UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



FORM 10-K



x      ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended
December 31, 2021



or



 ̈       TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period
from _________ to _________



Commission file number: 001-32046







Tivic Health Systems, Inc.

(Exact name of registrant as specified in its
charter)



|Delaware
    (State or other jurisdiction of incorporation
    or organization)                                             | 81-4016391
    (I.R.S. Employer Identification No.)                        
|--------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------
|                                                                                                                            |                                                                            
|25821 Industrial Blvd., Suite 100
    Hayward, CA 94545
    (Address of principal executive offices including
    zip code) | (888) 276-6888
    (Registrant’s telephone number, including
    area code)



SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE ACT:



|Title of Each Class
    Common Stock, par value $0.0001 per share | Trading
    Symbol(s)TIVC | Name of Each Exchange on Which Registered
    The Nasdaq Stock Market LLC
|----------------------------------------------------------------- | ------------------------- | -------------------------------------------------------------------------



SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF
THE ACT: None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈ No x



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   
Yes ̈ No x



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.  Yes    x  No ̈



Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).   Yes    x  No ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.



| | Large accelerated
    Filer ̈ | Accelerated Filer ̈         
| | ---------------------------- | ---------------------------
| | Non-accelerated Filer  x     | Smaller reporting company x
| | Emerging growth company  x   |                            



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ̈



Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit report. ̈



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ̈ No x



The registrant was not a public company as of
June 30, 2021, the last business day of its most recently completed second fiscal quarter, and therefore, cannot calculate the aggregate
market value of its voting and non-voting common equity held by non-affiliates as of such date. The registrant’s common stock began
trading on the Nasdaq Capital Market on November 11, 2021.



As of March 30, 2022, 9,715,234 shares of
the registrant’s common stock were outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Certain portions of the registrant’s definitive
proxy statement to be delivered to its shareholders in connection with the registrant’s 2022 Annual Meeting of Shareholders are
incorporated by reference into Part III of this Annual Report on Form 10-K. Such definitive proxy statement will be filed with
the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.




















Table of Contents



|                                                                                                                          | Page
|------------------------------------------------------------------------------------------------------------------------- | ----
|PART I                                                                                                                   
|                                                                                                                          |     
|Item 1 – Business                                                                                                         | 4   
|Item 1A – Risk Factors                                                                                                    | 14  
|Item
    1B – Unresolved Staff Comments                                                                                   | 28  
|Item
    2 – Properties                                                                                                   | 28  
|Item 3 – Legal Proceedings                                                                                                | 28  
|Item 4 – Mine Safety Disclosures                                                                                          | 29  
|                                                                                                                          |     
|PART II                                                                                                                  
|                                                                                                                          |     
|Item 5 – Market for Registrant’s
    Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 30  
|Item 6 – [Reserved]                                                                                                       | 32  
|Item 7 – Management’s
    Discussion and Analysis of Financial Condition and Results of Operations                        | 33  
|Item 7A – Quantitative and
    Qualitative Disclosures About Market Risk                                                  | 42  
|Item 8 – Financial Statements
    and Supplementary Data                                                                  | 42  
|Item 9 – Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                         | 43  
|Item 9A – Controls and Procedures                                                                                         | 43  
|Item 9B – Other Information                                                                                               | 43  
|Item 9C – Disclosure Regarding
    Foreign Jurisdictions that Prevent Inspections                                         | 43  
|                                                                                                                          |     
|PART III                                                                                                                 
|                                                                                                                          |     
|Item 10 – Directors, Executive
    Officers, and Corporate Governance                                                     | 44  
|Item 11 – Executive Compensation                                                                                          | 44  
|Item 12 – Security Ownership
    of Certain Beneficial Owners and Management and Related Stockholder Matters              | 44  
|Item 13 – Certain Relationships
    and Related Transactions, and Director Independence                                   | 44  
|Item 14 – Principal Accounting
    Fees and Services                                                                      | 44  
|                                                                                                                          |     
|PART IV                                                                                                                  
|                                                                                                                          |     
|Item 15 – Exhibits, Financial
    Statement Schedules                                                                     | 45  
|Signatures                                                                                                                | 47  



2







SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K (this “Report”)
contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which represent our
expectations or beliefs statements concerning, without limitation, our operations, economic performance, financial condition, growth
and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words
such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,”
 “could,” “estimate,” “might,” “plan,” “predict” or “continue”
or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements,
by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ
materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing
and maintaining growth, the operations of the Company, volatility of stock price, commercial viability of our product candidates and
any other factors discussed in this and other registrant filings with the Securities and Exchange Commission (“Commission”).



These risks and uncertainties and other factors
include, but are not limited to those set forth under “Risk Factors” of this Report. Given these risks and uncertainties,
readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking
statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements
or the risk factors described in this Report or in the documents and/or information that we incorporate by reference, whether as a result
of new information, future events, changed circumstances or any other reason after the date of this Report.



This Report contains forward-looking statements,
including statements regarding, among other things:



| | · |  | our
    ability to continue as a going concern;                                                                                                                                                          
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                          
| | · |  | our
    anticipated needs for working capital, and our ability to secure additional financing on favorable terms, if at all;                                                                             
| |   |  |                                                                                                                                                                                                          
| | · |  | the availability of electronic parts and other components for our products, as well as our ability to source such parts and components
at favorable prices;                                              
| |   |  |                                                                                                                                                                                                          
| | · |  | the
    demand for our products;                                                                                                                                                                         
| |   |  |                                                                                                                                                                                                          
| | · |  | our
    sales, marketing, and distribution prospects;                                                                                                                                                    
| |   |  |                                                                                                                                                                                                          
| | · |  | our
    financial performance;                                                                                                                                                                           
| |   |  |                                                                                                                                                                                                          
| | · |  | the
    level of expenses related to our product development and operations;                                                                                                                             
| |   |  |                                                                                                                                                                                                          
| | · |  | our
    efforts to expand our products and our business;                                                                                                                                                 
| |   |  |                                                                                                                                                                                                          
| | · |  | the
    implementation of our business model and strategic plans for our business and technology;                                                                                                        
| |   |  |                                                                                                                                                                                                          
| | · |  | regulatory
    or legal developments in the United States and other countries;                                                                                                                           
| |   |  |                                                                                                                                                                                                          
| | · |  | our
    expectations regarding the effects of the COVID-19 pandemic on our business, our suppliers and our customers, including the ability
    to secure sufficient electronic parts to meet demand; and
| |   |  |                                                                                                                                                                                                          
| | · |  | developments
    and projections relating to our competitors and our industry.                                                                                                                           



In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information
may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly
rely upon these statements.



Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined
under “Risk Factors” and matters described in this Report generally. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements contained in this Report will in fact occur. We caution you not to place undue reliance
on these forward-looking statements. In addition to the information expressly required to be included in this Report, we will provide
such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which
they are made, not misleading.



You should read this Report and the documents
that we reference in this Report and have filed as exhibits to this Report, completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of the forward-looking statements in this Report by these cautionary
statements.





3







PART I



Item 1 – Business



As used in this Report, unless the context otherwise
requires, references to “we,” “us,” “our,” “Company,” and “Tivic Health” refer
to Tivic Health Systems, Inc.



Business Overview



Tivic Health is a consumer health technology
company focused on bioelectronic medicine. Bioelectronic medicine treats disease and conditions by modulating the electrical signals
carried along various nerve pathways. The field grew out of the multi-billion-dollar neuromodulation industry and relied, historically,
on implantable devices (e.g. pacemakers, spinal implants, deep brain stimulators). We have demonstrated with our first product that
non-invasive bioelectronic therapy can safely and comfortably deliver therapeutic benefits with a favorable safety profile.



Tivic Health’s first product is a non-invasive
trigeminal nerve stimulation device sold as ClearUP® Sinus Relief (“ClearUP”). The patented handheld device
uses ultra-low current electrical waves to relieve symptoms of sinus and nasal inflammation. ClearUP is a US FDA Class II and EU
Class IIa medical device that has received three regulatory clearances: (US FDA 510(k) number K182025, US FDA De Novo number
DEN200006 and EU CE Mark Certificate number CE 704687). ClearUP consistently receives high customer ratings across multiple sales platforms.



We have brought bioelectronic medicine to the
home treatment market for nasal allergies, sinus infections, chronic sinusitis, cold and flu. This $9.9 billion U.S. market is currently
dominated by pharmaceuticals. However, through a market research study commissioned by the Company, in which 600 individuals reported
ongoing sinus conditions were electronically surveyed, we discovered that:



| | · | 70% of sufferers are not
    completely satisfied with over-the-counter treatment options;
| | - | ------------------------------------------------------------------------------------------



| | · | 90% are interested in treatments
    that reduce use of medications; and
| | - | ------------------------------------------------------------------------



| | · | 66% are concerned about
    side effects of pharmaceutical treatments.
| | - | ----------------------------------------------------------------------



We conducted two published clinical studies with
leading research institutions. The first clinical study was a randomized controlled double-blind trial conducted by the Standard University
Sinus Center consisting of 71 subjects suffering from sinus pain and congestion, each of whom used either ClearUP or a sham device. The
second clinical study was a 30-person study on the use of ClearUP over a period of four weeks conducted by the Allergy and Asthma Associates
of Santa Clara Valley Research Center. These studies have substantially demonstrated that ClearUP is highly effective at treating sinus
pain from allergic rhinitis and moderate to severe congestion with no substantive side effects.



We are currently preparing a second-generation
version of ClearUP, “ClearUP Gen 2,” for market. Covered by the same patents, ClearUP Gen 2 is expected to lower cost of goods
by lowering product manufacturing, fulfillment and shipping costs. Based on our analysis of regulatory guidance issued by the FDA and
approval by our designated EU Notified Body (an organization designated by an EU member state to assess the conformity of certain products
prior to their release in the EU market), we expect that ClearUP Gen 2 to be covered by the same regulatory clearances as ClearUP.





We
are currently conducting a clinical trial in concert with the Icahn School of Medicine at Mount Sinai, testing a new signal variant designed
to reduce pain resulting from functional endoscopic sinus surgery. If successful, a product based on this research would require new
regulatory clearances for a novel indication. Similarly, we are reviewing post-market data from use of ClearUP indicating users receive
some relief from migraine headaches and are evaluating clinical, regulatory and go-to-market pathways for a migraine indication.



First Product in Market



Tivic Health’s first product in market,
based on our core technology, is ClearUP® Sinus Relief. ClearUP has received FDA clearance for treating various symptoms
of allergic rhinitis (nasal allergies), sinusitis and cold and flu. It is available without prescription.



Market Opportunity



The FDA initially provided clearance to the ClearUP
product under a 510(k)  as an allergy treatment in January 2019. As a treatment for allergy-related sinus pain, we believe
that the available market for ClearUP is approximately 45 million U.S. adults.



Factors such as industrialization, climate change,
and changing lifestyles are increasing the prevalence of allergic rhinitis, making this a large and growing segment.





4







The FDA granted ClearUP a subsequent De Novo
clearance in March 2021, which expanded ClearUP’s label, enabling marketing of ClearUP for allergies, sinusitis, cold, flu,
and any inflammatory condition involving congestion. With this De Novo clearance, we believe that the available market for ClearUP expands
to over 200 million U.S. adults. Based upon our market research (conducted by a national sampling company, which electronically surveyed
600 individuals reporting ongoing sinus conditions) indicating that 27% of consumers are willing to pay the current retail price for
ClearUP, we estimate an available U.S. market of approximately $8 billion. Our market research indicates that, among our target consumers,
74% would expect to purchase on Amazon and 65% from the manufacturer’s website.



According to Mintel Group Ltd., over-the-counter
allergy, cough, cold and flu treatments were a $9.9 billion market in 2019 in the U.S. alone. According to our research, among recurring
sufferers (those who reported having an ongoing chronic sinus condition), 90% are interested in treatments that reduce use of medications,
66% are concerned about the side effects of pharmaceutical choices, and over 43% are concerned about addiction. We commissioned this
research, and it was conducted by a national sampling company, which electronically surveyed 600 individuals reporting ongoing sinus
conditions. Only subjects who reported having an ongoing chronic sinus condition were eligible to participate in the study.



