{"url_path":"/sec/modd/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-29","source_url":"https://www.sec.gov/Archives/edgar/data/1074871/0001213900-26-073223-index.html","accession_number":"0001213900-26-073223","cik":"0001074871","ticker":"MODD","issuer_name":"Modular Medical, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1074871/0001213900-26-073223-index.html","primary_entity_key":"0001074871","primary_entity_name":"Modular Medical, Inc."},"word_count":15297,"has_tables":true,"body_markdown":"ITEM\n1A. RISK FACTORS\n\n \n\nThis\nAnnual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of our objectives,\nexpectations and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applicable to all forward-looking\nstatements wherever they appear in this report. Our actual results could differ materially from those discussed herein. Factors that\ncould cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Annual Report\non Form 10-K.\n\n \n\nSummary\nof Risk Factors\n\n \n\nThe\nfollowing summarizes the risks and uncertainties that could materially adversely affect our business, financial condition, results of\noperation and stock price. You should read this summary together with the more detailed description of each risk factor contained below.\n\n \n\nRisks\nRelated to Our Business, Operations and Industry\n\n \n\n●We\nmight not be able to continue as a going concern.\n\n \n\n●We are an early commercial-stage medical device company and have a\nhistory of significant operating losses; we expect to continue to incur operating losses, and we may never achieve or maintain profitability.\n\n \n\n●We\nwill need substantial additional funding to complete subsequent phases of the development of our insulin pump products and to operate\nour business and such funding may not be available or, if it is available, such financing is likely to substantially dilute our existing\nstockholders.\n\n \n\n●We\nhave a limited operating history and historical financial information upon which you may evaluate our performance.\n\n \n\n●The\namount of financing we require will depend on a number of factors, many of which are beyond our control. Our results of operations, financial\ncondition and stock price are likely to be adversely affected if our funding requirements increase or are otherwise greater than we expect.\n\n \n\n●Our\nfuture cash requirements may differ significantly from our current estimates.\n\n \n\n●We\nmay not be able to utilize a significant portion of our net operating losses and tax credits.\n\n \n\n●Technological\nbreakthroughs in diabetes monitoring, treatment or prevention could render our insulin pump\nproducts obsolete.\n\n \n\n●Any\nfailure to attract and retain skilled directors, executives, employees and consultants could\nimpair our product development and commercialization activities.\n\n \n\n●Our\noperations are substantially dependent upon key personnel.\n\n \n\n●We\nhave and will need to outsource and rely on third parties for various aspects relating to\nthe development, manufacture, sales and marketing of our insulin pump products, as well as\nin connection with assisting us in the preparation and filing of our regulatory submissions,\nand our future success will be dependent on the timeliness and effectiveness of the efforts\nof these third parties*.*\n\n \n\n●We\nmay not be able to identify, negotiate and maintain the strategic alliances necessary to develop and commercialize our products and technologies,\nand we will be dependent on our corporate partners if we do.\n\n \n\n●We\nmay not receive the necessary regulatory clearance or approvals for our insulin pump products, and failure to timely obtain necessary\nclearances and/or approvals could harm our then operations, including our ability to commercialize our products.\n\n \n\n●We have a limited operating history upon which to evaluate our business\nand forecast our future sales and operating results and may face difficulties frequently encountered by companies in competitive and rapidly-evolving\nmarkets.\n\n \n\n●We have a limited commercial history and limited experience marketing\nand selling our products. We only recently launched our commercial product, which may make it difficult to evaluate the prospects for\nour future viability and predict our future performance.\n\n \n\n19 \n\n \n\n \n\n●Obtaining\nmarketing authorization in the United States will not obviate the need to obtain marketing authorization in other jurisdictions. We must\nobtain approval from foreign regulatory authorities before we can market and sell any of our product candidates in countries outside\nthe United States. We will incur additional costs in seeking such approvals, may experience delays in obtaining such approvals and cannot\nbe certain that such approvals will be granted.\n\n \n\n●Our\ncompetitors may develop products that are more effective, safer and less expensive than ours.\n\n \n\n●We\nexpect to rely on third-party manufacturers and will be dependent on their quality and effectiveness.\n\n \n\n●We\nmay not be able to successfully scale-up manufacturing of our products in sufficient quality and quantity, which would delay or prevent\nus from developing and commercializing our products and product candidates.\n\n \n\n●We\nare dependent upon third-party suppliers to manufacture our products, and this makes us vulnerable to supply shortages and price increases;\nwe may not be able to obtain an adequate supply of components on a timely basis or at all.\n\n \n\n●We\nmay be subject to potential product liability and other claims that could materially impact our business and financial condition.\n\n \n\n●Legislative,\nregulatory, or medical cost reimbursement changes may adversely impact our business.\n\n \n\n●We\nare subject to extensive regulation by the FDA, which could restrict the sales and marketing of our insulin pump products and could cause\nus to incur significant costs.\n\n \n\n●Although\nour insulin pump products do not presently require clinical trials to apply to the FDA for clearance, and even if a clinical trial is\ncompleted, the results of our clinical testing may not demonstrate the safety and efficacy of the device or may be equivocal or otherwise\nnot be sufficient for us to obtain approval of our product candidates.\n\n \n\n●Our\nsuccess depends substantially upon our ability to obtain and maintain intellectual property protection relating to our insulin pump products\nand research technologies.\n\n \n\n●If\nwe are sued for infringing on third-party intellectual property rights, it will be costly and time-consuming, and an unfavorable outcome\nwould have a significant adverse effect on our business.\n\n \n\n●If\nwe are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely\naffected.\n\n \n\n●Intellectual\nproperty rights do not necessarily address all potential threats to our competitive advantage.\n\n \n\n●Healthcare\nreform and drug-pricing reform laws could adversely affect our products and financial condition.\n\n \n\n●Even\nif we are able to obtain all regulatory approvals and have completed all other steps needed\nto be taken to commercialize our insulin pump products, if we or any contract manufacturers\nwe select fail to comply with the FDA’s quality system regulations, the manufacturing\nand distribution of our products could be interrupted, and our product sales and operating\nresults could suffer.\n\n \n\n●We\nmay become involved in disputes with our present or future contract partners over intellectual\nproperty ownership or other matters, which would have a significant effect on our business.\n\n \n\n●Our\ninsulin pump products will be subject to recalls, which would harm our reputation, business\noperations and financial results.\n\n \n\n●Our\ncurrent insulin pump product does not yet have reimbursement and is not approved for insurance\ncoverage. If in the future we are otherwise able to commercialize our insulin pump, but are\nunable to obtain adequate reimbursement or insurance coverage for such product from third-party\npayors, we will be unable to generate significant revenue.\n\n \n\n20 \n\n \n\n \n\nRisks\nRelated to Our Securities\n\n \n\n●We\nare subject to oversight by the SEC and other regulatory agencies. Investigations by those\nagencies could divert management’s focus and could have a material adverse effect on\nour reputation and financial condition.\n\n \n\n●If\nwe are unable to satisfy the continued listing requirements of the Nasdaq, our common stock\ncould be delisted and the price and liquidity of our common stock may be adversely affected.\n\n \n\n●We\nare a “smaller reporting company” and, as a result of the reduced disclosure\nand governance requirements applicable to smaller reporting companies, our common stock may\nbe less attractive to investors.\n\n \n\n●We\ndo not expect any cash dividends to be paid on our shares of common stock for the foreseeable\nfuture.\n\n \n\n●If\nthe beneficial ownership of our common stock continues to be concentrated, it may prevent\nour stockholders from influencing significant corporate decisions.\n\n \n\n●Future\nsales of our securities could adversely affect the market price of our common stock and our\nfuture capital-raising activities could involve the issuance of equity securities, which\nwould dilute your investment and could result in a decline in the trading price of our common\nstock.\n\n \n\n●The\neffective increase in the number of shares of our common stock available for issuance as\na result of our reverse stock split could result in further dilution to our existing stockholders\nand have antitakeover implications.\n\n \n\n●Our\narticles of incorporation allow for our board of directors to create new series of preferred\nstock without further approval by our stockholders, which could adversely affect the rights\nof the holders of our common stock.\n\n \n\n●If\nwe fail to establish and maintain an effective system of internal controls, we may not be\nable to report our financial results accurately or prevent fraud. Any inability to report\nand file our financial results accurately and timely could harm our reputation and adversely\naffect the trading price of our common stock.\n\n \n\n●Sustained\ninflation could have a material adverse effect on our business, financial condition, results\nof operations and liquidity.\n\n \n\n●Our\nboard of directors is able to adopt recapitalizations through forward or reverse splits of\nour outstanding shares of common stock without stockholder approval.\n\n* *\n\nRisks\nRelated to Our Business, Operations and Industry\n\n \n\nWe\nmight not be able to continue as a going concern.\n\n \n\nOur consolidated financial statements as of March 31, 2026 have been prepared\nunder the assumption that we will continue as a going concern twelve months from the date of issuance of this Report. At March 31, 2026,\nwe had cash and cash equivalents of $6.9 million and an accumulated deficit of $113.0 million. Subsequent to March 31, 2026, in April\n2026, we closed a public offering for net proceeds of approximately $3.0 million. Even with these proceeds, we do not believe that our\ncash and cash equivalents will be sufficient to fund our operations for the next 12 months, and we will need to raise additional capital.\nAs a result of our expected operating losses and cash burn for the foreseeable future and recurring losses from operations, if we are\nunable to raise sufficient capital through additional debt or equity arrangements, there will be uncertainty regarding our ability to\nmaintain liquidity sufficient to operate our business effectively, which raises substantial doubt as to our ability to continue as a going\nconcern. If we cannot continue as a viable entity, our shareholders would likely lose most or all of their investment in us. If we are\nunable to generate sustainable operating profit and sufficient cash flows, then our future success will depend on our ability to raise\ncapital. We intend to seek additional financing and evaluate financing alternatives in order to meet our cash requirements for the foreseeable\nfuture. We cannot be certain that raising additional capital, whether through selling additional debt or equity securities or obtaining\na line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us. If we issue additional securities\nto raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock, and our current stockholders\nmay experience dilution. