Common stock 1,348 $ 0.01 —

Common stock 4,421 1.22 May 2028

Common stock 535 1.32 May 2027

Common stock 768 6.00 January 2027 - February 2027

Common stock 4,011 6.60 February 2027

Common stock 1,438 $ 6.60 November 2027

The 1,348,000

pre-funded warrants with an exercise price of $ 0.01 per share were included in the weighted average shares outstanding calculation for

each of the three-month periods ended June 30, 2024 and 2023.

At March 31, 2024, the Company had a receivable from its transfer agent

for approximately $ 142,000 for the proceeds from warrants exercised prior to March 31, 2024.

The receivable was recorded in the prepaid

and other line in the consolidated balance sheet at March 31, 2024 and was collected during the three months ended June 30, 2024.

During the three months ended June 30, 2024, the

Company issued 10,000 shares of common stock with a fair value of approximately $ 15,000 to a service provider.

NOTE 5 – STOCK-BASED COMPENSATION

Amended 2017 Equity Incentive Plan

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.

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 increases in the number of shares reserved for issuance by 333,334 and 1,333,334 shares, respectively.

In January 2023

and February 2024, the Company’s stockholders approved increases in the number of shares reserved for issuance under the Plan by

an additional 2,000,000 and 3,000,000 shares, respectively.

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

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

stock units (RSUs).

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

Stock-Based Compensation Expense

As of December 31, 2023, the unamortized compensation cost was approximately

$ 2,512,000 related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 1.4 years.

During the three months ended December

31, 2023, under its Two-Part FDA Submission and Clearance Milestone Bonus Program, the Company granted stock options for 909,533 shares,

which are subject to vesting upon the achievement of certain performance milestones by the Company.

As of December 31, 2023, the Company

had not commenced expense recognition of 251,567 of these option shares based on its assessment of the probability of achievement of the

Stock options granted by the Company generally

vest over 36 months and have a 10 -year term.

As of June 30, 2024, the unamortized compensation cost related to stock options was approximately

$ 2,262,000 and is expected to be recognized as expense over a weighted-average period of approximately 1.6 years.

In October 2023, under its Two-Part FDA Submission

and Clearance Milestone Bonus Program (the Bonus Program), the Company granted stock options for 909,533 shares, which are subject to

vesting based upon the achievement of certain performance milestones by the Company and continued service by the optionees.

2024, options to purchase 625,326 shares (net of forfeitures), which were granted under part one of the Bonus Program, vested upon the

Company’s submission to the FDA.

As of June 30, 2024, the Company had not commenced expense recognition of 242,307 (net of forfeitures)

of the options, which were granted under part two of the Bonus Program, based on its assessment of the probability of achievement of the

applicable performance requirements.

During the three months ended December

31, 2023, the Company issued 6,375 shares to members of the Board in accordance with its outside director compensation plan and recorded

approximately $ 11,000 of stock-based compensation expense for these share awards.

The weighted-average grant date fair value of options granted was $ 0.98

and $ 3.58 per share for the nine months ended December 31, 2023 and 2022, respectively, and $ 0.97 and $ 1.86 for the three months ended

December 31, 2023 and 2022, respectively.

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

The weighted-average grant date fair value of

options granted was $ 1.33 and $ 1.00 per share for the three months ended June 30, 2024 and 2023, respectively.

The following assumptions

were used in the fair-value method calculations:

Three Months Ended

Nine Months Ended

Risk-free interest rates

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118 % - 123 %

2.82 % - 4.06 %

123.4 % - 127.6 %

82.5 % - 152.2 %

149 % - 223 %

Expected life (years)

The fair value of options at the grant

date was estimated utilizing the Black-Scholes valuation model, which includes simplified methods to establish the fair term of options,

as well as average volatility.

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the

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.

The following table summarizes the activity

in the shares available for grant under the Plan during the nine months ended December 31, 2023:

The fair values of options at the grant date were

estimated utilizing the Black-Scholes valuation model, which includes simplified methods to establish the fair term of options, as well

as average volatility.

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the U.S.

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.

The following table summarizes the activity in

the shares available for grant under the Plan during the three months ended June 30, 2024:

Options Outstanding

Exercise Prices

Balance at March 31, 2024

Options granted

Options cancelled and returned to the Plan

Balance at June 30, 2023

Options granted

Options cancelled and returned to the Plan

Balance at September 30, 2023

Options granted

Options exercised

Options cancelled and returned to the Plan

Balance at December 31, 2023

No stock options were exercised during

the nine months ended December 31, 2023 and 2022.