In clinical research studies pertaining to ClearUP:



| | · | 82% of participants indicated
    that they prefer it to their current treatments;(1) and
| | - | -----------------------------------------------------------------------------------------



| | · | 77% of participants indicated
    that they would recommend ClearUP.(2)
| | - | -----------------------------------------------------------------------



(1)Data
from a 71-person randomized controlled study conducted by a third-party academic research center.



(2)Data
from a 30-person open label trial conducted by a third-party clinical research organization.



Additionally, we have received a CE Mark for
international marketing. The CE Mark for ClearUP covers an equally broad set of conditions related to sinonasal inflammation with the
symptoms pain, pressure and congestion. The CE Mark allows sales in the European Union, United Kingdom, Australia, New Zealand and numerous
other countries that recognize the CE Mark for regulatory governance. We believe that ClearUP is an international opportunity.



Customers



We sell our products direct-to-consumer through
our own websites, Amazon.com and Walmart.com and also sell to major U.S. online retailers such as BestBuy.com and FSAStore.com.



Sales and Marketing



Purchase Motivation



ClearUP’s main consumer benefits as supported
by our clinical studies, include the following:



| | · | Efficacious drug-free alternative
    with no significant side effects.
| | - | -----------------------------------------------------------------------



| | · | Efficacy for 74% of trial
    subjects within ten minutes of first treatment.
| | - | -----------------------------------------------------------------------------



| | · | Efficacy for 88% of trial
    subjects with use over four-weeks.
| | - | ----------------------------------------------------------------



| | · | Continued reduction of
    sinus pain and congestion with regular use.
| | - | ----------------------------------------------------------------------



| | · | Portable, go anywhere, use anytime solution with no
    recommendation to discontinue use after a specified period of time or limit the number of times per day used.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sales Channels



ClearUP is sold over the counter without a prescription
through our own website, Amazon.com, Walmart.com, BestBuy.com, FSAStore.com, and other specialty online retailers.



Expansion
of our ClearUP sales channels has been gradual and measured to maintain pricing integrity, cultivate consumer acceptance and establish
strong channel relationships. With this foundation in place, we believe we are poised to accelerate sales through the expansion of our
advertising and marketing efforts.



Current sales represent a very small percentile of the available market.
We project that there is a significant growth opportunity for ClearUP with expanded advertising and product variants to reach new audiences.





5







Marketing and Advertising Strategies



We utilize omnichannel marketing to raise consumer
awareness of ClearUP and convert consumers to purchasers. We participate in press and media to raise general awareness of both ClearUP
and the bioelectronic medicine more generally. Since our IPO in November 2021, we have seen a steady increase in daily direct-to-consumer
sales volume as we continue to expand and optimize marketing and advertising tactics.



Core Technology



Tivic Health’s technology combines proprietary
algorithms, programmable stimulation parameters, and a patented monopolar delivery mechanism to modulate the nerve signals that control
inflammation-driven symptoms like pain and congestion. We are researching the clinical utility of this stimulation approach for other
clinical conditions. This platform has the potential to accelerate new product development by: (i) extending the existing device
platform to other clinical areas, thereby reducing research and development time, and (ii) continuing to benefit from low-risk non-invasive
device designations and regulatory pathways by the FDA, which typically result in shorter time to approval when compared with invasive
devices or new drugs. While it is our intention to bring new products to market, medical device development is inherently uncertain and
there is no guarantee that our research and development efforts will lead to approved products for other clinical indications.



Key elements of our platform include:



| | · | a proprietary algorithmic
    means of detecting areas of dense nerve innervation and blood vessels, which help guide a user to the optimal treatment locations;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a proprietary algorithmic
    means of adapting treatment currents and detection to the unique physiological attributes of the technology’s user at the time
    of use;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a proprietary algorithmic
    means of dynamically adjusting treatment levels to maintain both efficacy and comfort;
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | programmability of the
    stimulation protocols via firmware to deliver varied stimulation protocols for different physical and disease targets, providing
    accelerated opportunities for new product applications; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a unique monopolar design
    that enables ultra-low currents to pass through skin and tissue while maintaining nearly imperceptible current levels.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



This combination creates a platform for non-invasively
influencing peripheral activity with an ultra-low current level.



Numerous inflammatory conditions are associated
with trigeminal and peripheral nerve activity of the face, including:



| | · | chronic quality-of-life
    conditions such as migraines (39 million U.S.), temporomandibular joint disorder (31 million U.S.), and tinnitus (50 million U.S.);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | severe, life-altering conditions
    such as trigeminal neuralgia (150,000 U.S., severe condition); and
| | - | -------------------------------------------------------------------------------------------------------



| | · | acute conditions such as
    ear infections (50% of children) and pain and swelling from facial and sinus surgeries (600,000 functional endoscopic surgeries annually,
    U.S.).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Each of these applications would involve regulation
of pain and inflammation-related mediators like those seen in sinus and nasal inflammation.



Competitive Landscape



Pharmaceutical Treatments



Sinus pain and congestion can be caused by allergic
rhinitis (allergies), rhinosinusitis, sinus infections, cold and flu and are most often treated with over-the-counter products targeted
symptomatically.



| | · | Sinus pain/pressure is
    usually managed with analgesic medications (e.g., ibuprofen/Advil, acetaminophen/Tylenol, naproxen sodium/Aleve). Analgesic medications
    provide short periods of relief and are often associated with side effects including stomach pain, bleeding, ulcers, constipation,
    diarrhea, gas, bloating, heartburn, nausea, vomiting, dizziness, headache, nervousness, and rash.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Congestion is treated with
    a variety of approaches:
| | - | -------------------------------------------------------





6







| | o | Antihistamine medicationsare often a first-line therapy for allergy-related symptoms and research indicates that they are effective for treating
    allergy symptoms such as itchiness, but are less effective for congestion. Antihistamine medications (e.g., loratadine/Claritin)
    are generally well-tolerated but may have side-effects including headache, sleepiness, fatigue, dry mouth, and sore throat.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Oral decongestants
    (e.g., phenylephrine/Sudafed) used to treat congestion have been demonstrated to exert poor to moderate efficacy, and are associated
    with nervousness, restlessness, insomnia, dizziness, tachycardia, heart palpitations, syncope, headache, sweating, nausea or vomiting,
    trembling, paleness, and weakness.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Intranasal decongestants(e.g., oxymetazoline/Afrin) are more effective than oral decongestants. However, they have reduced effectiveness and rebound
    effects after three days of use and can lead to the development of a serious condition, rhinitis medicamentosa. Additionally, intranasal
    decongestants cause side effects including nose irritation or burning, sneezing, dizziness, increased blood pressure, tachycardia,
    heart palpitations, restlessness and insomnia.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Intranasal glucocorticoids(e.g., fluticasone propionate/Flonase) have been shown to have the most significant benefits, with some studies showing
    a 34% reduction in congestion severity after one week of use. Intranasal glucocorticoids have several side effects including epistaxis,
    dryness, stinging, burning in nose, headache, nausea, vomiting, diarrhea, dizziness, sore throat, and cough.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Examples of companies developing drugs for pain
and congestion include GlaxoSmithKline, Bayer, and Johnson & Johnson.



Limitations on Use of Pharmaceutical Treatments



Due to the side effect profiles of pharmaceuticals,
many of the above-mentioned treatments carry warnings to discontinue use after two weeks or less according to the U.S. National Library
of Medicine. Additionally, some carry warnings regarding use with certain medications or diseases such as high blood pressure.



Non-pharmaceutical Treatments



According to Mintel Group Ltd., consumers are
increasingly seeking natural, non-pharmaceutical treatment options.



| | o | Nasal irrigation with
    saline, rinsing the nasal passages with saline solution, is the most common non-pharmaceutical treatment, representing
    approximately $706 million in sales in the U.S. Example products include Sinus Rinse and Navage Nasal Care. Nasal irrigation
    is understudied, but there is some evidence of improved quality of life and clearance of mucus. However, saline can irritate an already
    inflamed sinonasal tissue and nasal irrigation using tap water has been found to carry risk of parasite-driven encephalitis.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Bioelectronic devices.ClearUP is the first device globally
to have been cleared by the FDA under a de novo classification for the intended use for temporary relief of moderate to severe congestion.
The Company also received FDA clearance for the intended use in treatment of sinus pain associated with allergic rhinitis.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Examples of companies developing non-drug products
for sinus pain and congestion include NeilMed, Rhinosystems Inc., and Vapore LLC.



Principal Competitors



Over the counter pharmaceuticals have historically
had the greatest market share for sinus pain and congestion treatments; however, according to Mintel Group Ltd.’s 2020 report on
Cough, Cold, Flu, and Allergy Remedies, there is increasing interest among consumers to reduce reliance on drugs and to find non-drug
solutions. For this reason, other companies selling non-pharmaceutical treatments, specifically nasal irrigation products, represent
our closest competitors. ClearUP is an emerging new product offering in the non-drug category and currently has small market share.



Clinical Research on ClearUP



Allergic rhinitis is an inflammatory disease
driven by IgE-mediated reactions to inhaled indoor or seasonal outdoor allergens. The resulting sinus and nasal inflammation may cause
symptoms including sinus pain and pressure, nasal congestion, runny nose, sneezing, and nasal itching. Allergic rhinitis affects a significant
number of U.S. adults, of which a vast majority experience sinus pain, pressure and congestion as a result of inflammation of the nasal
and sinus mucosa.





7







Key Technical Features



| | · | Treatment Point Detection.ClearUP employs an advanced treatment point detection algorithm that dynamically personalizes to each user. Haptic
    vibration indicates to the user to hold the device over these points to facilitate stimulation in areas that maximize therapeutic
    benefit. We have innovated by integrating dynamic measurement with neuromodulation technology to create this novel therapy. (Issued
    patents: US10625076, US10537738; 10 patents pending)
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Monopolar Circuit.ClearUP delivers microcurrent stimulation via a monopolar circuit in which the rounded tip of the device is the active
    electrode and the conductive housing of the device serves as the return electrode. The monopolar design of ClearUP is a significant
    improvement over typical bipolar approaches to neuromodulation engineering and facilitates deeper delivery of current and sensitive
    treatment point detection. (Issued patents: US10625076, US10596374; 7 patents pending)
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Proprietary Waveform
    Delivery. ClearUP delivers a specific frequency, waveform shape, and amplitude of microcurrent that was empirically
    determined to have fast-acting therapeutic effects on users with common sinonasal symptoms like pain and congestion. Additionally,
    we have developed an adaptive algorithm that ensures consistent and comfortable delivery of microcurrent treatment on different parts
    of the face that can have varying electrical properties. (Issued patents: US10625076, US10537738; 10 patents pending)
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Ergonomic Design
    and Ease of Use.ClearUP’s design ensures the product is comfortable to hold and that the hand will always be
    in contact with the conductive housing of the monopolar circuit. The device shape has also been refined so that the user can navigate
    the treatment path with ease. Additionally, the single-button control and intuitive indicators make ClearUP Sinus Relief simple to
    use. Greater than 95% of users report that applying ClearUP Sinus Relief treatment is easy. (Issued patents: US10596374, US10576280;
    3 patents pending)
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Two separate clinical trials have demonstrated
the safety and efficacy of ClearUP Sinus Relief in treating sinus pain from allergic rhinitis and moderate to severe congestion.



Pivotal Study: randomized, placebo-controlled,
double-blinded clinical trial



In July 2018, the Stanford University Sinus
Center conducted a double-blind randomized controlled clinical trial using the ClearUP bioelectronic device. 71 subjects suffering from
sinus pain and congestion used either ClearUP or a sham device. The sham device was identical to ClearUP in every way except that it
used a continuous DC output instead of the pulsed AC stimulation used by ClearUP.



Each subject used the real or sham device for
a single five-minute treatment. Before and ten minutes after treatment, subjects completed questionnaires to quantify their symptoms.
Subjects treated with ClearUP reported a rapid and clinically meaningful reduction in sinus pain (-29.6%) and congestion (-35%) at ten
minutes after treatment.



This magnitude of change was significantly greater
than that observed in sham device-treated subjects.



PUBLICATION: Maul, X. A., Borchard, N. A.,
Hwang, P. H., & Nayak, J. V. (2019, April). Microcurrent technology for rapid relief of sinus pain: a randomized, placebo-controlled,
double-blinded clinical trial. In International forum of allergy & rhinology (Vol. 9, No. 4, pp. 352-356).