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current\nproduct development programs, cut operating costs, forego future development and other opportunities or even terminate our operations.\n\n  \n\n21 \n\n \n\n \n\n*We are an early commercial-stage medical\ndevice company and have a history of significant operating losses; we expect to continue to incur operating losses, and we may never\nachieve or maintain profitability.*\n\n* *\n\nWe do not currently have revenues to generate cash flows to cover operating\nexpenses. Since our inception, we have incurred operating losses each year due to costs incurred in connection with research and development\nactivities and general and administrative expenses associated with our operations. For the years ended March 31, 2026 and 2025, we incurred\nnet losses of approximately $28.2 million and $18.8 million, respectively. As a result, we will need to raise additional capital in the\nfuture, which may or may not be available to us at all or only on unfavorable terms.\n\n \n\nWe expect to incur losses for the foreseeable\nfuture as we continue to commercialize and seek to expand market acceptance of our insulin pump products. Our Pivot insulin pump is currently\nour only commercial product, and, if it fails to gain market acceptance, we may not be able to generate sufficient revenue, or explore\nother opportunities to enhance stockholder value, such as through a sale. If we fail to generate sufficient revenue and eventually become\nprofitable, or if we are unable to fund our continuing losses, our stockholders could lose all or a substantial part of their investment.\n\n \n\nWe\nwill need substantial additional funding to complete subsequent phases of the development of our insulin pump products and to operate\nour business and such funding may not be available or, if it is available, such financing is likely to substantially dilute our existing\nstockholders.\n\n \n\nThe discovery, development, and commercialization\nof new medical devices, such as our insulin pump, entails significant costs. We have completed the engineering and mechanical development\nof our insulin pump and cartridge, and obtained FDA clearance for our Pivot product. In addition, we have also implemented a production-level\nmanufacturing process with a tier-one manufacturing partner. In June 2026, we announced commercial availability of our Pivot product and\ncommenced initial shipments. To enable us to expand commercial activities and continue to operate our business, we will need to raise\nsubstantial additional capital and/or enter into strategic partnerships or joint ventures to enable us to:\n\n \n\n●seek\nEuropean regulatory approvals with appropriate clinical studies, as required;\n\n \n\n●expand\nand continue to improve our manufacturing and commercialization capabilities;\n\n \n\n●develop,\ntest, and, if approved, market our future product candidates;\n\n \n\n●acquire\nor license additional internal systems and other infrastructure; and\n\n \n\n●hire\nand support additional management, administrative, sales and marketing, and technical personnel.\n\n \n\nUntil\nwe can generate a sufficient amount of product revenue to finance our cash requirements, which we may never achieve, we expect to finance\nour cash needs primarily through public or private equity offerings, debt financings or through the establishment of possible strategic\nalliances. We may in the future seek additional capital from public or private offerings of our capital stock or borrow additional amounts\nunder new credit lines or from other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders\nmay experience dilution, we may incur significant financing costs, and the new equity or debt securities may have rights, preferences\nand privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing,\njoint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable\nrights to our pump products or our potential future products or proprietary technologies or grant licenses on terms that are not favorable\nto us.\n\n \n\n22 \n\n \n\n \n\nWe\ncannot be certain that additional funding will be available on acceptable terms, or at all. If we are not able to secure additional equity\nfunding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our post-market clinical studies, development\nprograms or future commercialization initiatives. In addition, any additional equity funding that we do obtain will dilute the ownership\nheld by our existing equity holders. The amount of this dilution may be substantially increased if the trading price of our common stock\nis lower at the time of any financing. Regardless, the economic dilution to stockholders will be significant if our stock price does\nnot increase significantly, or if the effective price of any sale is below the price paid by a particular stockholder. Any debt financing\nthat we obtain in the future could involve substantial restrictions on activities and creditors could seek a pledge of some or all of\nour assets. We have not identified potential sources for such financing that we will require, and we do not have commitments from any third parties to provide any future\ndebt financing. If we fail to obtain funding as needed, we may be forced to cease or scale back operations, and our business, prospects,\nresults of operations, financial condition and stock price would be adversely affected.\n\n \n\nWe\nhave a limited operating history and historical financial information upon which you may evaluate our performance.\n\n \n\nYou\nshould consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that,\nlike us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully complete\nour studies and/or implement our existing and new products. If we fail to do so, it could materially harm our business and impair the\nvalue of our common stock. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business, conducting\nresearch, and developing new products. These include, but are not limited to, inadequate funding, failure to obtain regulatory approval,\nunforeseen research issues, lack of consumer, physician or third-party payor acceptance, competition, sluggish product development, and\ninadequate sales and marketing. The failure by us to meet any of these conditions would have a materially adverse effect upon us and\nmay force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.\n\n \n\nThe\namount of financing we require will depend on a number of factors, many of which are beyond our control. Our results of operations, financial\ncondition and stock price are likely to be adversely affected if our funding requirements increase or are otherwise greater than we expect.\n\n \n\nOur\nfuture funding requirements will depend on many factors, including, but not limited to:\n\n \n\n●the\ntesting costs for our insulin pump product candidates and other development activities conducted by us directly, and our ability to successfully\nconclude the studies and activities and achieve favorable results;\n\n \n\n●our\nability to attract future strategic partners to pay for or share costs related to our product development efforts;\n\n \n\n●the\ncosts and timing of seeking and obtaining regulatory clearance and approvals for our product candidates;\n\n \n\n●the\ncosts of filing, prosecuting, maintaining and enforcing any patents and other intellectual property rights that we may have and defending\nagainst potential claims of infringement;\n\n \n\n●decisions\nto hire additional scientific, engineering or administrative personnel or consultants;\n\n \n\n●our\nability to manage administrative and other costs of our operations; and\n\n \n\n●the\npresence or absence of adverse developments in our research program.\n\n \n\nIf\nany of these factors cause our funding needs to be greater than expected, our operations, financial condition, ability to continue operations\nand stock price may be adversely affected.\n\n \n\nOur\nfuture cash requirements may differ significantly from our current estimates.\n\n \n\nOur\ncash requirements may differ significantly from our estimates from time to time, depending on a number of factors, including:\n\n \n\n●the\ncosts and results of our clinical studies regarding our insulin pump product candidates;\n\n \n\n●the\ntime and costs involved in obtaining regulatory clearance and approvals;\n\n \n\n●whether\nwe are able to obtain funding under future licensing agreements, strategic partnerships, or other collaborative relationships, if any;\n\n \n\n23 \n\n \n\n \n\n●the\ncosts of compliance with laws, regulations, or judicial decisions applicable to us; and\n\n \n\n●the\ncosts of general and administrative infrastructure required to manage our business and protect corporate assets and stockholder interests.\n\n \n\nIf\nwe fail to raise additional funds on a timely basis, we will need to scale back our business plans, which would adversely affect our\nbusiness, prospects, results of operations, financial condition, and stock price, and we may even be forced to discontinue our operations\nand liquidate our assets.\n\n \n\nWe\nmay not be able to utilize a significant portion of our net operating losses and tax credits.\n\n \n\nAs of March 31, 2026, our federal and state net\noperating loss carryforwards (“NOLs”) totaled $74.6 million and $93.6 million, respectively. These NOLs are available to reduce\nfuture taxable income and will expire at various times from 2037 through 2046, except federal NOLs from fiscal 2018 and later, which will\nnever expire. In addition, we had federal R&D tax credit carryforwards of $3.2 million which will expire in various years between\n2038 through 2045.\n\n  \n\nUnder\nSections 382 and 383 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change”\nis subject to limitations on its ability to utilize its pre-change net operating losses and other tax attributes to offset future taxable\nincome or income tax. In general, an “ownership change” occurs if there is a greater than 50 percentage point change (by\nvalue) in a corporation’s equity ownership by certain stockholders over a rolling three year period. We may have experienced ownership\nchanges in the past and may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (many\nof which are outside our control). If it is determined that we have in the past experienced an ownership change, or if we undergo one\nor more ownership changes as a result of future transactions in our stock then we may not be able to utilize a material portion of our\nnet operating losses prior to their expiration, even if we were to achieve profitability. To the extent we are not able to offset future\ntaxable income with our net operating losses, our net income and cash flows may be adversely affected.\n\n \n\nTechnological\nbreakthroughs in diabetes monitoring, treatment or prevention could render our insulin pump products obsolete.\n\n \n\nThe\ndiabetes treatment market is subject to rapid technological change and product innovation. Our insulin pump products are based on our\nproprietary technology, but a number of companies, medical researchers and existing pharmaceutical companies are pursuing new delivery\ndevices, delivery technologies, sensing technologies, procedures, drugs and other therapeutics for the monitoring, treatment and/or prevention\nof insulin-dependent diabetes. Any technological breakthroughs in diabetes monitoring, treatment or prevention could render our products\nobsolete, which would have a material adverse effect on our business, prospects, results of operations and financial condition and could\nresult in stockholders losing their entire investment.\n\n \n\nAny\nfailure to attract and retain skilled directors, executives, employees and consultants could impair our product development and commercialization\nactivities.