A summary of RSU activity under the Plan is presented

Balance at June 30, 2024

Non-vested shares at September 30, 2023

Non-vested shares at December 31, 2023

The total intrinsic value of the RSUs

outstanding as of December 31, 2023 was approximately $ 379,000 .

The unamortized compensation cost at December 31, 2023 was approximately

$ 190,000 related to RSUs and is expected to be recognized as expense over a period of approximately 2.50 years.

The following table summarizes the range of outstanding and

exercisable options as of December 31, 2023:

Options Outstanding

Options Exercisable

Range of Exercise Price

A stock option was exercised on a cashless basis

for 7,530 shares of common stock during the three months ended June 30, 2024.

There were no stock options exercised during the three months

ended June 30, 2023.

During the three months ended June 30, 2024 and 2023, the Company awarded 3,875 and 6,375 shares, respectively, to

its non-employee directors under the Company’s outside director compensation plan.

For the three months ended June 30, 2024 and

2023, the Company recorded stock-based compensation expense for these share awards of approximately $ 6,000 and $ 5,900 , respectively.

A summary of restricted stock unit (RSU) activity

under the Plan is presented below.

Balance at March 31, 2024

Non-vested shares at June 30, 2024

The total intrinsic value of RSUs outstanding

as of June 30, 2024 was approximately $ 263,000 .

The unamortized compensation cost at June 30, 2024 was approximately $ 153,000 related

to RSUs and is expected to be recognized as expense over a period of approximately two years.

The following table summarizes the range of outstanding

and exercisable options as of June 30, 2024:

Options Outstanding Options Exercisable

Range of Exercise Price Number

Outstanding Weighted

(in Years) Weighted

Exercisable Weighted

Price Aggregate

$ 0.93 - $ 2.00 2,872,922 8.46 $ 1.49 1,564,467 $ 1.51 $ 369,936

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$ 0.93 - $ 17.70 4,321,956 7.96 $ 3.38 2,858,157 $ 4.16 —

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

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.

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 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 files U.S.

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 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 tax authorities.

As of December 31, 2023, the Company has not recorded

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

As of June 30, 2024, 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.

The Company has also

entered into indemnification agreements with its officers and directors.

No amounts were reflected in the

Company’s consolidated financial statements for the nine months ended December 31, 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

The Company has also entered into indemnification agreements

with its officers and directors.

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

ended June 30, 2024 and 2023 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.

2 unchanged sentences

include purchase orders for machinery and equipment.

At December 31, 2023, the Company had outstanding purchase orders for machinery and

equipment and related expenditures of approximately $ 592,000 .

In December 2023, the Company signed a device integration agreement with

a provider of connected-care and remote monitoring diabetes technology solutions for an obligation of approximately $ 575,000 over three

years for technology integration and license fees.

At June 30, 2024, the Company had outstanding purchase orders for machinery and equipment

and related expenditures of approximately $ 768,000 .

In December 2023, the Company signed a device

integration agreement with a provider of connected-care and remote monitoring diabetes technology solutions.

As of June 30, 2024, the

Company had a remaining obligation under the device integration agreement of approximately $ 400,000 over three years for technology

license fees.

NOTE 8 – RELATED PARTY TRANSACTIONS

A family member of one of the Company’s

executive officers is an employee of the Company.

During the three months ended June 30, 2024 and 2023, the Company paid the family member

approximately $ 57,300 and $ 34,800 , respectively, which includes the aggregate grant date fair values, as determined pursuant to FASB ASC

Topic 718, of stock options granted during each period.

NOTE 9 – SUBSEQUENT EVENTS

In January 2024, under the ATM Agreement,

the Company sold 153,879 shares of common stock for net proceeds of approximately $ 278,000 .

In January 2024, the Company received

proceeds of approximately $ 550,000 from the exercise of warrants to purchase 445,744 shares of common stock.

On February 13, 2024, the Company’s stockholders approved increases in:

i) the number of shares reserved for issuance under the

Plan by 3,000,000 shares and ii) the authorized shares of common stock to 100,000,000 .

On August 2, 2024, 242,307 outstanding options,

which were granted under part two of the Bonus Program, were cancelled, as the applicable performance requirements had not been achieved.

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