Open-label Prospective Trial



The Allergy and Asthma Associates of Santa Clara
Valley Research Center conducted a 30-person study on the use of ClearUP over four weeks. Subjects with sinus pain and congestion used
the ClearUP device for five minutes during the study visit and then took the device home with them with instructions to use the device
one to four times daily for five minutes per treatment as needed for four weeks. Subjects rated their symptoms weekly using a questionnaire.
After the first five-minute treatment with ClearUP, subjects reported reduced sinus pain that remained six hours later, the longest time
interval tested in the study. Additionally, subjects reported that after four weeks of use, they experienced an average of 43% reduction
in sinus pain and 44% reduction in congestion. This magnitude of change was equivalent to efficacy seen in studies of fluticasone propionate
after two-weeks of use.



PUBLICATION: Goldsobel, A. B., Prabhakar,
N., & Gurfein, B. T. (2019). Prospective trial examining safety and efficacy of microcurrent stimulation for the treatment of
sinus pain and congestion. Bioelectronic medicine, 5(1), 1-9.



Safety



In the clinical studies and post-market surveillance,
there have been no reports of any significant side effects and very few reports of minor side effects. Minor side effects have included
reddening of skin (0.02%), eyelid twitch (0.01%), and headache (0.01%), all of which resolved without intervention.





8









New Product Introductions



We are currently preparing ClearUP Gen 2 for market.
Covered by the same patents, ClearUP Gen 2 is expected to lower cost of goods by lowering product manufacturing, fulfillment and shipping
costs.



Based on our analysis of regulatory guidance issued by the FDA and
approval by our designated EU Notified Body (an organization designated by an EU member state to assess the conformity of certain products
prior to their release in the EU market), we expect ClearUP Gen 2 to be covered by the same regulatory clearances as ClearUP.



Research Initiatives: New Product Candidates



We combine proprietary algorithms, programmable
stimulation parameters, and a patented monopolar delivery mechanism to modulate the nerve signals that control inflammation-driven symptoms
like pain and congestion. This design has proven effective in treating sinus and nasal inflammatory conditions and we are researching
the clinical utility of this stimulation approach for other clinical conditions. This platform has the potential to accelerate new product
development by: (i) extending the existing device platform to other clinical areas, thereby reducing research and development time,
and (ii) continuing to benefit from low-risk non-invasive device designations and regulatory pathways by the FDA, which typically
result in shorter time to approval when compared with invasive devices or new drugs.



Numerous inflammatory conditions are associated
with peripheral nerve activity of the face, including:



| | • | chronic quality-of-life
    conditions such as migraines (39 million U.S.), temporomandibular joint disorder (31 million U.S.), and tinnitus (50 million U.S.);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | severe, life-altering conditions
    such as trigeminal neuralgia (150,000 U.S., severe condition); and
| | - | -------------------------------------------------------------------------------------------------------



| | • | acute conditions such as
    ear infections (50% of children) and pain and swelling from facial and sinus surgeries (600,000 functional endoscopic surgeries annually,
    U.S.).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Each of these applications would involve regulation
of pain and inflammation-related mediators like those seen in sinus and nasal inflammation. Firmware programming allows various stimulation
protocols to be used for different disease and neural targets, providing accelerated opportunities for new product candidates at varying
price points.



Activities are ongoing for two product candidates:
(i) npdPP, an at home-use device for treating postoperative pain after sinus surgery, and (ii) npdMI, an at home-use device
for treating migraine headaches. These product candidates are still in early stages of research and development and will require additional
studies and regulatory clearances prior to bringing them to market.



npdPP:
We completed a ten-person pilot study with the U.S. Institute for Advanced Sinus Care and Research (Cleveland, OH) to evaluate a new device
for the treatment of postoperative pain after functional endoscopic sinus surgery (“FESS”). The pilot study was conducted
to establish clinical feasibility and we subsequently began a double-blind randomized controlled trial with the Icahn School of Medicine
at Mt. Sinai to further test this application. Enrollment in this study began in the first quarter of 2022.



npdMI:
We are in the process of investigating the area of migraine headaches, which impacts approximately 1 billion people worldwide and 39 million
people in the U.S. As part of our research and development activities for migraine, we have been in communication with the FDA to determine
the next steps and an appropriate regulatory pathway for expanding our indications.



We believe our commitment to non-invasive bioelectronic
medicine simplifies clinical trial approaches, improves the safety profile important in regulatory matters, and lowers barriers to adoption
once in the market. These factors could afford us a unique opportunity for a rapid pace of innovation relative to other medical product
companies. While it is our intention to bring new products to market, medical device development is inherently uncertain and there is
no guarantee that our research and development efforts will lead to approved products for other clinical indications.





9







Manufacturing



The ClearUP device uses conventional, off-the-shelf
electronic components. Suppliers must be registered with the FDA and certified for manufacturing of products of the class of product.
Our products require no specialty manufacturing capabilities.



Our electronic components are sourced primarily
from China. To increase predictability in sourcing and pricing of electronic components used in our products, we maintain an agreement
with Future Electronics, Inc., one of the largest global electronic components distributors. The contract has an initial term of
12 months that automatically renews for additional 12-month periods, subject to annual review, and provides for extended payment terms.
Future Electronics may terminate the agreement upon 30 days prior written notice if it determines, in its sole discretion, that we are
not meeting our minimum purchase requirement or we are otherwise not performing our obligations under the agreement.



Packaging production is divided between North
America and China. The plastic enclosure components and sub-assemblies are produced in China. Materials for both packaging and plastics
are commonly available and can be sourced from multiple vendors. Lead times may vary due to COVID-related shortages, customs and port
management issues.



We have encountered disruptions in our supply
of various materials and components, and electronic components in particular, due to well-documented shortages and constraints in the
global supply chain. We are currently evaluating alternative and secondary source suppliers in order to ensure that we are able to source
sufficient components and materials to manufacture our products. In the event that we are unable source sufficient components and materials
from our current suppliers, or to develop relationships with additional suppliers, to manufacture enough of our products to satisfy demand,
we may have to cease or slow down production and our business operations and financial condition may be materially harmed.



Electronic components are assembled onto printed
circuit boards in the San Francisco Bay Area, near our final assembly and test house. ClearUP is assembled, tested, and warehoused at,
and distributed from the San Francisco Bay Area.



We
continue investing in development of ClearUP Gen 2,which is expected to lower product, fulfillment and shipping costs and increase
flexibility for line extensions. In order to allow the Company to capitalize on cost-saving opportunities while managing global supply
chain risks, elements of the ClearUP Gen 2 program may be introduced in a step wise fashion.



Intellectual Property / Barriers to Entry



Intellectual Property



Our success depends in part on our ability to
obtain and maintain proprietary protection for our product candidates and other discoveries, inventions, trade secrets and know-how that
are critical to our business operations. Our success also depends in part on our ability to operate without infringing the proprietary
rights of others, and in part, on our ability to prevent others from infringing our proprietary rights. A comprehensive discussion on
risks relating to intellectual property is provided under the section of this Report titled “Risk Factors—Risks Related to
Our Intellectual Property.”



We rely primarily on a combination of patent,
copyright, trademark, and trade secret laws, as well as contractual provisions with employees and third parties, to establish and protect
our intellectual property rights. Our patent strategy is to pursue broad protection for key technologies, supplemented by additional
patent filings covering conceptual methods, specific aspects of current and proposed products, and forward-looking applications and technological
developments. We also engage in strategic analysis of our owned patent assets, and pursue additional patent claims from our existing
portfolio that may provide us with market advantages. We do not rely heavily on trade secret protection, but do maintain a certain amount
of in-house know-how that is not disclosed publicly.



Our intellectual property portfolio currently
consists of:



| | • | 5 issued U.S. patents.
| | - | ----------------------



| | • | 18 patents pending in the
    U.S. and abroad.
| | - | ----------------------------------------------



| | • | 4 provisional patent applications
    have been filed in the U.S.
| | - | -----------------------------------------------------------------



| | • | 7 trademarks granted in
    the U.S. and China.
| | - | -----------------------------------------------





10







Our intellectual property portfolio includes
a large number of disclosures that cover enhanced cost and manufacturability, performance, ergonomics, comfort, ease of use, system
expansion, and treatments performed.  Identity is protected by way of trademarks. Various aspects of design and function that cannot
be readily reverse engineered are held as trade secrets.



In most jurisdictions in which we file, the patent
term is 20 years from the earliest date of filing of a non-provisional patent application. However, the term of U.S. patents may be extended
for delays incurred due to compliance with FDA requirements or by delays encountered during prosecution that are caused by the United
States Patent and Trademark Office (“USPTO”). We intend to seek patent term extensions in any jurisdiction where these are
available and where we also have a patent that may be eligible; however, there is no guarantee that the applicable authorities will agree
with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.



Other Barriers to Entry



We have published high-quality clinical research
in high-impact peer reviewed journals, establishing Tivic Health as an evidence-based company. Our first-to-market position has secured
a high volume and proportion of positive reviews on our websites and other ecommerce channels. We believe that each of these assets, in
addition to our intellectual property and regulatory clearances, will create barriers to entry for competitors.



Government Regulation



Regulation by the FDA



In the United States, the Federal Food, Drug,
and Cosmetic Act (“FD&C Act”), as well as FDA regulations and other federal and state statutes and regulations, govern
medical device design and development, preclinical and clinical testing, device safety, premarket clearance, grant, and approval, establishment
registration and device listing, manufacturing, labeling, storage, record-keeping, advertising and promotion, sales and distribution,
export and import, recalls and field safety corrective actions, and post-market surveillance, including complaint handling and medical
device reporting of adverse events.



The FDA classifies medical devices into three
classes (Class I, II or III) based on the degree of risk associated with a device and the level of regulatory control deemed
necessary to ensure its safety and effectiveness. Class I devices are those for which safety and effectiveness can be assured by
adherence to the FDA’s general controls for medical devices. Class II devices are subject to the FDA’s general controls
and any other special controls the FDA deems necessary to ensure the safety and effectiveness of the device. Class III devices are
those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a
potential, unreasonable risk of illness or injury.



De Novo classification is a risk-based classification
process. The De Novo process provides a pathway to classify novel medical devices for which general controls alone, or general and special
controls, provide reasonable assurance of safety and effectiveness for the intended use, but for which there is no legally marketed predicate
device. De Novo classified devices fall either into Class I or Class II and may be marketed and used as predicates for future
premarket notification 510(k) submissions.



The FDA classifies our peripheral nerve stimulation
platform as a Transcutaneous Electrical Nerve Stimulator (“TENS”) regulated as a Class II medical device.



ClearUP sinus relief was cleared under 510(k) number
K182025 based on clinical data supporting its safety and efficacy for the temporary relief of sinus pain associated with allergic rhinitis.
We were subsequently granted the rights to market ClearUP for the temporary relief of moderate to severe congestion under De Novo number
DEN200006.



Labeling



All medical devices commercially distributed
in the U.S. must comply with specific FDA labeling requirements. These requirements address the labeling (e.g., device label, Instruction
for Use, package label, etc.) that must be affixed to the device or packaging and, in the case of devices used by the consumer,
provided to all users of the device. Our ClearUP labeling has been reviewed by the FDA as part of our regulatory clearances and our quality
management system provides for control of documents to prevent changes that might invalidate FDA’s review.





11







Quality System Regulation



The devices that we commercially distribute in
the U.S. are subject to pervasive and continuing regulation by the FDA and certain state agencies. This includes product listing and
establishment registration requirements, which facilitate FDA inspections and other regulatory actions. We adhere to applicable current
good manufacturing practice, or cGMP, requirements, as set forth in the 21 CFR 820 QSR, which require manufacturers, including third-party
manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of
the design and manufacturing process. We are also required to verify that our suppliers maintain facilities, procedures and operations
that comply with applicable quality and regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections
of medical device manufacturing facilities, which may include the facilities of contractors. FDA regulations also require investigation
and correction of any deviations from the QSR and impose reporting and documentation requirements upon us and our third-party manufacturers.