\n\n \n\nOur\nbusiness depends on the skills, performance, and dedication of our directors, executive officers and key engineering, scientific and\ntechnical advisors. Many of our current engineering or scientific advisors are independent contractors and are either self employed or\nemployed by other organizations. As a result, they may have conflicts of interest or other commitments, such as consulting or advisory\ncontracts with other organizations, which may affect their ability to provide services to us in a timely manner. We will need to recruit\nadditional directors, executive management employees, and advisers, particularly engineering, scientific and technical personnel, which\nwill require additional financial resources. In addition, there is currently intense competition for skilled directors, executives and\nemployees with relevant engineering, scientific and technical expertise, and this competition is likely to continue. If we are unable\nto attract and retain persons with sufficient engineering, scientific, technical and managerial experience, we may be forced to limit\nor delay our product development activities or may experience difficulties in successfully conducting our business, which would adversely\naffect our business, prospects, results of operations and financial condition.\n\n \n\n24 \n\n \n\n \n\nOur\noperations are substantially dependent upon key personnel.\n\n \n\nOur\nperformance is substantially dependent on the continued services and performance of our senior management and certain other key personnel.\nIn particular, we are dependent on the performance and continued engagement of Paul DiPerna, our chairman, president and principal financial\nofficer. Although we believe we will be able to engage qualified personnel for such purposes, an inability to do so could materially\nadversely affect our ability to market, sell, and enhance our products. While Mr. DiPerna is currently devoting his full-time working\nefforts to us, other employees and consultants may only be available to us on a part-time basis. The loss of services of one or more\nof our executive officers, especially Mr. DiPerna, or other key employees or our inability to hire and retain other qualified employees,\nincluding but not limited to research and development, sales, manufacturing, and administrative support staff, could have a material\nadverse effect on our business, prospects, results of operations and financial condition.\n\n \n\nWe\nhave and will need to outsource and rely on third parties for various aspects relating to the development, manufacture, sales and marketing\nof our insulin pump products, as well as in connection with assisting us in the preparation and filing of our regulatory submissions,\nand our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.\n\n \n\nWe\nare dependent on third parties for important aspects of our business strategy. We do not have the required financial resources and personnel\nto carry out independently all aspects of the development of our products, and have limited resources to manufacture, market and sell\nour current product candidate. As a result, we contract with and rely on third parties for important functions, including in connection\nwith certain aspects of the development and finalization of our products, the preparation and filing of our regulatory submissions and\nmanufacturing and commercialization of our pump products. We have in the past and will continue to enter into multiple agreements with\nthird parties for such services. If problems develop in our relationships with third parties, or if such parties fail to perform as expected, it could lead to delays or\nlack of progress in obtaining regulatory clearance, significant cost increases, changes in our strategies, and even failure of our product\ninitiatives.\n\n \n\nWe\nmay not be able to identify, negotiate and maintain the strategic alliances necessary to develop and commercialize our products and technologies,\nand we will be dependent on our corporate partners if we do.\n\n \n\nWe\nmay seek to enter into a strategic alliance with a diabetes-related service providing company for the further development and approval\nof our insulin pump product candidate. At this time, we have not entered into any such strategic alliance. Strategic alliances, if entered\ninto, could potentially provide us with additional funds, expertise, access, and other resources in exchange for exclusive or non-exclusive\nlicenses or other rights to the product that we are currently developing or a product we may explore in the future. We cannot give any\nassurance that we will be able to enter into strategic relationships with a diabetes-related service providing company or others in the\nnear future or at all. In addition, we cannot assure you that any agreements that we do reach will allow us to achieve our goals or that\nsuch grants will be on terms that prove to be economically beneficial to us. When we do enter into strategic or contractual relationships,\nwe become dependent on the successful performance of our partners or counter-parties. If they fail to perform as expected, such failure\ncould adversely affect our financial condition, lead to increases in our capital needs, or hinder or delay our development efforts. See\n“Our Business-Employees” below.\n\n \n\nWe\nmay not receive the necessary regulatory clearance or approvals for our insulin pump products, and failure to timely obtain necessary\nclearances and/or approvals could harm our then operations, including our ability to commercialize our products.\n\n \n\nBefore\nwe can market a new medical device, such as our insulin pump, we must first receive clearance under Section 510(k) of the Federal Food,\nDrug, and Cosmetic Act, or the “FDCA.” In the 510(k) clearance process, before a device may be marketed, the FDA must determine\nthat such proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which includes\na device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (preamendments\ndevice), a device that was originally on the U.S. market pursuant to a premarket approval (PMA) and later down classified, or a 510(k)-exempt\ndevice. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and\neither have the same technological characteristics as the predicate device or have different technological characteristics and not raise\ndifferent questions of safety or effectiveness than the predicate device. We have received FDA clearance to market and sell our initial\npump products, our MODD1 and Pivot, in the United States. Our Pivot product is the product that we intend to commercialize in the fall\nof 2026.\n\n \n\nWe\nexpect that future versions of our pump products will require FDA 510(k) approvals. The 510(k) clearance process can be expensive, lengthy\nand uncertain. The FDA’s 510(k) clearance process usually takes less than 12 months, but it can last longer. Despite the time,\neffort and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory authorizations\ncould harm our business, including our ability to commercialize our future product candidates and our stockholders could lose their entire\ninvestment. Furthermore, even if we are granted the required regulatory authorizations, such authorizations may be subject to significant\nlimitations on the indicated uses for the device, which may limit the market for our future product candidates.\n\n \n\n25 \n\n \n\n \n\nIf\nthe FDA requires us to go through a lengthier, more rigorous examination for our future product candidates than we had expected, product\nintroductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.\n\n \n\nThe\nFDA can delay, limit or deny clearance or approval for our product candidates for many reasons, including, for example:\n\n \n\n●our\ninability to demonstrate to the satisfaction of the FDA that a product candidate is substantially equivalent to the proposed predicate\ndevice;\n\n \n\n●the\ndisagreement of the FDA with the design or implementation of our performance testing protocols or the interpretation of data from our\nperformance testing;\n\n \n\n●the\ndata from performance testing may be insufficient to support a determination of substantial equivalence or that our device meets required\nspecial controls or applicable performance standards;\n\n \n\n●our\ninability to demonstrate that the benefits of our pump outweigh the risks;\n\n \n\n●the\nmanufacturing process or facilities we intend to use may not meet applicable requirements; for example, we experienced issues maintaining\ninsulin stability on an initial version of our MODD1 product, and we attributed this issue to the materials used in the initial production\nprocess; we made the necessary changes to our materials and process to address this issue to obtain FDA clearance for the MODD1 product;\nand\n\n \n\n●the\npotential for approval policies or regulations of the FDA to change significantly in a manner rendering our data or regulatory filings\ninsufficient for clearance or approval.\n\n \n\nIn\naddition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take\nother actions, which may prevent or delay approval or clearance of our future product candidates or impact our ability to modify our\nfuture product candidate after clearance on a timely basis. Such policy or regulatory changes could impose additional requirements upon\nus that could delay our ability to obtain clearance for our proposed future pump products, increase the costs of compliance or restrict\nour ability to maintain our current approval.\n\n \n\nAs\na general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based,\namong other things, on the evaluation of data supporting the safety and performance of the product candidates during normal conditions\nof use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use,\nthat the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended\nperformance, and that any claims made about the performance and safety of the device are supported by suitable evidence.\n\n \n\n*We have a limited operating history upon\nwhich to evaluate our business and forecast our future sales and operating results and may face difficulties frequently encountered by\ncompanies in competitive and rapidly-evolving markets.*\n\n \n\nWe have a limited operating history upon\nwhich to evaluate our business and forecast our future sales and operating results. In June 2026, we announced commercial availability\nof, and commenced initial shipments of, our Pivot insulin delivery system in the United States, and we intend to expand commercial activities\nacross metropolitan markets by late 2026. This is our first commercial product launch. We previously received FDA clearance for our MODD1\npump in September 2024, but we do not intend to commercialize the MODD1 product. In assessing our business prospects, you should consider\nthese factors as well as the various risks and difficulties frequently encountered by companies in competitive and rapidly evolving markets,\nparticularly those facing emerging growth companies that manufacture and sell medical devices.\n\n \n\nThese risks include our ability to:\n\n \n\n●implement and execute our business strategy;\n\n \n\n●manage and improve the productivity of our sales, clinical\nand marketing infrastructure to grow sales of our Pivot insulin pump and any future products;\n\n \n\n26 \n\n \n\n \n\n●gain acceptance of our Pivot pump among people with insulin-dependent\ndiabetes, their caregivers and healthcare providers, particularly the “Almost Pumpers,” who are our primary target market;\n\n \n\n●comply with a broad range of regulatory requirements within\na highly regulated industry;\n\n \n\n●enhance our manufacturing capabilities with our manufacturing\npartner, Phillips Medisize, increase production of our Pivot pump efficiently while maintaining quality standards, and adapt our manufacturing\nfacilities to the production of new products;\n\n \n\n●respond effectively to competitive pressures from established\ninsulin pump manufacturers such as Medtronic, Tandem and Insulet;\n\n \n\n●enhance our Pivot pump and develop future products;\n\n \n\n●obtain and maintain regulatory clearance or approval to enhance\nour existing products and commercialize proposed products;\n\n \n\n●perform any required clinical trials with respect to our\nexisting products and proposed products; and\n\n \n\n●attract, retain and motivate qualified personnel in various\nareas of our business.\n\n \n\nDue to our limited operating history,\nwe may not have the institutional knowledge or experience to be able to effectively address these and other risks that may face our business.\nIn addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to respond\neffectively to those trends. As a result of these or other risks, we may not be able to execute key components of our business strategy,\nand our business, financial condition and operating results may suffer.\n\n \n\n*We have a limited commercial history and\nlimited experience marketing and selling our products. We only recently launched our commercial product, which may make it difficult to\nevaluate the prospects for our future viability and predict our future performance.*\n\n* *\n\nWe are a commercial-stage medical device company\nwith limited commercial history and may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown\nobstacles. We announced commercial availability of our Pivot insulin delivery system in June 2026 and therefore do not have a long history\noperating as a commercial company. Our limited commercial history and limited number of cleared products makes it difficult to evaluate\nour current business and predict our future performance. These factors also make it difficult for us to forecast our future financial\nperformance and growth. Although we intend to expand commercial activities across metropolitan markets by late 2026, any assessment of\nour future revenue, profitability or prediction about our future success or viability is subject to significant uncertainty. We have encountered\nin the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies in emerging and rapidly\nchanging industries, including scaling up our infrastructure and headcount, developing relationships with distributors and diabetes educator\npractices, and building brand awareness among Almost Pumpers and healthcare providers. If our assumptions regarding these risks and uncertainties,\nwhich we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results\nof operations could differ materially from our expectations, and our business, financial condition and results of operations could be\nmaterially and adversely affected.\n\n \n\nObtaining\nmarketing authorization in the United States will not obviate the need to obtain marketing authorization in other jurisdictions We must\nobtain approval from foreign regulatory authorities before we can market and sell any of our product candidates in countries outside\nthe United States. We will incur additional costs in seeking such approvals, may experience delays in obtaining such approvals and cannot\nbe certain that such approvals will be granted.\n\n \n\nThe\ndevelopment, manufacture, and marketing of our product candidates outside the United States is subject to government regulation. In most\nforeign countries, we must complete rigorous pre-clinical testing and extensive human clinical trials that demonstrate the safety and\nefficacy of a product in order to apply for regulatory approval to market the product. If foreign regulatory authorities grant regulatory\napproval of a product, the approval may be limited to specific indications or limited with respect to its distribution. Expanded or additional\nindications for approved devices may not be approved, which could limit our potential revenues. Foreign regulatory authorities may refuse\nto grant any approval. Consequently, even if we believe that preclinical and clinical data are sufficient to support regulatory approval\nfor our products, foreign regulatory authorities may not ultimately grant approval for commercial sale in any jurisdiction. If our product\ncandidates are not approved in such jurisdictions, our ability to generate revenues will be limited and our business will be adversely\naffected.\n\n \n\n27 \n\n \n\n \n\nOur\ncompetitors may develop products that are more effective, safer and less expensive than ours.\n\n \n\nExisting\ninsulin pumps are expensive, with the more popular models receiving reimbursement exceeding $4,000 under durable medical equipment or\npharmacy benefit coverage from individuals without health insurance and often requiring significant patient copays. Others have daily\nuse costs that exceed the reimbursement rates of many health insurance plans, forcing some users to spend thousands of dollars a year\nin copays. We believe this makes insurers hesitant to pay for any pumps and places pumps out of reach for many patients who cannot afford\nsuch out of pocket expenses.\n\n \n\nWe\nare engaged in the diabetes treatment sector of the healthcare marketplace, which is intensely competitive. There are current products\nthat are quite effective at addressing the effects of diabetes, and we expect that new developments by other companies and academic institutions\nin the areas of diabetes treatment will continue. If approved for marketing by the FDA, depending on the approved clinical indication,\nour product will be competing with existing and future products related to treatments for diabetes.\n\n \n\nOur\ncompetitors may:\n\n \n\n●develop\nproduct candidates and market products that increase the levels of safety or efficacy that our product candidates will need to show in\norder to obtain regulatory approval;\n\n \n\n●develop\nproduct candidates and market products that are less expensive or more effective than ours;\n\n \n\n●commercialize\ncompeting products before we can launch any products we are working to develop;\n\n \n\n●hold\nor obtain proprietary rights that could prevent us from commercializing our products; or\n\n \n\n●introduce\ntherapies or market medical products that render our current product and future product candidates obsolete.\n\n \n\nWe\nexpect to compete against large medical device companies, such as Medtronic, Inc., Tandem Diabetes Care, Inc. and Insulet Corporation,\nsmaller companies that are collaborating with larger medical device companies, new companies, academic institutions, government agencies\nand other public and private research organizations. These competitors, in nearly all cases, produce similar products relative to the treatment of diabetes and have substantially\ngreater financial resources than we do. Some of our competitors also have significantly greater experience in:\n\n \n\n●developing\nmedical device and other product candidates;\n\n \n\n●undertaking\ntesting and clinical studies;\n\n \n\n●building\nrelationships with key customers and opinion-leading physicians;\n\n \n\n●obtaining\nand maintaining FDA and other regulatory approvals;\n\n \n\n●formulating\nand manufacturing medical devices;\n\n \n\n●launching,\nmarketing and selling medical devices;\n\n \n\n●providing\nmanagement oversight for all of the above-listed operational functions; and\n\n \n\n●obtaining\ninsurance coverage and reimbursement for their competitive products.\n\n \n\nIf\nwe fail to achieve acceptance over other existing or newly developed products, we may be unable to obtain regulatory approval or successfully\ncommercialize our future insulin pump product candidates. If our competitors’ market medical devices that are less expensive, safer\nor more effective than our insulin pump, or that gain or maintain greater market acceptance, we may not be able to compete effectively,\nwhich would adversely affect our business, prospects, results of operations and financial condition. See “Business - Competition.”\n\n \n\n28 \n\n \n\n \n\nWe\nexpect to rely on third-party manufacturers and will be dependent on their quality and effectiveness.\n\n \n\nOur\ninsulin pump requires precise, high-quality manufacturing. The failure to achieve and maintain high manufacturing standards, including\nfailure to detect or control anticipated or unanticipated manufacturing errors or the frequent occurrence of such errors, could result\nin patient injury or death, discontinuance or delay of ongoing or planned clinical studies, delays or failures in product testing or\ndelivery, cost overruns, product recalls or withdrawals and other problems that could seriously hurt our business. Contract medical device\nmanufacturers often encounter difficulties involving production yields, quality control and quality assurance and shortages of qualified\npersonnel. These manufacturers are subject to stringent regulatory requirements, including the FDA’s current good-manufacturing-practices\nregulations. If our contract manufacturers fail to maintain ongoing compliance at any time, the production of our product could be interrupted,\nresulting in delays or discontinuance of our clinical studies, additional costs and loss of potential revenues.\n\n \n\nWe\nmay not be able to successfully scale-up manufacturing of our products in sufficient quality and quantity, which would delay or prevent\nus from commercializing our products.\n\n \n\nIn\norder to conduct larger-scale or late-stage clinical studies and for commercialization of our insulin pump products, we will need to\nmanufacture it in larger quantities. We may not be able to successfully increase the manufacturing capacity for our Pivot product or\nfuture product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities.\nIf we are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development\nand testing of our product candidates and regulatory approval or commercial launch may be delayed, which could significantly harm our\nbusiness.\n\n \n\nWe\nare dependent upon third-party suppliers to manufacture our product, and this makes us vulnerable to supply shortages and price increases;\nwe may not be able to obtain an adequate supply of components on a timely basis or at all.\n\n \n\nThe\nmanufacture of our product will require the timely delivery of sufficient amounts of components from multiple suppliers in various countries.\nWe have been working closely with our suppliers to ensure continuity of supply, but we cannot guarantee these efforts will be successful.\nDue to the supply chain issues experienced by the semiconductor industry, at times, we have experienced delays obtaining integrated circuits\nfrom certain suppliers. We may need to enter into “take or pay” contracts with suppliers. We have also seen price increases\nfor various components. We do not have supply agreements with any of our suppliers, and we make purchases based on individual purchase\norders. An interruption, delay, or inability to obtain components from our third-party suppliers at acceptable prices in a timely manner,\ncould hinder our ability to manufacture our products and have a material adverse effect on our business, prospects, financial condition\nand results of operations.\n\n \n\nWe\nmay be subject to potential product liability and other claims that could materially impact our business and financial\ncondition.\n\n \n\nThe\nmarketing and sale of our insulin pump exposes us to the risk of significant damages from product liability and other claims, and the\nuse of our product in clinical studies may result in adverse effects from liability claims. We cannot predict all the possible harms\nor adverse effects that may result. We have obtained product liability insurance to provide some protection from potential claims. Nonetheless,\nwe may not have sufficient resources to pay for any liabilities resulting from a personal injury or other claim, even if it is partially\ncovered by insurance. In addition to the possibility of direct claims, we may be required to indemnify third parties against damages\nand other liabilities arising out of our development, commercialization and other business activities, which would increase our liability\nexposure. If third parties that have agreed to indemnify us fail to do so, we may be held responsible for those damages and other liabilities\nas well.\n\n \n\nLegislative,\nregulatory, or medical cost reimbursement changes may adversely impact our business.