Post-market surveillance



We must also comply with post-market surveillance
regulations, including medical device reporting (“MDR”), requirements which require that we review and report to the FDA
any incident in which our products may have caused or contributed to a death or serious injury, and any incident in which our device
has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur. We must also
comply with medical device correction and removal reporting regulations, which require manufacturers to report to the FDA corrections
and removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act that may present
a risk to health. Although we may undertake recall actions voluntarily, we must submit detailed information on any recall action to the
FDA, and the FDA can order a medical device recall in certain circumstances.



In addition to post-market quality and safety
actions, labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the FTC. Medical devices
approved, cleared, or granted by the FDA may not be promoted for outside their respective Indication for Use, otherwise known as “off-label”
promotion.



Other healthcare laws and regulations



The healthcare industry is also subject to federal
and state fraud and abuse laws, including anti-kickback, self-referral, false claims and physician payment transparency laws, as well
as patient data privacy and security and consumer protection and unfair competition laws and regulations. Our operations are also subject
to certain state and local laws, including manufacturing license, sales and marketing practices, interactions with consumers, consumer
incentive and other promotional programs, and state corporate practice and fee-splitting prohibitions.



Currently, ClearUP is not reimbursed by any government
or private healthcare program, limiting our exposure under certain laws such as the Sunshine Act.



CE Mark – European Union, United
Kingdom, and other jurisdictions that recognize the CE Mark



In 2020 we secured the CE Mark CE 704687 allowing
sales and marketing of ClearUP in the European Union, United Kingdom and in any country that recognizes CE Mark certificate for relief
of sinus pain, pressure and congestion, without regard to the cause of pain, pressure and congestion. Sales in such jurisdictions will
expose our operations to additional regulations.



To the extent that any of our products are sold
in a foreign country, we may become subject to foreign laws, which may include, for example, applicable post-marketing requirements,
including post-market clinical follow up, safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs
and reporting of payments or transfers of value to healthcare professionals. We must operate our business within the requirements of
these laws.



Coverage and reimbursement



Our current product is purchased on a cash-pay
basis and is not covered by government healthcare programs and other third-party payors. However, we monitor federal and state legislations
and regulatory changes that could affect our results of operations.



Privacy and security



The Health Insurance Portability and Accountability
Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”),
and their implementing regulations, imposes privacy, security and breach reporting obligations with respect to individually identifiable
health information upon “covered entities” (health care providers, health plans and health care clearinghouses), and their
respective business associates, individuals or entities that create, received, maintain or transmit protected health information in connection
with providing a service for or on behalf of a covered entity.



Even when HIPAA does not apply, according to
the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices
in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s
data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the
size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable
health information is considered sensitive data that merits stronger safeguards.





12







In addition, certain states and non-U.S. laws,
such as the GDPR govern the privacy and security of health information in certain circumstances, some of which are more stringent than
HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and
private litigation. For example, California recently enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1,
2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California
residents, including the right to opt out of certain disclosures of their information.



Environmental Matters



Our operations, properties and products are subject
to a variety of U.S. and foreign environmental laws and regulations governing, among other things, use of manufacturing components containing
substances below established threshold, air emissions, wastewater discharges, management and disposal of hazardous and non-hazardous
materials and waste and remediation of releases of hazardous materials. We believe, based on current information that we are in material
compliance with environmental laws and regulations applicable to us and rely heavily on our outsourced design and manufacturing partners
to assist in maintaining compliance.



Facilities



Our principal executive office is located at 25821
Industrial Blvd., Suite 100, Hayward, California 94545. On November 17, 2021, we entered into a sublease agreement for approximately
9,091 square feet of office and warehouse space. The term of the sublease will expire on October 31, 2025. Monthly rent for the premises
is $12,273 per month, plus the Company’s pro rata share of operating, which are currently approximately $4,500 per month.



Human Capital Resources



As of December 31, 2021, we had seven full-time
employees and five contractors. None of our employees are represented by a labor union, and we consider our employee relations to be
good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating
our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected
employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.



Legal Proceedings



We are not currently a party to any material
legal proceedings. We may, however, in the ordinary course of business face various claims brought by third parties, and we may, from
time to time, make claims or take legal actions to assert our rights, including intellectual property rights as well as claims relating
to employment matters and the safety or efficacy of our products. Any of these claims could subject us to costly litigation. If this
were to happen, the payment of any such awards could have a material adverse effect on our business, financial condition and results
of operations. Additionally, any such claims, whether or not successful, could damage our reputation and business.



Corporate Information



The Company was incorporated in California in
September 2016 and reincorporated as a Delaware corporation in June 2021. Our principal executive offices are located at 25821
Industrial Blvd., Suite 100, Hayward, California 94545. Our telephone number is (888) 276-6888. Our website address is www.tivichealth.com.
Information contained on, or that can be accessible through, our website is not a part of this Report and the inclusion of our website
address in this Report is an inactive textual reference only.



On November 10, 2021, the Company completed
an initial public offering (the “IPO”) of 3,450,000 shares of its common stock, at a public offering price of $5.00 per share,
including the exercise in full by the underwriters of their option to purchase up to 450,000 additional shares of common stock, for aggregate
gross proceeds of $17,250,000 and its shares stared trading on The NASDAQ Capital Market under the ticker symbol “TIVC.”
The Company received approximately $14,887,000 in net proceeds after deducting underwriting discounts and commissions and other offering
expenses payable by the Company. In connection with the closing of the IPO, all of the Company’s outstanding shares of convertible
preferred stock at the time of the IPO automatically converted into an aggregate of 2,227,116 shares of common stock and the outstanding
convertible notes payable borrowings of $4,384,000 converted to 1,204,160 shares of common stock.





13







Item 1A – Risk Factors



You should carefully consider the risks described
below, as well as the other information in this Report, including our financial statements and the related notes and the section entitled
 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our publicly
traded securities. The occurrence of any of the events or developments described below could harm our business, financial condition,
operating results, and/or growth prospects. The risks described below are not the only ones facing us. Our business is also subject to
the risks that affect many other companies, such as competition, labor relations, general economic conditions, geopolitical changes,
and international operations. We operate in a rapidly changing environment that involves a number of risks, some of which are beyond
our control. Additional risks not currently known to us or that we currently believe are immaterial also may impair our business operations
and our liquidity. The risks described below could cause our actual results to differ materially from those contained in the forward-looking
statements we have made in this Report, the information incorporated herein by reference, and those forward-looking statements we may
make from time to time. You should understand that it is not possible to predict or identify all such factors. Consequently, you should
not consider the following to be a complete discussion of all potential risks or uncertainties.



Risk Factor Summary



Below is a summary of the principal factors that make an investment
in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks
summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together
with other information included in this Report.



| | • | We rely on third parties to supply and manufacture our devices, and we expect to continue to rely on third parties to manufacture and
supply our devices. Recently, we have encountered disruptions in our supply of various materials and components, and electronic components
in particular, due to well-documented shortages and constraints in the global supply chain. The supply or manufacture of our devices could
be stopped, delayed or made less profitable if any of these third parties fail to provide us with sufficient quantities at acceptable
quality levels or prices, or fail to maintain or achieve satisfactory regulatory compliance.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We have a relatively limited
    operating history and may not be able to execute on our business strategy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Our operating results may
    be volatile and may not be a reliable indicator of our future performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | If we fail to manage our
    growth effectively, including with respect to potential acquisitions of other companies, our business could be materially and adversely
    affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We have a history of net
    losses, we may not achieve or maintain profitability in the future, and there is substantial doubt about our ability to continue
    as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We have identified a material
    weakness in our internal control over financial reporting associated with staffing levels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We expect that we will
    need additional capital, which, if obtainable, could dilute the ownership interest of investors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Our business plan depends
    heavily on revenues from our core technology, the clinical and consumer acceptance of which is at this time unproven.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing
military conflict between Russia and Ukraine, could harm our financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We may be adversely affected by the effects of inflation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We depend on our senior
    management team, and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel may impair
    our ability to grow our business.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | The product guarantees
    and warranties we provide on our products could have a material adverse effect on our business, financial condition and results of
    operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Our markets are undergoing
    continuous change, and our future success will depend on our ability to meet the changing needs of our customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Developing medical technology
    entails significant technical, regulatory and business risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | We may face risks associated
    with expanding to international markets, including trade disputes that could materially impact our business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | The size and expected growth
    of our available market has not been established with precision and may be smaller than we estimate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Our insurance may not adequately
    cover our operating risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Our business could be disrupted
    by catastrophic occurrences and similar events, including COVID-19.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       





14







| | • | Changes in the regulatory
    landscape for our products could render our business model contrary to applicable regulatory requirements, and we may be required
    to seek additional clearance or approval for our products. Additionally, we have relied on guidance documents from FDA and our EU
    Notified Body to make determinations about the regulatory pathway for future products, which may be interpreted to a different effect
    by the governing regulatory bodies.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | We are subject to consumer
    protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived
    failure to comply with such obligations could harm our business, and changes in such regulations or laws could require us to modify
    our products or marketing or advertising efforts.                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Our reliance on vendors
    in foreign countries, including China, subjects us to risks and uncertainties relating to foreign laws and regulations and changes
    in relations between the United States and such foreign countries.                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | We are highly dependent
    on our intellectual property (“IP”) and our methods of protecting our IP may not be adequate or could be costly. In addition,
    we may face risks of claims for IP infringement. We may be unable to enforce our intellectual property rights throughout the world.                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | We expect that our stock
    price may fluctuate significantly, and investors may not be able to resell their shares at or above the initial public offering price.
    An active trading market for our common stock may never develop.                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | We do not expect to pay
    any cash dividends for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Future issuances of stock
    or other securities could dilute the holdings of our stockholders and could materially affect the price of the shares of common stock
    being issued in connection with this offering.                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | We are an “emerging
    growth company” and a “smaller reporting company,” and the reduced public company reporting and disclosure requirements
    applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | If we are unable to implement
    and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and
    completeness of our financial reports and the market price of our common stock may decline.                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | A significant portion of
    our total outstanding shares are restricted from immediate resale, but such shares may be sold into the market in the near future.
    This could cause the market price of our common stock to drop significantly, even if our business is doing well.                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | If our operating and financial
    performance in any given period does not meet any guidance that we provide to the public, the market price of our common stock may
    decline.                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Actual or perceived failures
    to comply with applicable data privacy and security laws, regulations, policies, standards, contractual obligations and other requirements
    related to data privacy and security and changes to such laws, regulations, standards, policies and contractual obligations could
    adversely affect our business, financial condition and results of operations.                                                                                    



Risks Related to Our Financial Condition and
Business Model



We rely on third parties to supply and manufacture
our devices, and we expect to continue to rely on third parties to manufacture and supply our devices. Recently, we have encountered disruptions
in our supply of various materials and components, and electronic components in particular, due to well-documented shortages and constraints
in the global supply chain. The supply or manufacture of our devices could be stopped, delayed or made less profitable if any of these
third parties fail to provide us with sufficient quantities at acceptable quality levels or prices, or fail to maintain or achieve satisfactory
regulatory compliance.



We rely on, and expect to continue to rely on,
third-party providers for the supply and manufacturing of our devices, including components and electronic parts. The circumstances relating
to the COVID-19 pandemic, as well as other disasters, have caused significant shortages in the supply of the electronic parts and certain
other components used in our products. Recently, we have encountered disruptions in our supply of various materials and components, and
electronic components in particular, due to well-documented shortages and constraints in the global supply chain. Lead times for ordered
components may vary significantly, and some components used to manufacture our products are provided by a limited number of sources. We
have experienced lengthened lead times throughout our supply chain as a result of supply chain constraints and material shortages that
have occurred in the recent months, and may continue through 2022. This has been exacerbated by the recent resurgence of the COVID-19
pandemic in certain parts of China, which has resulted in the temporary closure of manufacturing facilities, including those that make
electronic parts like those that we included in our products, in certain parts of China.



We are currently evaluating alternative and secondary
source suppliers in order to ensure that we are able to source sufficient components and materials to manufacture our products. In the
event that we are unable source sufficient components and materials from our current suppliers, or to develop relationships with additional
suppliers, to manufacture enough of our products to satisfy demand, we may have to cease or slow down production of our products. To the
extent our current manufacturers or suppliers, or any manufacturers and suppliers that we engage in the future, are unable to meet our
requirements in a timely and cost-effective manner, including as a result of circumstances relating to the COVID-19 pandemic, we may not
be able to obtain an adequate supply of electronic parts or components for our products. Any shortage of materials caused by any disruption
or unavailability of supply or an increase in the demand for our products, could harm our ability to satisfy customer demand, delay deliveries
of our products to customers, lead to customer cancellations and returns, delay the development and launch of new products, or increase
our costs. Any such impacts or delays could adversely affect our sales, customer satisfaction, profitability, cash flows and financial
condition. and our business may be adversely affected. Our efforts to mitigate supply chain weaknesses may not be successful or may have
unfavorable effects.



We do not control the operational processes of the contract manufacturing
organizations with whom we contract and are dependent on these third parties for the production of our devices in accordance with relevant
regulations, which include, among other things, quality control, quality assurance and the maintenance of records and documentation.



We have a relatively limited operating
history and may not be able to execute on our business strategy.



We were originally incorporated in 2016 and began
selling our first product in 2019. Accordingly, we have a limited operating history, which makes an evaluation of our future prospects
and execution ability difficult. Our revenue and income-producing potential is unproven, and our business model and strategy may continue
to evolve. Future revenues are contingent upon several factors, including, without limitation, our ability to successfully develop and
scale-up sales of ClearUP Gen 2, our ability to develop relationships with channel partners and customers, as well as the clinical and
market acceptance of our technology. We may need to make business decisions that could adversely affect our operating results, such as
modifications to our pricing strategy, business structure or operations.



Our operating results will likely be volatile
and may not be a reliable indicator of our future performance.



Our future expenses, revenues and operating results
may vary significantly from quarter to quarter due to a number of factors, including, without limitation:



| | • | receptiveness
    of the market to a fundamentally new way of treating target conditions;
| | - | -----------------------------------------------------------------------------------------



| | • | intrinsic variability
    in spending patterns associated with the conduct of clinical trials;
| | - | ----------------------------------------------------------------------------------------------
| |   |                                                                                               
| | • | disruptions to the global supply chain and inflationary pressures;                            



| | • | fluctuations
    in demand for our technology, including seasonal variations; and
| | - | ---------------------------------------------------------------------------------





15







| | • | delays in introducing
    new technology to market, including product design, manufacturing, marketing cycles, sales and distribution related delays.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



We expect that our revenues may be volatile as
we develop new technology and obtain new customers in the future. The volume and timing of commercial outcomes are difficult to estimate,
as the adoption of bioelectronic treatments is immature, and the sales cycle may vary substantially from forecasts.



If we fail to manage our growth effectively,
our business could be materially and adversely affected.



We will not be successful unless we are able
to generate additional revenues and grow our business, which will likely require us to hire additional employees and expand our technology,
product, development and sales and marketing divisions in order to achieve our business plan. Our management systems are emergent. The
continued growth of our business may place demands on our management, financial, operational, technological and other resources, and
we expect that our growth will require us to continue developing and improving our operational, financial and other internal controls.
We may not be able to address these challenges in a cost-effective manner, or at all. If we do not effectively manage our growth, we
may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer
requirements or maintain high-quality product offerings, which could have a material adverse effect on our business, financial condition
and results of operations.



We have a history of net losses and we
may not achieve or maintain profitability in the future.



We have incurred net losses since inception. For
the years ended December 31, 2021 and 2020, we incurred net losses of $8,494,000 and $3,639,000, respectively, and at December 31,
2021, we had working capital of $13,070,000 and an accumulated deficit of $19,546,000. Since inception through December 31, 2021,
we have spent approximately $14,528,000 on organizational and start-up activities, to recruit key managers and employees, to develop our
products, to develop our manufacturing know-how and customer support resources and for research and development. The net losses we incur
may fluctuate significantly from quarter to quarter and may increase as a result of a continuation of the COVID-19 pandemic. Additionally,
future costs relating to product development and operating activities may be significantly higher than our historical costs.



Management expects to incur substantial additional
operating losses for at least the next two years to expand its markets, complete development of new products, obtain regulatory approvals,
launch and commercialize our products and continue research and development programs. Although the Company believes it has adequate cash
and financial resources to operate for at least the next twelve months from the date hereof, no assurances can be given.



Our future capital requirements will depend upon
many factors, including without limitation progress with developing, manufacturing and marketing our technologies, the time and costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, our ability to establish
collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and
overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully
market and secure purchase orders for our products and services from customers currently identified in our sales pipeline as well as new
customers. We also will be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including
our planned research and development efforts, will require significant uses of working capital. There can be no assurance that we will
generate revenue and cash as expected in our current business plan. We may seek additional funds through equity or debt offerings and/or
borrowings under additional notes payable, lines of credit or other sources. We do not know whether additional financing will be available
on commercially acceptable terms or at all, when needed. If adequate funds are not available or are not available on commercially acceptable
terms, our ability to fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly
delayed or limited, which could materially adversely affect our business, financial conditions, or results of operations.



Our long-term success is dependent upon our ability
to successfully develop, commercialize and market our products, earn revenue, obtain additional capital when needed and, ultimately, to
achieve profitable operations. We will need to generate significant additional revenue to achieve profitability. Future products may require
substantially higher levels of investment than initial products, including investments in research, development, regulatory and/or marketing
and sales. It is possible that we will not achieve profitability or that, even if we do achieve profitability, we may not maintain or
increase profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common
stock.



We have identified a material weakness in
our internal control over financial reporting.



Prior to our initial public offering, we were
a private company and had limited accounting and financial reporting personnel and other resources with which to address our internal
controls and related procedures. In connection with the audit of our financial statements for the years ended December 31, 2021 and
2020, we and our independent registered public accounting firm identified a material weakness in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis. The material weakness in our case arose from an accumulation of significant deficiencies, which
amounted to a material weakness in internal controls. Such significant deficiencies identified included insufficient accounting
and financial reporting personnel, inadequate segregation of duties, and inadequate application of inventory cost accounting procedures.
If we are unable to remedy our material weakness, or if we generally fail to establish and maintain effective internal controls appropriate
for a public company, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control
over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.



We expect that we will need additional capital,
which, if obtainable, could dilute the ownership interest of investors.



We anticipate we will need additional capital
to market our products, develop additional products and fund our operations. To the extent that cash from operations and the proceeds
from our IPO are insufficient to fund our operations, we may need to raise additional funds through the issuance of equity, equity-related
or convertible debt, or other securities. We cannot be certain that additional financing will be available to us on acceptable terms when
required, or at all.



If we issue additional equity securities or securities
convertible into equity securities, our existing stockholders will be subject to dilution. Additionally, sales of substantial amounts
of our equity securities could have an adverse effect on the value of our equity and our ability to raise additional capital through future
capital increases.





16







Our business plan depends heavily on revenues
from our initial products, the clinical and consumer acceptance of which is unproven at this time.



Our future growth depends on the commercial success
of our technology and initial products. It is not certain that our target customers will choose our technology for technical, cost, support
or commercial reasons. If our target customers do not widely adopt and purchase our technology, our future growth will be limited. Further,
our resources and investments may not be adequate to achieve the targeted level of manufacturing and sales set out in our business plan.



We
are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical
instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations
could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in
Ukraine or any other geopolitical tensions.



U.S. and global markets are experiencing volatility
and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On
February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing
military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility
in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in
Ukraine and globally and assessing its potential impact on our business.



Additionally, the recent military conflict in
Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia.
Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions
could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially
making it more difficult for us to obtain additional funds.



Although our business has not been materially
impacted by the ongoing military conflict between Russian and Ukraine to date, it is impossible to predict the extent to which our operations,
or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact
our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but
could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.



We may be adversely affected by the effects
of inflation.



Inflation has the potential to adversely affect
our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are
unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted
in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor,
weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost
increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective our business, financial
condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could
be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred.



We depend on our senior management team
and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel may impair our ability to grow
our business.



Our future success depends
heavily upon the continued services of our executive officers and key personnel, including Jennifer Ernst, our Chief Executive Officer
and founder. We have not entered into employment agreements our executive officers or other key personnel that require them to continue
to work for us for any specified period and, therefore, they may terminate employment with us at any time, for any reason and with no
advance notice. The replacement of members of our senior management team or other key personnel would likely involve significant time
and costs, and the loss of these employees may significantly delay or prevent the achievement of our business objectives.



In addition, our ability to recruit and retain
talent in all areas of the business, including but not limited to skilled hires in marketing, product development, regulatory, clinical,
quality, logistics, and finance, faces significant competition. We may not be able to hire or retain the type and number of managerial,
sales and technical personnel necessary for future success. We will need to devote considerable resources to ensure that we retain our
employees in the face of a highly competitive market for talented personnel. If we fail to attract and retain the skilled employees required,
this could harm our business and hamper future expansion of our sales and support operations.



We rely on third parties for sales, marketing,
manufacturing, distribution, and other business operations.



For us to be successful, third parties providing
us with sales, marketing, manufacturing, distribution and other business operations services must be able to provide us with such services
in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs, and on a timely basis.
While our service providers have generally met our expectations in the past, their ability and willingness to continue to do so going
forward, and the ability and willingness of any new service provider to meet our expectations in the future, may be limited for several
reasons, including our relative importance as a customer or disruptions caused by the COVID-19 pandemic, including global supply chain
constraints. Additionally, we rely on third parties such as Amazon.com, BestBuy.com, Walmart.com, FSAStore.com and other specialty online
retailers, to sell our products. We do not have long term agreements in place with certain of these third parties and there is no guarantee
that such third parties will continue to allow us to sell our products through their platforms. Accordingly, we may be exposed to disruptions
or reduced qualify of services, including access to distribution channels, due to factors beyond our direct control, which may impact
our ability to operate successfully.



We may not be able to successfully identify,
consummate or integrate acquisitions or to successfully manage the impacts of such transactions on our operations.



Part of our business strategy includes investigating
growth through acquisitions. We may expand our business by making strategic acquisitions and seeking suitable acquisition targets to
enhance our growth. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) the
potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing
business activities; (iii) incurring additional indebtedness; (iv) the anticipated benefits and cost savings of those transactions
not being realized fully, or at all, or taking longer to realize than anticipated; (v) an increase in the scope and complexity of
our operations; and (vi) the loss or reduction of control over certain of our assets.



The pursuit of acquisitions may pose certain
risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are
able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We may incur expenses
and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions,
which may divert management’s attention from our day-to-day business.



Additionally, even if we are able to acquire
suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours. Achieving the anticipated
benefits of any acquisition will depend in significant part upon whether we integrate such acquired businesses in an efficient and effective
manner. We may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of our acquisitions
within the anticipated timing, or at all. The benefits from any acquisition will be offset by the costs incurred in integrating the businesses
and operations. We may also assume liabilities in connection with acquisitions to which we would not otherwise be exposed. An inability
to realize any or all of the anticipated synergies or other benefits of an acquisition as well as any delays that may be encountered
in the integration process, which may delay the timing of such synergies or other benefits, could have an adverse effect on our business,
results of operations and financial condition.





17







The product guarantees and warranties we
provide on our products could have a material adverse effect on our business, financial condition and results of operations.



We provide product guarantees to our customers,
pursuant to which we allow for the return of products from customers within 60 days after the original sale. We also provide a one-year
warranty for any defective product. Existing and future product guarantees and warranties place us at the risk of incurring future returns
and repair and/or replacement costs. While we engage in product quality programs and processes, including monitoring and evaluating the
quality of our components sourced from our suppliers, our guaranty and warranty obligation is affected by actual product defect rates,
parts and equipment costs and service labor costs incurred in correcting a product defect. Since launching in late 2019 and through the
date hereof, we have accrued return and warranty reserves equal to approximately 10.3% of revenue (before return and warranty reserves)
and believe our reserve of $16,000 for return and warranty as of December 31, 2021 is adequate. However, our reserves set aside to cover
warranty returns and customer returns may be inadequate due to an unanticipated number of customer returns, undetected product defects,
unanticipated component failures or changes in estimates for material, labor and other costs we may incur to replace projected product
defects. As a result, if actual customer returns, product defect rates, parts and equipment costs or service labor costs exceed our estimates,
it could have a material adverse effect on our business, financial condition and results of operations.