\n\n \n\nNew\nlaws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to the health\ncare system in the U.S. and in other jurisdictions may change the nature of and regulatory requirements relating to innovations in medical\ndevices, testing and regulatory approvals, limit or eliminate payments for medical procedures and treatments, or subject the pricing\nof medical devices to government control. In addition, third-party payors in the U.S. are increasingly attempting to contain health care\ncosts by limiting both coverage and the level of reimbursement of new products. Consequently, significant uncertainty exists as to the\nreimbursement status of newly approved health care products. Significant changes in the health care system in the U.S. or elsewhere,\nincluding changes resulting from adverse trends in third-party reimbursement programs, could have a material adverse effect on our projected\nfuture operating results and our ability to raise capital, commercialize products, and remain in business.\n\n \n\n29 \n\n \n\n \n\nWe\nare subject to extensive regulation by the FDA, which could restrict the sales and marketing of our insulin pump products and could cause\nus to incur significant costs.\n\n \n\nOur\ninsulin pump products are subject to extensive regulation by the FDA. These regulations relate to manufacturing, labeling, sale, promotion,\ndistribution and shipping. Before a new medical device, or a new intended use of a legally marketed device, can be marketed in the United\nStates, it must be cleared or approved by the FDA through the applicable premarket review process (510(k), PMA, or de novo classification),\nunless an exemption applies. While we have received 510(k) clearance for our initial insulin pump products, the MODD1 and Pivot, we may\nbe required to obtain new 510(k) clearances for significant, post-market modifications to our pump products. Each premarket submission\nand review process can be expensive and lengthy, and entail significant user fees, unless exempt.\n\n \n\nMedical\ndevices may be marketed only for the indications for which they are approved or cleared. Further, 510(k) clearance can be revoked if\nsafety or effectiveness problems develop once the device is on the market.\n\n \n\nThe\ncurrent regulatory requirements to which we are subject may change in the future in a way that adversely affects us. If we fail to comply\nwith present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by the FDA, which may\ninclude any of the following sanctions:\n\n \n\n●untitled\nletters, warning letters, fines, injunctions, consent decrees and civil penalties;\n\n \n\n●customer\nnotification, or orders for repair, replacement or refunds;\n\n \n\n●voluntary\nor mandatory recall or seizure of our current or future products;\n\n \n\n●administrative\ndetention by the FDA of medical devices believed to be adulterated or misbranded;\n\n \n\n●imposing\noperating restrictions, suspension or shutdown of production;\n\n \n\n●refusing\nour requests for 510(k) clearance, PMA or de-novo classification of any new products, new intended uses or modifications to our insulin\npump;\n\n \n\n●rescinding\n510(k) clearance that has already been granted; and\n\n \n\n●criminal\nprosecution.\n\n \n\nThe\noccurrence of any of these events would have a material adverse effect on our business, financial condition and results of operations\nand could result in stockholders losing their entire investment.\n\n  \n\nAlthough\nour insulin pump products do not presently require clinical trials to apply to the FDA for clearance, and even if a clinical trial is\ncompleted, the results of our clinical testing may not demonstrate the safety and efficacy of the device or may be equivocal or otherwise\nnot be sufficient for us to obtain approval of our product candidates.\n\n \n\nClinical\ntrials are almost always required to support a PMA application and may also be required to support 510(k) submissions, although at this\ntime our products do not require a PMA. If the device presents a “significant risk” to human health as defined by the FDA,\nthe FDA requires the study sponsor to submit an investigational device exemption, or IDE, application and obtain IDE approval prior to\ncommencing human clinical trials. The IDE must be supported by appropriate data, such as animal and laboratory testing results, showing\nthat it is safe to test the device in humans and that the testing protocol is scientifically sound. An IDE will automatically become\neffective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the sponsor that the investigation is on\nhold and may not begin until the sponsor provides supplemental information about the investigation that satisfies the agency’s\nconcerns. The FDA may also notify the sponsor that the study is approved as proposed. If the FDA determines that there are deficiencies\nor other concerns with an IDE that require modification of the study, the FDA may permit a clinical trial to proceed under conditional\napproval. Furthermore, the agency may withdraw approval of an IDE under certain circumstances. Clinical trials for a significant risk\ndevice may begin once an IDE is approved by the FDA and the appropriate Institutional Review Board, or IRB, at each clinical trial site.\nIf the product is deemed a “non-significant risk” device, IDE approval from the FDA would not be required, but the clinical\ntrial would need to meet other requirements including IRB approval. Our clinical trials must be conducted in accordance with FDA regulations\nand federal and state regulations concerning human subject protection, including informed consent and healthcare privacy. A clinical\ntrial may be suspended by the FDA or at a specific site by the relevant IRB at any time for various reasons, including a determination\nthat the risks to the trial participants outweigh the benefits of participation in the clinical trial. Even if a clinical trial is completed,\nthe results of our clinical testing may not demonstrate the safety and efficacy of the device or may be equivocal or otherwise not be\nsufficient for us to obtain approval of our product.\n\n \n\n30 \n\n \n\n \n\nOur\nsuccess depends substantially upon our ability to obtain and maintain intellectual property protection relating to our insulin pump products\nand research technologies.\n\n \n\nWe\nhave applied to the U.S. Patent and Trademark Office, or the USPTO, and various foreign patent agencies for patents on our proprietary\nfluid movement technology and our insulin delivery methodology. To date, the USPTO has granted six patents to us, and we have been awarded\nfour patents by foreign jurisdictions. We have additional applications pending and in various stages of review by the USPTO and foreign\npatent agencies. There can be no assurance that we will be issued additional patents by the USPTO or foreign patent agencies and that\nany of our patents will prevent other companies from competing with us. We will continue to attempt to patent our innovations, as appropriate,\nto help ensure a sustainable competitive advantage.\n\n \n\nDue\nto evolving legal standards relating to the patentability, validity and enforceability of patents covering health care product inventions,\nour ability to enforce our existing patents and to obtain and enforce patents that may issue from any pending or future patent applications\nis uncertain and involves complex legal, scientific and factual questions. To date, no consistent policy has emerged regarding the breadth\nof claims allowed in medical device patents. Thus, we cannot be sure that any patents will issue from any pending or future patent applications\nowned by or licensed to us. Even if patents do issue, we cannot be sure that the claims of these patents will be held valid or enforceable\nby a court of law, will provide us with any significant protection against competing products, or will afford us a commercial advantage\nover competitive products. If, at some point in the future, one or more products resulting from our product candidates is approved for\nsale by the FDA and we do not have adequate intellectual property protection for those products, competitors could duplicate them for\napproval and sale in the United States without repeating the extensive testing required of us to obtain FDA approval.\n\n \n\nIf\nwe are sued for infringing on third-party intellectual property rights, it will be costly and time-consuming, and an unfavorable outcome\nwould have a significant adverse effect on our business.\n\n \n\nOur\nability to commercialize our pump products depends on our ability to use, manufacture and sell our product current and future product\ncandidates without infringing the patents or other proprietary rights of third parties. Numerous U.S. and foreign issued patents and\npending patent applications owned by third parties exist in the diabetes medical device area. There may be existing patents, unknown\nto us, on which our activities with our insulin pump products could infringe.\n\n \n\nIf\na third party claims that our actions infringe on its patents or other proprietary rights, we could face a number of issues that could\nmaterially harm our competitive position, including, but not limited to:\n\n \n\n●infringement\nand other intellectual property claims that, even if meritless, can be costly and time-consuming, delay the regulatory approval process\nand divert management’s attention from our core business operations;\n\n \n\n●an\norder that we pay substantial damages for infringement, including consequential damages for lost of profits or market share, if a court determines that our products or technologies infringe\non a third party’s patent or other proprietary rights;\n\n  \n\n●a\ncourt prohibiting us from selling or licensing our products or technologies unless the holder licenses the patent or other proprietary\nrights to us, which it is not required to do; and\n\n \n\n●even\nif a license is available from a holder, we may have to pay substantial royalties or grant cross-licenses to our patents or other proprietary\nrights.\n\n \n\nIf\nany of these events occur, it could significantly harm our operations and financial condition and negatively affect our stock price.\n\n \n\nIf\nwe are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely\naffected.\n\n \n\nIn\naddition to patented technology and technology for which patent protection is being sought, we rely on our unpatented technology, trade\nsecrets and know-how. We generally seek to protect this information by confidentiality, non-disclosure and assignment of invention agreements\nwith our officers, employees, contractors and other service providers and with parties with which we do business. These agreements may\nbe breached, which breach may result in the misappropriation of such information, and we may not have adequate remedies for any such\nbreach. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of our technology.\n\n \n\n31 \n\n \n\n \n\nMoreover,\nour trade secrets may be disclosed to or otherwise become known or be independently developed by competitors. To the extent that our\nofficers, employees, contractors, other service providers, or other third parties with whom we do business use intellectual property\nowned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If, for any\nof the above reasons, our intellectual property is disclosed or misappropriated, it would harm our ability to protect our rights and\nhave a material adverse effect on our business, financial condition, and results of operations.\n\n \n\nIntellectual property rights do not\nnecessarily address all potential threats to our competitive advantage.\n\n \n\nThe\ndegree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations,\nand may not adequately protect our business, or permit us to gain and maintain a competitive advantage. The following examples are illustrative:\n\n \n\n●others\nmay be able to make devices that are similar to our insulin pump but that are not covered\nby the claims of the patents that we own;\n\n \n\n●we\nor any collaborators might not have been the first to make the inventions covered by the\nissued patents or pending patent applications that we own;\n\n \n\n●we\nmight not have been the first to file patent applications covering certain of our inventions;\n\n \n\n●others\nmay independently develop similar or alternative technologies or duplicate any of our technologies\nwithout infringing our intellectual property rights;\n\n \n\n●it\nis possible that our pending patent applications will not lead to issued patents;\n\n \n\n●issued\npatents that we own may not provide us with any competitive advantages, or may be held invalid\nor unenforceable as a result of legal challenges;\n\n \n\n●our\ncompetitors might conduct research and development activities in the U.S. and other countries\nthat provide a safe harbor from patent infringement claims for certain research and development\nactivities, as well as in countries where we do not have patent rights, and then use the\ninformation learned from such activities to develop competitive products for sale in our\nmajor commercial markets; and\n\n \n\n●we\nmay not develop additional proprietary technologies that are patentable.