Risks Related to Our Business and Markets



Our ability to compete in the sinus, cold
and allergy market is unproven.



We compete in the sinus, cold and allergy market
segment, a segment with large, entrenched players. We expect to experience competition from current and potential new competitors, some
of which may be better established and have significantly greater financial, technical, marketing and distribution resources. We encounter
competition from larger, well-established and well-financed entities that may continue to acquire, invest in, or form joint ventures
with producers of alternate sinus care technologies.



Our competitors may be able to respond more quickly
to new or emerging technologies and changes in customer requirements than we can. Our market position could erode rapidly as a result
of the development of new, superior products and technology by competitors. In addition, current and potential competitors may have greater
name recognition, broader physician reach and more extensive customer bases. Increased competition could result in price reductions,
lower volume sales, and reduced gross margins. There can be no assurance that we will be able to compete successfully against our
current or future competitors or that competitive pressures will not have a material adverse effect on our business, financial condition
and results of operations.



Our markets are undergoing continuous change,
and our future success will depend on our ability to meet the changing needs of our customers.



For our business to survive and grow, we must
continue to enhance and improve our products and technology to address a broader range of customers’ needs. If new clinical standards
and practices emerge, our existing technology may become obsolete. Our future success will depend upon, among other things, our ability
to:



| | • | develop and license new
    technologies that address the increasingly sophisticated and varied needs of prospective customers;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | • | respond to technological
    advances and emerging industry standards and practices on a cost-effective and timely basis; and
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | respond to shifts in the
    competitive landscape.
| | - | ---------------------------------------------------



Developing medical technology entails significant
technical, regulatory and business risks.



We may fail to adapt our technology to user requirements
or emerging treatment standards. Microcurrent and other neuromodulation therapies are not currently considered standard of care for inflammation
and may not ever be considered standard of care. Treatment standards may not evolve to incorporate our product. New industry standards
for the development, manufacture and marketing of medical devices may evolve and we may not be able to conform to the changes, meet new
standards in a timely fashion or maintain a competitive position in the market. In particular, regulatory standards for bioelectronic
treatments of medical conditions are evolving. If we face material delays in introducing our products and new technology, we may fail
to attract new customers.



Customer or third-party complaints or negative
reviews or publicity about our company or our products could harm our reputation and brand.



We are heavily dependent on customers who use
our ClearUP device to provide good reviews and word-of-mouth recommendations to contribute to our growth. Customers who are dissatisfied
with their experiences with our products or services may post negative reviews. We may also be the subject of blog, forum or other media
postings that include inaccurate statements and/or create negative publicity. In addition, any negative news regarding bioelectronic
medicine may adversely impact our business. Any negative reviews or publicity, whether real or perceived, disseminated by word-of-mouth,
by the general media, by electronic or social networking means or by other methods, could harm our reputation and brand and could severely
diminish consumer confidence in our products.





18







We may face risks associated with expanding
to international markets.



We intend to pursue marketing and selling our
products internationally, primarily through distribution arrangements and out-bound regional licensing. We have limited experience operating
outside the United States, and we will likely need to rely heavily on distributors and licensees. Expansion into international markets
may expose us to, among other things, the following additional risks:



| | • | strain on our
    managerial resources;
| | - | ---------------------------------------



| | • | pricing pressure
    that we may experience internationally;
| | - | ------------------------------------------------------------



| | • | a shortage
    of high-quality salespeople and distributors;
| | - | ------------------------------------------------------------



| | • | competitive
    disadvantage to competition with established business and customer relationships;
| | - | -------------------------------------------------------------------------------------------------



| | • | foreign currency
    exchange rate fluctuations;
| | - | ------------------------------------------------



| | • | the imposition
    of additional U.S. and foreign governmental controls or regulations;
| | - | ---------------------------------------------------------------------------------------



| | • | economic instability;
| | - | ---------------------



| | • | changes in
    duties and tariffs, license obligations and other non-tariff barriers to trade;
| | - | ----------------------------------------------------------------------------------------------



| | • | the imposition
    of restrictions on the activities of foreign agents, representatives and distributors;
| | - | ---------------------------------------------------------------------------------------------------------



| | • | scrutiny of
    foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | • | laws and business
    practices favoring local companies;
| | - | ---------------------------------------------------------



| | • | difficulties
    in maintaining consistency with our internal guidelines;
| | - | -------------------------------------------------------------------------



| | • | difficulties
    in enforcing agreements and collecting receivables through certain foreign legal systems;
| | - | ----------------------------------------------------------------------------------------------------------



| | • | the imposition
    of costly and lengthy new export licensing requirements;
| | - | ---------------------------------------------------------------------------



| | • | the imposition
    of U.S. or international sanctions against a country, company, person or entity with whom we do business that would restrict or prohibit
    continued business with the sanctioned country, company, person or entity; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the imposition
    of new trade restrictions.
| | - | ---------------------------------------------



The size and expected growth of our available
market has not been established with precision and may be smaller than we estimate.



Our data on the available market for our current
products and future products is based on a number of internal and third-party research reports, estimates and assumptions. While we believe
that such research, our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be
correct. In addition, the statements in this Report relating to, among other things, the expected growth in the market for our ClearUP
device are based on a number of internal and third-party data, estimates and assumptions, and may prove to be inaccurate. If the actual
number of consumers who would benefit from our products, the price at which we can sell future products or the available market for our
products is smaller than we estimate, it could have a material adverse effect on our business, financial condition and results of operations.



Our insurance may not adequately cover
our operating risk or litigation exposure.



We have insurance to protect our assets, operations
and employees. While we believe our insurance coverage addresses the material risks to which we are exposed and is adequate and customary
in our current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks
and hazards to which we are exposed. Also, our insurance may be insufficient to cover the costs of any securities-related or other lawsuits
or litigation, regardless of the merits of any such lawsuits or litigation. In addition, no assurance can be given that such insurance
will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially
justifiable or affordable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess
of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, results
of operations and financial condition could be materially adversely affected.





19







Our
business could be disrupted by catastrophic occurrences and similar events.



Our headquarters are located in the San Francisco
Bay Area, and we are vulnerable to interruption from catastrophic occurrences, such as earthquakes, floods, fires, power loss, telecommunication
failures, terrorist attacks, criminal acts, sabotage, other intentional acts of vandalism and misconduct, geopolitical events, disease,
such as the COVID-19 pandemic, and similar events. The San Francisco Bay Area is a region known for seismic activity. Despite any precautions
we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of our suppliers
and vendors could result in disruptions and other performance and quality problems. If we are unable to develop adequate plans to ensure
that our business functions continue to operate during and after a disaster and/or to execute successfully on those plans in the event
of a disaster or emergency, our business would be seriously harmed.



Risks Related to Legal and Regulatory Matters



Changes in the regulatory landscape for
our products could render our business model contrary to applicable regulatory requirements, and we may be required to seek additional
clearance or approval for our products.



Our ClearUP device is a US FDA Class II
device with FDA clearance for over-the-counter purchase. ClearUP Gen 2 is a design modification of the ClearUP device. Given that ClearUP
Gen 2 is a line extension of the ClearUP device, and based on the approval by our designated EU Notified Body and our assessment of relevant
FDA guidance (Guidance for Industry and Food and Drug Administration Staff “Deciding When to Submit a 510(k) for a Change
to and Existing Device” October 25, 2017), we have determined that the ClearUP Gen 2 device is covered under the same
regulatory clearances as ClearUP. If the FDA were to determine that our products do not properly satisfy the conditions for FDA clearance
as Class II devices, or that our ClearUP Gen 2 device is not covered by the same regulatory clearances as our existing ClearUP device,
we could be forced to cease distribution of our products until we obtain regulatory clearance or approval, and we could be subject to
additional enforcement action by the FDA. All existing FDA clearances, including those covering our first generation ClearUP device,
could be subject to change based on subsequent FDA review or changes in FDA regulations. In addition, many states have laws regarding
the provision of medical devices, and if we are found to be in violation of the laws of any state in which our devices are sold, we could
be subject to further sanctions at the state level.



The laws and regulations applicable to the industries
in which we operate are continuously evolving. Changes in our regulatory and legal landscape could substantially increase the costs of
compliance, increase the time and resources required to bring new products to market, or otherwise negatively impact our business. There
can be no assurance that new legislation or regulations will not impose significant additional costs or burdens on our business or subject
us to additional liabilities. We may be or become subject to claims that our operations violate these laws or regulations.



Our business, financial condition, results
of operations and growth may be impacted by the effects of the COVID-19 pandemic.



We are subject to risks related to public health
crises, such as the global pandemic associated with COVID-19. In December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported
to have surfaced in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease COVID-19, has spread to most countries, and all 50
states within the United States. Of significant current concern is the emergence of a number of SARS-CoV-2 variants, some of
which have increased transmissibility and may be resistant to current vaccines being administered throughout the world. The impact of
such variants cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population,
the effectiveness of COVID-19 vaccines against such variants and the response by governmental bodies and regulators. The continuing COVID-19
pandemic may negatively impact our operations and revenues and overall financial condition by harming the ability or willingness of customers
to pay for our products due to macro-economic conditions resulting from the pandemic or the operations of manufacturers, suppliers and
other third parties with which we do business. These challenges will likely continue for the duration of the pandemic, which is uncertain,
and the macro-economic effects of the pandemic will likely continue far beyond the duration of the pandemic.





20







Numerous foreign, state and local jurisdictions
have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government
orders and restrictions for their residents to control the spread of COVID-19. The electronics supply chain on which we depend has been
materially impacted by plant closures and reduced operations, resulting in global parts shortages for the electronic industry as a whole.
The governor of California, where our headquarters are located, previously issued “shelter-in-place” or “stay at home”
orders restricting non-essential activities, travel and business operations, which could potentially be put in place again in the future.
Such orders or restrictions have resulted in our offices closing, work stoppages, slowdowns and delays, travel restrictions and cancellation
of events, among other effects, thereby negatively impacting our operations. Other potential disruptions may include delays in processing
registrations or approvals by applicable state or federal regulatory bodies, delays in product development efforts, and additional government
requirements or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of
our ClearUP device.



While the potential economic impact brought by,
and the duration of, COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result
in, significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our future
liquidity, including our ability to repay our existing indebtedness. In addition, a recession or market correction resulting from the
spread of COVID-19 could materially affect our business and the value of our common stock. The COVID-19 pandemic has also resulted in
a significant increase in unemployment in the United States, which may continue even after the pandemic subsides. The occurrence of any
such events may lead to reduced disposable income and reduced consumer demand, which could adversely affect the number of our products
sold after the pandemic has subsided.



We are subject to consumer protection laws
that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with
such obligations could harm our business, and changes in such regulations or laws could require us to modify our products or marketing
or advertising efforts.



In connection with the marketing or advertisement
of our products, we could be the target of claims relating to false, misleading, deceptive or otherwise noncompliant advertising or marketing
practices, including under the auspices of the FTC and state consumer protection statutes. If we rely on third parties to provide any
marketing and advertising of our products, we could be liable for, or face reputational harm as a result of, their marketing practices
if, for example, they fail to comply with applicable statutory and regulatory requirements.



If we are found to have breached any consumer
protection, advertising, unfair competition or other laws or regulations, we may be subject to enforcement actions that require us to
change our marketing and business practices in a manner that may negatively impact us. This could also result in litigation, fines, penalties
and adverse publicity that could cause reputational harm and loss of customer trust, which could have a material adverse effect on our
business, financial condition and results of operations.



Our reliance on vendors in foreign countries,
including China, subjects us to risks and uncertainties relating to foreign laws and regulations and changes in relations between the
United States and such foreign countries.