\n\n \n\nHealthcare reform and drug-pricing\nreform laws could adversely affect our products and financial condition.\n\n \n\nIn\nthe United States, there have been, and continue to be, a number of legislative initiatives to contain healthcare costs. In March 2010,\nthe Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (ACA), was\nenacted in the United States, which made a number of substantial changes in the way healthcare is financed by both governmental and private\ninsurers. Among other ways in which it may affect our business, the ACA implemented payment system reforms, including a national pilot\nprogram on payment bundling to encourage hospitals, physicians, and other providers to improve the coordination, quality, and efficiency\nof certain healthcare services through bundled payment models and expanded the eligibility criteria for Medicaid programs. Since its\nenactment, there have been judicial, executive, and Congressional challenges to certain aspects of the ACA. It is unclear how the ACA\nand its implementation, as well as efforts to repeal or replace, or invalidate, the ACA, or portions thereof, will affect our insulin\npump or our business. Additional legislative changes, regulatory changes, and judicial challenges related to the ACA remain possible.\nIt is possible that the ACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may\nbe adopted in the future, could have an adverse effect on our industry generally and on our ability to commercialize our insulin pump\nproducts and achieve profitability. We have assumed in all of our financial projections that there is not an increase in the reimbursement\nfor our products through the pharmacy or durable medical equipment routes.\n\n \n\n32 \n\n \n\n \n\nDrug\npricing continues to be a subject of debate at the executive and legislative levels of U.S. government. The American Rescue Plan Act\nof 2021 eliminated the statutory cap on rebates that drug manufacturers pay to Medicaid beginning January 1, 2024. With the elimination\nof the rebate cap, manufacturers may be required to compensate states in an amount greater than what the state Medicaid programs pay\nfor the drug. Additionally, the Inflation Reduction Act of 2022 contains substantial drug pricing reforms, including the establishment\nof a drug price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge\na negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of\nrebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace\ninflation, and requires manufacturers to provide discounts on Part D drugs. Substantial penalties can be assessed for noncompliance with\nthe drug pricing provisions in the Inflation Reduction Act of 2022. The Inflation Reduction Act of 2022 could have the effect of reducing\nthe prices we can charge and reimbursement we receive for our products, if approved, thereby reducing our profitability, and could have\na material adverse effect on our financial condition, results of operations and growth prospects. The effect of Inflation Reduction Act\nof 2022 on our business and the pharmaceutical industry in general is not yet known.\n\n \n\nAt\nthe state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product\npricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure\nand transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect\nthat additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts\nthat federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement\nand reduced demand for our products, once approved, or additional pricing pressures.\n\n \n\nThese\nand other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and in additional\ndownward pressure on the price that we receive for any current product or future product candidate. Any reduction in reimbursement from\nMedicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation\nof cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or\ncommercialize our products. Legislative and regulatory proposals have been made to expand post approval requirements and restrict sales\nand promotional activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations,\nguidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any current or future product\ncandidates, if any, may be. In addition, increased Congressional scrutiny of the FDA’s approval process may significantly delay\nor prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.\n\n \n\nEven if we are able to obtain all regulatory\napprovals and have completed all other steps needed to be taken to commercialize our insulin pump, if we or any contract manufacturers\nwe select fail to comply with the FDA’s quality system regulations, the manufacturing and distribution of our products could be\ninterrupted, and our sales and operating results could suffer.\n\n \n\nWe\nhave established initial, low-volume manufacturing capability in our facility and with a tier one medical device contract manufacturer.\nWe and the contract manufacturer of our insulin pump products will be required to comply with the FDA’s quality system regulations,\nwhich impose a complex regulatory framework that covers the procedures and documentation of the design, testing, production, control,\nquality assurance, labeling, packaging, sterilization, storage and shipping of medical devices. The FDA enforces its quality system regulations\nthrough periodic unannounced inspections. We cannot assure that, in the future, any manufacturing facilities owned by us or any contract\nmanufacturer will pass any quality system inspection. In the event that our or any contract manufacturer’s facilities fails a quality\nsystem inspection, the manufacturing or distribution of our products could be interrupted and our operations disrupted. Failure to take\nadequate and timely corrective action in response to an adverse quality system inspection could force a suspension or shutdown of any\npackaging and labeling operations or then manufacturing operations of any contract manufacturers, or a recall of our insulin pump products.\nIf any of these events were to occur, we at such time would not be able to provide our customers with the quantity of insulin pumps that\nthey require on a timely basis, our reputation could be harmed and we could lose any customers we then have, any or all of which could\nhave a material adverse effect on our business, financial condition and results of operations.\n\n \n\n33 \n\n \n\n \n\nWe may bring infringement claims or\nother legal proceedings against third parties, causing us to spend substantial resources on litigation and exposing our own intellectual\nproperty portfolio to challenge.\n\n \n\nWe\nmay come to believe that third parties are infringing on our patents or other proprietary rights. To prevent infringement or unauthorized\nuse, we may need to file infringement and/or misappropriation suits, which are very expensive and time-consuming, could result in meritorious\ncounterclaims against us and would distract management’s attention. Also, in an infringement or misappropriation proceeding, a\ncourt may decide that one or more of our patents is invalid, unenforceable, or both, in which case third parties may be able to use our\ntechnology without paying license fees or royalties. Even if the validity of our patents is upheld, a court may refuse to stop the other\nparty from using the technology at issue on the grounds that the other party’s activities are not covered by our patents. See “Business\n- Patents,” below.\n\n \n\nWe may become involved in disputes\nwith our present or future contract partners over intellectual property ownership or other matters, which would have a significant effect\non our business.\n\n \n\nInventions\ndiscovered in the course of performance of contracts with third parties or contractors may become jointly owned by such third-party contractors\nand us, in some cases, and the exclusive property of one of us, in other cases. Under some circumstances, it may be difficult to determine\nwho owns a particular invention or whether it is jointly owned, and disputes could arise regarding ownership or use of those inventions\nor jointly developed improvements thereto. Other disputes may also arise relating to the performance or alleged breach of our agreements\nwith third parties. Any disputes could be costly and time-consuming, and an unfavorable outcome could have a significant adverse effect\non our business.\n\n \n\nOur insulin pump products may be subject\nto recalls, which would harm our reputation, business operations and financial results.\n\n \n\nThe\nFDA has the authority to require the recall of our pump products, if we commence manufacturing of our insulin pumps, and we, or any contract\nmanufacturers we retain, fail to comply with relevant regulations pertaining to manufacturing practices, labeling, advertising or promotional\nactivities, or if new information is obtained concerning the safety or efficacy of the device. A government-mandated recall could occur\nif the FDA finds that there is a reasonable probability that our device would cause serious, adverse health consequences or death. A\nvoluntary recall by us could occur as a result of manufacturing defects, labeling deficiencies, packaging defects or other failures to\ncomply with applicable regulations. Any recall would divert management’s attention and financial resources and harm our reputation\nwith customers. A recall involving our insulin pump products would be particularly harmful to our business, financial condition and results\nof operations because these are currently our only products.\n\n \n\nOur current insulin pump product does\nnot yet have reimbursement and is not approved for insurance coverage. If, in the future, we are otherwise able to commercialize our\ninsulin pump products, but are unable to obtain adequate reimbursement or insurance coverage for such product from third-party payors,\nwe will be unable to generate significant revenue.\n\n \n\nOur\nPivot insulin pump is not yet eligible for reimbursement and is not approved for insurance coverage. The future availability of insurance\ncoverage and reimbursement for newly approved medical devices is highly uncertain. In the United States, patients using insulin pumps\nare generally reimbursed for all or part of the product cost by Medicare or other third-party payors. Any future commercial success of\nour insulin pump products will be substantially dependent on whether third-party coverage and reimbursement is available for future customers.\nMedicare, Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to contain healthcare costs\nby limiting both coverage and the level of reimbursement of new medical devices, and, as a result, they may not cover or provide adequate\nreimbursement for our insulin pump, assuming we are able to fully develop and obtain all regulatory approval to market it in the United\nStates. In addition, in certain countries, no uniform policy of coverage and reimbursement for medical device products and services exists\namong third- party payors. Therefore, coverage and reimbursement for medical device products and services can differ significantly from\npayor to payor. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage\nfor these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that\nwill require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that\ncoverage and adequate reimbursement will be obtained or maintained, if obtained. Reimbursement systems in international markets vary\nsignificantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis.\nIn many international markets, a product must be approved for reimbursement before it can be approved for sale in that country. Further,\nmany international markets have government-managed healthcare systems that control reimbursement for new devices and procedures. Accordingly,\nunless government and other third-party payors provide coverage and reimbursement for our insulin pump products, patients may not use\nit, which would cause investors to lose their entire investment.\n\n \n\n34 \n\n \n\n \n\nRisks Related to Our Securities\n\n \n\nAny disruption and/or instability in\neconomic conditions and capital markets could adversely affect our ability to access the capital markets, and thus adversely affect our\nbusiness and liquidity.\n\n \n\nNegative\neconomic conditions and instability or uncertainty in the financial markets could have a negative impact on our ability to access the\ncapital markets, and thus have a negative impact on our then operations and liquidity. We face certain risks in the event of a sustained\ndeterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity, or failure, of our\nbanking, cash management and custodial financial institutions. A general shortage of liquidity and credit combined with the substantial\nlosses in worldwide equity markets could lead to an extended worldwide recession in the future. If such occurred, we would face significant\nchallenges if conditions in the capital markets did not improve. Our ability to access the capital markets under such circumstances could\nbe severely restricted at a time when we need to access such markets, which could have a negative impact on our business plans. Even\nif we are able to raise capital under such circumstances, it may not be at a price or on terms that are favorable to us. We cannot predict\nthe occurrence of future disruptions or how long such negative conditions might continue.\n\n \n\nInternational trade policies, including\nprotectionist trade policies, such as tariffs and sanctions, could adversely affect our business, results of operations and financial\ncondition.\n\n \n\nDue\nto the interconnectedness of the global economy, policy changes in one area of the world can have an immediate and material adverse impact\non markets around the world. Changes in international trade policies, including: (i) changes to existing trade agreements; (ii) greater\nrestrictions on free trade generally; and (iii) significant increases in customs duties and tariffs on goods imported into the United\nStates and reciprocal actions by other countries, could adversely affect our business, results of operations and financial condition.\n\n \n\nCurrent\nor future tariffs or other restrictive trade measures may raise the costs of raw materials, components or finished goods, which may adversely\nimpact both our product offerings and our operational expenses. Such cost increases may reduce our margins and require us to increase\nprices, which could harm our competitive position, reduce customer demand and damage customer relationships.\n\n \n\nTrade\ndisputes, trade restrictions, tariffs and other political tensions between the U.S. and other countries may also exacerbate unfavorable\nmacroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions\nor downturns, which may also negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion\nopportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff,\ntrade restrictions and macroeconomic uncertainty has and may continue to contribute to volatility in the price of our common stock.\n\n \n\nOngoing\nuncertainty regarding trade policies may also complicate our short- and long-term strategic planning, and that of our partners and customers,\nincluding decisions regarding hiring, product strategy, capital investment, supply chain design and geographic expansion.\n\n \n\nWhile\nwe continue to monitor trade developments, the ultimate impact of these risks remains uncertain and any prolonged economic downturn,\nescalation in trade tensions, or deterioration in international perception of U.S.-based companies could materially and adversely affect\nour supply chain, as well as our business, results of operations and financial condition. In addition, tariffs and other trade developments\nhave and may continue to heighten the risks related to the other risk factors described in this Report.\n\n \n\nThird parties might attempt to gain\nunauthorized access to our network or seek to compromise our products.\n\n \n\nOur\nbusiness is dependent on the security and efficacy of our networks and computer and data management systems, and we rely on our internal\ncomputer networks for many of the systems we use to operate our business generally. From time to time, we may face attempts by others\nto gain unauthorized access through the Internet or otherwise or to introduce malicious software to our information technology systems.\nWe or our products may be a target of computer hackers, organizations or malicious attackers who attempt to:\n\n \n\n●gain\naccess to our network;\n\n \n\n●steal\nproprietary information related to our business, products and employees; or\n\n \n\n●interrupt\nour systems.\n\n \n\n35 \n\n \n\n \n\nFrom\ntime to time, we may encounter attempts at gaining unauthorized access to our network, and we periodically run security checks. While\nwe seek to detect and investigate unauthorized attempts and attacks against our network and products of which we become aware, and to\nprevent their recurrence where practicable through changes to our internal processes and tools and/or changes to our products, we remain\npotentially vulnerable to additional known or unknown threats. In addition to intentional security breaches, the integrity and confidentiality\nof Company and customer data and our intellectual property may be compromised as a result of human error, product defects, or technological\nfailures. Different geographic markets may have different regulations regarding data protection, raising potential compliance risks.\nFurther, retaliatory acts by foreign governments or terrorist organizations in response to policies of the United States government could\ninclude cyber-attacks that could disrupt the economy more generally or that could also impact our operations directly or indirectly.\nAny failure or perceived failure by us or our service providers to prevent information security breaches or other incidents or system\ndisruptions, or any compromise of security that results in or is perceived or reported to result in unauthorized access to, or loss,\ntheft, alteration, release or transfer of, our information, or any personal information, confidential information, or other data could\nresult in loss or theft of proprietary or sensitive data and intellectual property, could harm our reputation and competitive position\nand could expose us to legal claims, regulatory investigations and proceedings, and fines, penalties, and other liability. Any such actual\nor perceived security breach, incident or system disruption could also divert the efforts of our personnel, and could require us to incur\nsignificant costs and operational consequences in connection with investigating, remediating, eliminating and putting in place additional\ntools, devices, policies, and other measures designed to prevent actual or perceived security breaches and other incidents and system\ndisruptions, and in, for example, rebuilding internal systems, reduced inventory value, providing modifications to our products and services,\ndefending against claims and litigation, responding to regulatory inquiries or actions, paying damages, or taking other remedial steps\nwith respect to third parties. Moreover, we could be required or otherwise find it appropriate to expend significant capital and other\nresources to respond to, notify third parties of, and otherwise address the incident or breach and its root cause, and to notify individuals,\nregulatory authorities and others of security breaches involving certain types of data.\n\n \n\nFurther,\nwe cannot assure that any limitations of liability provisions in our current or future contracts that may be applicable would be enforceable\nor adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security\nbreach or other security-related matter. We also cannot be sure that any insurance coverage will continue to be available on acceptable\nterms or will be available in sufficient amounts to cover claims related to a security breach or incident, or that the insurer will not\ndeny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the\noccurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements,\ncould have a material adverse effect on our business, including our financial condition, operating results, and reputation.\n\n \n\nWe are subject to oversight by the\nSEC and other regulatory agencies. Investigations by those agencies could divert management’s focus and could have a material adverse\neffect on our reputation and financial condition.\n\n \n\nWe\nare subject to the regulation and oversight of the SEC and state regulatory agencies, in addition to the FDA. As a result, we may face\nlegal or administrative proceedings by these agencies. We are unable to predict the effect of any investigations on our business, financial\ncondition or reputation. In addition, publicity surrounding any investigation, even if ultimately resolved in our favor, could have a\nmaterial adverse effect on our business.\n\n \n\nIf we are unable to satisfy the continued\nlisting requirements of Nasdaq, our common stock could be delisted and the price and liquidity of our common stock may be adversely affected.\n\n \n\nOur common stock may lose value and could be delisted\nfrom Nasdaq due to several factors or a combination of such factors. While our common stock is currently listed on Nasdaq, we can give\nno assurance that we will be able to maintain compliance with the continued listing requirements of Nasdaq, including, but not limited\nto, the corporate governance requirements, the minimum closing bid price requirement or the minimum equity requirement. If we fail to\nmaintain compliance with any such continued listing requirement, there can also be no assurance that we will be able to regain compliance\nwith any such continued listing requirement in the future or that our common stock will not be delisted in the future.\n\n  \n\nIf we were to be delisted, we would expect our\ncommon stock to be traded in the over-the-counter market which could adversely affect the liquidity of our common stock. Additionally,\nwe could face significant material adverse consequences, including:\n\n \n\n●a\nlimited availability of market quotations for our common stock;\n\n \n\n●a\ndecreased ability to issue additional securities or obtain additional financing in the future;\n\n \n\n●reduced\nliquidity for our stockholders;\n\n \n\n●potential\nloss of confidence by customers, collaboration partners and employees; and\n\n \n\n●loss\nof institutional investor interest.\n\n \n\n36 \n\n \n\n \n\nIn the event of a delisting, we can provide no\nassurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again,\nstabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum\nbid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements.\n\n \n\nWe are a “smaller reporting company”\nand, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may\nbe less attractive to investors.\n\n \n\nWe\nare a “smaller reporting company,” and are subject to lesser disclosure obligations in our SEC filings compared to other\nissuers. Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in\ntheir filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public\naccounting firms provide an attestation report on the effectiveness of internal control over financial reporting and have certain other\ndecreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited\nfinancial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company”\nmay make it harder for investors to analyze our operating results and financial prospects.\n\n \n\nWe do not expect any cash dividends\nto be paid on our shares of common stock for the foreseeable future.\n\n \n\nWe\nhave never declared or paid a cash dividend and we do not anticipate declaring or paying dividends on our common stock for the foreseeable\nfuture. We expect to use future financing proceeds and earnings, if any, to fund operating expenses. Consequently, stockholders’\nonly opportunity to achieve a return on their investment is if the price of our stock appreciates and they sell their shares at a profit.