Electronic components for our ClearUP devices
are sourced primarily from China, and we may in the future source components from vendors located in other foreign countries. Under its
current leadership, the government of China has been pursuing economic reform policies, including by encouraging foreign trade and investment.
However, there is no assurance that the Chinese government will continue to pursue such policies, that such policies will be successfully
implemented, that such policies will not be significantly altered, or that such policies will be beneficial to our partnerships in China.
China’s system of laws, as well as the laws of other foreign countries where we may source components, can be unpredictable, especially
with respect to foreign investment and foreign trade. The United States government has called for substantial changes to foreign trade
policy with China and has raised tariffs on several Chinese goods. China has retaliated with increased tariffs on United States goods.
Any further changes in United States trade policy could trigger retaliatory actions by affected countries, including China, resulting
in trade wars. Changes to Chinese regulations affecting the manufacture of electronic components may also be unpredictable. In addition,
there has been a recent resurgence of COVID-19 in certain parts of China, which has resulted in manufacturing plants being temporarily
closed in some areas, which could further impact our ability to source the electronic components necessary for our products at favorable
prices, if at all. Changes to regulations in any other country where we may source components in the future may also be unpredictable
and could affect the manufacture of electronic components in such countries and our ability to purchase components on a cost-effective
basis. Any regulatory changes and changes in United States and China relations, or changes in relations with the United States any other
country where we may source components in the future, may have a material adverse effect on our vendors in China and other such countries
which could materially harm our business and financial condition.





21







International trade disputes could result
in tariffs and other protectionist measures that could have a material adverse effect on our business, financial condition and results
of operations.



Tariffs could increase the cost of our products
and raw materials that go into making them. These increased costs could adversely impact the gross margin that we earn on our products.
Tariffs could also make our products more expensive for customers, which could make our products less competitive and reduce consumer
demand. Countries may also adopt other protectionist measures that could limit our ability to offer our products. Political uncertainty
surrounding international trade disputes and protectionist measures could also have a negative effect on consumer confidence and spending,
which could have a material adverse effect on our business, financial condition and results of operations.



We may in the future become subject to
the requirements of the Sunshine Act.



We are not currently subject to the Physician
Payment Sunshine Act (“Sunshine Act”), which was enacted as part of the Affordable Care Act. However, if we begin selling
our products directly to governmental entities or our products become reimbursable by Medicare or Medicaid, then we may become subject
to the Sunshine Act, which will require us to report annually to the Secretary of Health and Human Services: (i) payments or other
transfers of value made by us, or by a third-party as directed by us, to physicians and teaching hospitals or to third parties on behalf
of physicians or teaching hospitals; and (ii) physician ownership and investment interests in our company. The payments required
to be reported include the cost of meals provided to a physician, travel reimbursements and other transfers of value, including those
provided as part of contracted services such as speaker programs, advisory boards, consultation services and clinical trial services.
Failure to comply with the reporting requirements can result in significant civil monetary penalties ranging from $1,000 to $10,000 for
each payment or other transfer of value that is not reported (up to a maximum per annual report of $150,000) and from $10,000 to $100,000
for each knowing failure to report (up to a maximum per annual report of $1.0 million). Additionally, becoming subject to the Sunshine
Act and the information we disclose could lead to greater scrutiny, which could result in modifications to established practices and
additional costs. Additionally, similar reporting requirements have also been enacted on the state level domestically, and an increasing
number of countries worldwide have either adopted or are considering adopting similar laws requiring transparency of interactions with
healthcare professionals.



Risks Related to Our Intellectual Property



We are highly dependent on intellectual
property (“IP”), and our methods of protecting our IP may not be adequate or could be costly.



We rely on a combination of patent and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to protect our IP rights. We are building our IP portfolio,
and may not be able to secure sufficient protection to prevent competition from entering the market or from creating competing products.



We cannot be certain that we will be able to
obtain patent protection on the key components of our technology or that we will be able to obtain patents in key jurisdictions, such
as the United States, Europe and Asia. We cannot give assurances that we will develop new products or technologies that are patentable
or (to the extent applicable) that any new products will be covered by existing patents, that any issued patent will provide us with
any competitive advantages or will not be challenged by third parties, or that the patents of others will not impair our ability to do
business.



We cannot guarantee that the applicable governmental
authorities will approve any of our future trademark applications. Even if the applications are approved, third parties may seek to oppose
or challenge these registrations. A failure to obtain trademark registrations in key jurisdictions could limit our ability to use our
trademarks and impede our marketing efforts in those jurisdictions.



Despite our efforts to protect our IP, unauthorized
parties may attempt to copy or obtain and use our technology. Policing the unauthorized use of our technology on a global basis is difficult,
and there can be no assurance that the steps taken by us will prevent misappropriation of our technology.



We cannot give assurances that our measures for
preserving the secrecy of our trade secrets and confidential information will be sufficient to prevent others from obtaining our trade
secrets.



We generally require our employees, consultants
and corporate partners to sign confidentiality and non-disclosure agreements prohibiting them from disclosing any of our trade secrets.
Our employment agreements and consulting agreements also contain confidentiality undertakings, as well as non-compete provisions, which
prohibit employees, advisors and consultants from acting contrary to our interests during the period of their relationship with us.



Despite our efforts to preserve the secrecy of
our trade secrets and confidential information, we may not have adequate remedies to preserve our trade secrets or to compensate us fully
for our loss if employees, consultants or corporate partners breach confidentiality agreements with us. We cannot give assurances that
our trade secrets will provide any competitive advantage, as they may become known to, or be independently developed by, competitors,
regardless of the success of any measures we may take to try to preserve their confidentiality.



Any failure or inability to protect any of our
IP or confidential information, or to enforce our rights against any infringement or misappropriation of our IP or confidential information,
could have a material adverse effect on our business, financial condition and results of operations. Additionally, we may be forced to
litigate to enforce or defend our IP, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary
rights. Any such litigation could be very costly and could distract our management from focusing on operating our business. The existence
and/or outcome of any such litigation could harm our business.





22







We may face risks of claims for IP infringement.



Our competitors or other persons may have already
obtained or may in the future obtain patents or other rights relating to one or more aspects of our technology. Because we have not conducted
a formal freedom to operate analysis for patents related to our technology, we may not be aware of issued patents that a third party
might assert are infringed by our current or any future technology, which could materially impair our ability to commercialize our current
or any future technology. Even if we diligently search third-party patents for potential infringement by our current or any future technology,
we may not successfully find patents that our current or any future technology may infringe. If we are unable to secure and maintain
freedom to operate, others could preclude us from commercializing our current or future technology. We may in the future become party
to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and
any future technology, whether or not we are actually infringing, misappropriating or otherwise violating the rights of third parties.
If we are sued for patent or other intellectual property right infringement, we may be forced to incur substantial costs in defending
our self.



If litigation were to result in a judgment that
we infringed a valid and enforceable patent or other intellectual property right, a court may order us to pay substantial damages to
the owner of the patent or other intellectual property right and to stop using any infringing technology or products. This could cause
a significant disruption in our business and force us to incur substantial costs to develop and implement alternative, non-infringing
technology or products, or to obtain a license from the patent or other intellectual property right owner.



We cannot give assurance that we would be able
to develop non-infringing alternatives at a reasonable cost that would be commercially acceptable, or that we would be able to obtain
a license from any patent or other intellectual property right owner on commercially reasonable terms, if at all.



We may be unable to enforce our intellectual
property rights throughout the world.



The laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the United States. The area of bioelectronic medicine, specifically, is
a nascent and emerging industry. To the extent we demonstrate novel means to manage physiological functions, the nature and degree of
intellectual property protection we can obtain throughout the world may vary. Many companies have encountered significant problems in
protecting and defending intellectual property rights in certain foreign jurisdictions. This could make it difficult for us to stop infringement
of our foreign patents, if obtained, or the misappropriation of our other intellectual property rights. For example, some foreign countries
have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the
enforceability of patents against certain third parties, including government agencies or government contractors. In these countries,
patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an
expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries,
and we will not have the benefit of patent protection in such countries.



Proceedings to enforce our patent rights in foreign
jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly,
our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal
decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology
and the enforcement of our intellectual property.



Risks Related to Our Common Stock



We expect that our stock price may fluctuate
significantly, and investors may not be able to resell their shares at or above the initial public offering price. An active trading
market for our common stock may never develop.



Prior to our initial public offering, you could
not buy or sell our common stock publicly. Even though our common stock is now listed on the Nasdaq Capital Market, an active trading
market for our shares may not develop or be sustained following our initial public offering. If an active market for our common stock
does not develop or is not maintained, it may be difficult for you to sell shares you purchase in this offering without depressing the
market price for the shares, or at all. An inactive trading market may also impair our ability to raise capital to continue to fund operations
by selling additional shares of our common stock and may impair our ability to acquire other companies or technologies by using shares
of our common stock as consideration.



The market price of shares of our common stock
could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:



| | • | the effect of the COVID-19 pandemic and/or inflationary factors on our business and operations and on market conditions generally;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | the success
    of our products and of competitive products or technologies;
| | - | ----------------------------------------------------------------------------





23









| | · | regulatory
    or legal developments in the United States and other countries;
| | - | ------------------------------------------------------------------------------



| | · | the level of
    expenses related to our products or development programs;
| | - | --------------------------------------------------------------------------



| | · | announcements
    by us, our partners or our competitors of new products or therapies, significant contracts, strategic partnerships, joint ventures,
    collaborations, commercial relationships, or capital commitments;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | failure to
    meet or exceed financial estimates and projections of the investment community or that we provide to the public;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | issuance of
    new or updated research or reports by securities analysts or recommendations for our stock;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | disputes or
    other developments related to proprietary rights (including patents), litigation matters, and our ability to obtain patent protection
    for our technologies;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | commencement
    of, or our involvement in, litigation;
| | - | -------------------------------------------------------



| | · | fluctuations
    in the valuation of companies perceived by investors to be comparable to us;
| | - | ---------------------------------------------------------------------------------------------



| | · | manufacturing
    disputes or delays;
| | - | -------------------------------------



| | · | any future
    sales of our common stock or other securities;
| | - | -------------------------------------------------------------



| | · | any change
    to the composition of the board of directors or key personnel;
| | - | -----------------------------------------------------------------------------



| | · | general economic
    conditions and slow or negative growth of our markets;
| | - | ---------------------------------------------------------------------------



| | · | share price
    and volume fluctuations attributable to inconsistent trading volume levels of our shares;
| | - | ---------------------------------------------------------------------------------------------------------



| | · | announcement
    or expectation of additional debt or equity financing efforts; and
| | - | -----------------------------------------------------------------------------------



| | · | other factors
    described in this section of the Report.
| | - | ----------------------------------------------------------



These and other market and industry factors may
cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance. In
addition, the stock market in general, and medical device companies in particular, have experienced price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of
a stock has been volatile, holders of that stock have on occasion instituted securities class action litigation against the company that
issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be
costly and divert the time and attention of our management and harm our operating results.



We do not expect to pay any cash dividends
for the foreseeable future.



We do not expect to pay dividends to our stockholders
at any time in the foreseeable future. Anyone considering investing in our stock should not rely on such investment to provide dividend
income. Instead, we plan to retain any earnings to establish, maintain and expand our operations and product offerings. In addition,
any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid
on our stock. Accordingly, investors must rely on sales of their shares after price appreciation, which may never occur, as the only
way to realize any return on their investment.



Future issuances of stock or other securities
could dilute the holdings of stockholders and could materially affect the price of the shares of stock being issued in connection with
this offering.



We anticipate that we will issue shares of capital
stock in conjunction with future funding requirements. Any issuance of new shares of stock, or securities exercisable for or convertible
into shares of stock, for the purpose of securing capital will result in the dilution of the ownership interests of our existing stockholders.



We have used and intend to continue to use equity
incentives for employees, advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options
and/or incentive rights will result in the dilution of the ownership interests of our existing stockholders.





24







In addition, we may in the future decide to offer
additional stock or other securities in order to finance new capital-intensive projects, in connection with unanticipated liabilities
or expenses or for any other purposes. There is no assurance that we will not decide to conduct offerings of securities in the future.
Depending on the structure of any future offering, certain existing stockholders may not have the ability to purchase additional equity
securities. If we raise additional funds by issuing additional equity securities, the holdings and voting interests of existing stockholders
could be diluted.



We are an “emerging growth company”
and a “smaller reporting company,” and the reduced public company reporting and disclosure requirements applicable to emerging
growth companies and smaller reporting companies may make our common stock less attractive to investors.



We qualify as an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For so long as we remain an emerging growth company,
we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to public companies that are
not emerging growth companies. These provisions include, but are not limited to: being permitted to have only two years of audited financial
statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure;
an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”); not being required to
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit
firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements and proxy
statements; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved. In addition, the JOBS Act permits emerging growth companies to take advantage
of an extended transition period to comply with new or revised accounting standards applicable to public companies. We intend to take
advantage of certain of the exemptions discussed above.