\nWe cannot assure stockholders of a positive return on their investment when they sell their shares or that stockholders will not lose\nthe entire amount of their investment.\n\n \n\nIf the beneficial ownership of our\ncommon stock continues to be concentrated, it may prevent our stockholders from influencing significant corporate decisions.\n\n \n\nAs\nof March 31, 2026, our executive officers, directors and certain persons, who may be deemed affiliates, owned approximately 5.4% of our\nissued and outstanding common stock. Specifically, James Besser, our chief executive officer, and Morgan Frank, a member of our board\nof directors, are the principals of Manchester Explorer, L.P., our largest stockholder. As of March 31, 2026, in the aggregate, Messrs.\nBesser and Frank were the owners of approximately 3.4% of our outstanding common stock. As a result, such persons may exercise substantial\ninfluence over the outcome of corporate actions requiring stockholder approval including, without limitation, the election of directors,\ncertain mergers, consolidations and sales of all or substantially all of our assets or any other significant corporate transactions.\nSuch persons may also vote against a change of control, even if such a change of control would benefit our other stockholders. Thus,\ninvestors in our common stock cannot reasonably expect to have any influence over the election of our directors or other matters submitted\nto a vote of our stockholders. Instead, our existing significant stockholders may exert a substantial influence on the election of our\ndirectors and any actions requiring or otherwise put to a stockholder vote, potentially in a manner that you do not support. The concentrated\namount of control over our affairs held by a relatively few significant investors could serve to reduce the attractiveness or liquidity\nof our common stock, and thereby depress its trading price. Additionally, conflicts of interest may arise between these executive officers,\ndirectors and other affiliates, on the one hand, and us and our other stockholders, on the other hand. In resolving these conflicts of\ninterests, these investors may favor their own interests and the interests of their affiliates, over the interests of our other stockholders,\nwhich could cause a material adverse effect on our business, prospects, financial condition and results of operations. \n\n \n\nFuture sales of our securities could\nadversely affect the market price of our common stock and our future capital-raising activities could involve the issuance of equity\nsecurities, which would dilute your investment and could result in a decline in the trading price of our common stock.\n\n \n\nWe\nmay sell securities in the public or private equity markets at prices per share below the current market price of our common stock, even\nif we do not have an immediate need for additional capital at that time. Sales of substantial amounts of shares of our common stock,\nor the perception that such sales could occur, could adversely affect the prevailing market price of our shares and our ability to raise\ncapital. We may issue additional shares of common stock in future financing transactions or as incentive compensation for our executive\nmanagement and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests\nrepresented by our then-outstanding shares of common stock. Moreover, sales of substantial amounts of shares in the public market, or\nthe perception that such sales could occur, may adversely affect the prevailing market price of our common stock and make it more difficult\nfor us to raise additional capital. Such resulting significant downward pressure on the price of our common stock could also encourage\nshort sales by third parties. Such an event could place further downward pressure on the price of our common stock.\n\n \n\n37 \n\n \n\n \n\nThe effective increase in the number\nof shares of our common stock available for issuance as a result of our reverse stock split could result in further dilution to our existing\nstockholders and have antitakeover implications.\n\n \n\nThe\nreverse stock split effected in March 2026 alone had no effect on our authorized capital stock, and the total number of authorized shares\nremains the same as before the reverse stock split. The reverse stock split of our issued and outstanding shares increased the number\nof shares of our common stock (or securities convertible or exchangeable for our common stock) available for issuance by decreasing the\nnumber of shares of our common stock issued and outstanding. The additional available shares are available for issuance from time to\ntime at the discretion of our board of directors when opportunities arise, without further stockholder action or the related delays and\nexpenses, except as may be required for a particular transaction by law, the rules of any exchange on which our securities may then be\nlisted, or other agreements or restrictions. Any issuance of additional shares of our common stock would increase the number of outstanding\nshares of our common stock and (unless such issuance was pro-rata among existing stockholders) the percentage ownership of existing stockholders\nwould be diluted accordingly. In addition, any such issuance of additional shares of our common stock could have the effect of diluting\nthe earnings per share and book value per share of outstanding shares of our common stock.\n\n \n\nAdditionally,\nthe effective increase in the number of shares available for issuance could, under certain circumstances, have anti-takeover implications.\nFor example, the additional shares of common stock that have become available for issuance could be used by us to oppose a hostile takeover\nattempt or to delay or prevent changes in control or our management. Although our reverse stock split is prompted by other considerations\nand not by the threat of any hostile takeover attempt, stockholders should be aware that our reverse stock split could facilitate future\nefforts by us to deter or prevent changes in control, including transactions in which our stockholders might otherwise receive a premium\nfor their shares over then-current market prices.\n\n \n\nOur articles of incorporation allow\nfor our board of directors to create new series of preferred stock without further approval by our stockholders, which could adversely\naffect the rights of the holders of our common stock.\n\n \n\nOur\nboard of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Currently, our board\nof directors has the authority to designate and issue up to 5,000,000 shares of our preferred stock without further stockholder approval.\nIn the future, our board of directors could authorize the issuance of one or more series of preferred stock that would grant to holders,\namong other rights, the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed\nto the holders of common stock and the right to the redemption of our preferred shares acquired by such persons, together with a premium,\nprior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred\nstock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative\nvoting power of our common stock or result in dilution to our existing stockholders.\n\n \n\n*If we fail to establish and maintain an\neffective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Any inability\nto report and file our financial results accurately and timely could harm our reputation and adversely affect the trading price of our\ncommon stock.*\n\n \n\nEffective internal controls are necessary for\nus to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not\nbe able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation\nwith investors may be harmed. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial\ninformation, and we may be unable to meet our reporting obligations as a public company, including the requirements of the Sarbanes-Oxley\nAct of 2002 (the Sarbanes-Oxley Act). In addition, we may be unable to accurately report our financial results in future periods or report\nthem within the timeframes required by the requirements of the SEC or the Sarbanes-Oxley Act. Failure to comply with the Sarbanes-Oxley\nAct, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.\nAny failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could\nresult in identification of material weaknesses or significant deficiencies, cause us to fail to meet our reporting obligations or result\nin material misstatements in our financial statements. As previously reported in our Form 10-Q for the period ended December 31, 2025,\nwe identified a material weaknesses in our internal control over financial reporting. We did not design and maintain effective controls\nrelated to the accounting for the warrants issued in the public offering completed in December 2025. In response to this identified material\nweakness, our management, with the oversight of the Audit Committee of our board of directors, has been actively engaged in remediating\nthe above material weakness. During the quarter ended March 31, 2026, we implemented remediation measures designed to remediate this material\nweakness. Furthermore, Section 404 of the Sarbanes-Oxley Act and related regulations require our management to evaluate the effectiveness\nof our internal control over financial reporting as of the end of each fiscal year. Based on its evaluation, our management concluded\nthat our internal controls over financial reporting were effective as of March 31, 2026. We cannot provide assurance that, in the future,\na material weakness or significant deficiency will not exist or otherwise be discovered. If that were to happen, it could harm our operating\nresults and cause stockholders to lose confidence in our reported financial information. Any such loss of confidence would have a negative\neffect on the trading price of our securities.\n\n \n\n38 \n\n \n\n \n\nFurthermore,\nSection 404 of the Sarbanes-Oxley Act and related regulations require our management to evaluate the effectiveness of our internal control\nover financial reporting as of the end of each fiscal year. Based on its evaluation, our management concluded that our internal controls\nover financial reporting were effective as of March 31, 2026. We cannot provide assurance that, in the future, a material weakness or\nsignificant deficiency will not exist or otherwise be discovered. If that were to happen, it could harm our operating results and cause\nstockholders to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the\ntrading price of our securities.\n\n \n\nSustained inflation could have a material\nadverse effect on our business, financial condition, results of operations and liquidity.\n\n \n\nInflation rates in the United States have remained\nelevated and may continue to rise. Inflation over the last several months has led us to experience higher costs, including, among others,\nlabor and transportation. Some of our suppliers have raised their prices and may continue to raise prices, and, as we expand commercialization\nof our product, in the future, we may not be able to make corresponding price increases to obtain adequate gross margins and achieve profitability.\nIf inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our\nbusiness, financial condition, results of operations and liquidity.\n\n \n\nOur board of directors is able to adopt\nrecapitalizations through forward or reverse splits of our outstanding shares of common stock without stockholder approval.\n\n \n\nPursuant\nto our amended and restated articles of incorporation, our board of directors has the power, without obtaining stockholder approval,\nto effectuate recapitalizations of us through forward or reverse splits of our outstanding common stock. As a result of such provision,\nour board of directors can implement recapitalizations of us by effectuating a forward or reverse stock split of our outstanding common\nstock, which would increase or decrease each of our stockholder’s number of shares owned, and our stockholders will have no right\nto approve or disapprove any such action even if such actions have a material adverse effect on them."}