In addition, we are currently a “smaller
reporting company,” as defined in the Securities Exchange Act of 1934, as amended (“Exchange Act”), and have elected
to take advantage of certain of the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify
as a “smaller reporting company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify
as an emerging growth company, certain of the exemptions available to us as an “emerging growth company” may continue to
be available to us as a “smaller reporting company,” including exemption from compliance with the auditor attestation requirements
pursuant to the Sarbanes-Oxley Act and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller
reporting company” until we have more than $250 million in public float (based on our common stock) measured as of the last
business day of our most recently completed second fiscal quarter or, in the event we have no public float (based on our common stock),
annual revenues of more than $100 million during the most recently completed fiscal year.



As a result, the information we provide will
be different than the information that is available with respect to other public companies. In this Report, we have not included all
of the executive compensation-related information that would be required if we were not an emerging growth company. We cannot predict
whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock
less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock
may be more volatile.



If we are unable to implement and maintain
effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of
our financial reports and the market price of our common stock may decline.



As a public company, we will be required to maintain
internal control over financial reporting and to report any material weaknesses in such internal controls. In addition, beginning with
our second annual report on Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal
control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act. The process of designing, implementing and
testing the internal control over financial reporting required to comply with this obligation is time consuming, costly and complicated.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to assert that our internal control over financial
reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price
of our common stock could decline, and we could also become subject to investigations by the stock exchange on which our common stock
is listed, the SEC or other regulatory authorities, which could require additional financial and management resources.



A significant portion of our total outstanding
shares of common stock are restricted from immediate resale but may be sold into the market in the near future. This could cause the
market price of our common stock to drop significantly, even if our business is doing well.



Subject to certain exceptions, without the prior
written consent of ThinkEquity LLC, as representative of the underwriters, our pre-initial public offering stockholders, during the period
ending 6 months after the date of our initial public offering, and our officers and directors and, during the period ending 12 months
after the date of our initial public offering, have agreed not to: (i) offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities
convertible into, exchangeable for or that represent the right to receive shares of common stock; (ii) file any registration statement
with the Commission relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable
for common stock; or (iii) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences
of ownership of common stock, subject to certain exceptions. ThinkEquity, in its sole discretion, may release the common stock and other
securities subject to the lock-up agreements described above in whole or in part at any time with or without notice.





25







The market price of our common stock may decline
significantly when the restrictions on resale by our existing stockholders lapse. A decline in the market price of our common stock might
impede our ability to raise capital through the issuance of additional shares of common stock or other equity securities.



If our operating and financial performance
in any given period does not meet any guidance that we provide to the public, the market price of our common stock may decline.



We may, but are not obligated to, provide public
guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements
subject to the risks and uncertainties described in this Report and in our other public filings and public statements. Our actual results
may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future,
our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts,
or if we reduce our guidance for future periods, the market price of our common stock may decline. Even if we do issue public guidance,
there can be no assurance that we will continue to do so in the future.



Anti-takeover provisions in our charter
documents, and under Delaware law, could make an acquisition of our company more difficult, limit attempts by our stockholders to replace
or remove our current management and limit the market price of our common stock.



Provisions in our amended and restated certificate
of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our
management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:



| | · | authorize our
    board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights,
    and preferences determined by our board of directors that may be senior to our common stock;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | require that
    any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | specify that
    special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our
    Chief Executive Officer or our President (in the absence of a Chief Executive Officer);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | establish an
    advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons
    for election to our board of directors;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | prohibit cumulative
    voting in the election of directors;
| | - | ------------------------------------------------------------



| | · | establish that
    our board of directors will be divided into three classes—Class I, Class II, and Class III—with each class
    serving staggered three-year terms;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide that,
    so long as our board of directors is classified, directors may only be removed for cause;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | provide that
    vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
    and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | require the
    approval of our board of directors or the holders of two-thirds of our outstanding shares of voting stock to amend our bylaws and
    certain provisions of our certificate of incorporation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These provisions may frustrate or prevent any
attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members
of our board of directors, which is responsible for appointing the members of our management. In addition, we are governed by the provisions
of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years
following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit
the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers
of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.





26







Our amended and restated certificate of
incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware or the federal district court
for the District of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could result in
increased costs for our stockholders to bring a claim and could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees.



Our amended and restated certificate of incorporation
and amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court
for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for (i) any derivative action
or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by, or other wrongdoing
by, any director, officer, employee or agent of the Company to the Company or our stockholders, creditors or other constituents; (iii) any
action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of
incorporation or our amended and restated bylaws; (iv) any action to interpret, apply, enforce or determine the validity of our
amended and restated certificate of incorporation or our amended and restated bylaws; or (v) or any action asserting a claim against
us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to
enforce any liability or duty created by the Securities Act, Exchange Act or any other claim for which the federal courts have exclusive
jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for
lack of subject matter jurisdiction, or the Company consents in writing to the selection of an alternative forum, such action may be
brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and
amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive forum
for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and
arising under the Securities Act or Exchange Act. Nothing in our amended and restated certificate of incorporation or amended and restated
bylaws preclude stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to
applicable law.



We believe these provisions may benefit us by
providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable,
particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to
other forums and protection against the burdens of multi-forum litigation. However, this choice of forum provision could result in increased
costs for our stockholders to bring a claim and could may limit a stockholder’s ability to bring a claim in a judicial forum that
it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits
with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws
and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’
certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions
to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid,
a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there
can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice
of forum provision that will be contained in our amended and restated certificate of incorporation and amended and restated bylaws to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions,
which could adversely affect our business and financial condition.



General Risk Factors



If securities or industry analysts do not
publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common
stock could decline.



The market price and trading volume of our common
stock is heavily influenced by the way analysts interpret our financial information and other disclosures. We do not have control over
these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would
be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common
stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage
of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline
and could decrease the trading volume of our common stock.



We will incur increased costs and become
subject to additional regulations and requirements as a result of becoming a public company, which could lower our profits or make it
more difficult to run our business.



As a public company, we incur significant legal,
accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements.
We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act, and related rules implemented by
the Commission, and the Nasdaq Capital Market. The expenses generally incurred by public companies for reporting and corporate governance
purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to
make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty.
These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director
and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified
persons to serve on our board of directors, on our board committees or as our executive officers. Furthermore, if we are unable to satisfy
our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action
and potentially civil litigation.





27







Actual or perceived failures to comply
with applicable data privacy and security laws, regulations, policies, standards, contractual obligations and other requirements related
to data privacy and security and changes to such laws, regulations, standards, policies and contractual obligations could adversely affect
our business, financial condition and results of operations.



The global data protection landscape is rapidly
evolving, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. We
are subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, transmission, use, disclosure,
storage, retention and security of personal and personally-identifying information, such as information that we may collect in connection
with conducting our business in the United States and abroad. Implementation standards and enforcement practices are likely to remain
uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards or perception of their
requirements may have on our business. This evolution may create uncertainty in our business; affect our ability to operate in certain
jurisdictions; or to collect, store, transfer use and share personal information; necessitate the acceptance of more onerous obligations
in our contracts; result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards
is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws
or regulation, our internal policies and procedures, or our contracts governing our processing of personal information could result in
negative publicity, government investigations and enforcement actions, fines, imprisonment of company officials and public censure, claims
by third parties, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial
condition and results of operations.



Changes in accounting standards and subjective
assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.



U.S. generally accepted accounting principles
(“GAAP”) and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters
that are relevant to our business, such as, but not limited to, revenue recognition, stock-based compensation, trade promotions and income
taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes to these rules or
their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported
results.



We are subject to anti-corruption, anti-bribery,
anti-money laundering, and similar laws, and non-compliance with such laws could subject us to criminal or civil liability and harm our
business, financial condition, and results of operations.



We are subject to the U.S. Foreign Corrupt Practices
Act of 1977, as amended (“FCPA”), U.S. domestic bribery laws, the UK Bribery Act 2010, and other anti-corruption and anti-money
laundering laws in the countries in which we conduct business. Anti-corruption and anti-bribery laws have been enforced aggressively
in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party intermediaries from
authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
As we increase our international sales and business and sales to the public sector, we may engage with business partners and third-party
intermediaries to market our products and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our
third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned
or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees,
representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. While we have policies and
procedures to address compliance with such laws, there is a risk that our employees and agents will take actions in violation of our
policies and applicable law, for which we may be ultimately held responsible. As we expand internationally, our risks under these laws
may increase.



Detecting, investigating, and resolving actual
or alleged violations of anti-corruption laws can require a significant diversion of time, resources, and attention from senior management.
In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints,
investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties or injunctions,
suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences.
If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible
civil or criminal proceeding, our business, financial condition, and results of operations could be harmed.



Item 1B – Unresolved
Staff Comments



None.



Item 2 – Properties



Our principal executive office is located at 25821
Industrial Blvd., Suite 100, Hayward, California 94545. On November 17, 2021, we entered into a sublease agreement for approximately
9,091 square feet of office and warehouse space. The term of the sublease will expire on October 31, 2025. Monthly rent for the premises
is approximately $12,300.00 per month, plus the Company’s pro rata share of operating expenses, which are currently approximately
$4,500 per month.



Item 3 – Legal
Proceedings



We are not currently a party to any material
legal proceedings. We may, however, in the ordinary course of business face various claims brought by third parties, and we may, from
time to time, make claims or take legal actions to assert our rights, including intellectual property rights as well as claims relating
to employment matters and the safety or efficacy of our products. Any of these claims could subject us to costly litigation. If this
were to happen, the payment of any such awards could have a material adverse effect on our business, financial condition and results
of operations. Additionally, any such claims, whether or not successful, could damage our reputation and business.





28







Item 4 – Mine
Safety Disclosures



Not applicable.





29







PART II



Item 5 – Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Market Information



Our common stock is listed on the Nasdaq Capital
Market under the ticker symbol “TIVC.”



Our common stock, par value $0.0001 per share,
has been publicly traded on The Nasdaq Capital Market under the symbol “TIVC” since our initial public offering on November 11,
2021, which was completed at an offering price to the public of $5.00 per share. Prior to our initial public offering, there was no public
market for our common stock.



Holders



As of March 30, 2022, there were approximately
93 shareholders of record of our common stock. A substantially greater number of holders of our common stock are “street name”
or beneficial holders, whose shares are held by banks, brokers, and other financial institutions.





Dividends



We have never declared or paid cash dividends
on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business
and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We may enter into credit agreements or
other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any future
determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition,
operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.



Recent Sales of Unregistered Securities; Use of Proceeds from Registered
Securities



All share and per share data included in this
Item 15 has been retrospectively adjusted to reflect the 1-for-4 reverse stock split of our common stock, which was effected on August 31,
2021.



Convertible Debt



From December 2017 through November 2018,
we issued unsecured convertible promissory notes (the “$7 Million Cap Notes”) in the aggregate amount of approximately $1.98
million to accredited investors pursuant to the terms of a Note Purchase Agreement dated December 2017, as amended September 2018.
Each of the $7 Million Cap Notes had a maturity date of December 2019, and were generally convertible into the Company’s equity
securities at a per share conversion price that was computed on the basis of a valuation cap (the “Cap”) of $7 million, or
a discount rate of 20% to the next round of financing (the “Discount Rate”), whichever resulted in the issuance of a greater
number of equity securities to the investors, and were converted into shares of our Series Seed-3 Preferred Stock in connection
with our preferred stock financing, discussed in further detail below.



From August 2018 through April 2019,
we issued unsecured convertible promissory notes (the “$14 Million Cap Notes”) in the aggregate amount of approximately $1.53
million to accredited investors pursuant to the terms of a Note Purchase Agreement dated August 2018. Each of the $14 Million Cap
Notes had a maturity date of September 2020, and were generally convertible into the Company’s equity securities at a per share
conversion price that was computed on the basis of a Cap of $14 million, or a Discount Rate of 15%, whichever resulted in the issuance
of a greater number of equity securities to the investors, and were converted into shares of our Series Seed-4 Preferred Stock in
connection with our preferred stock financing, discussed in further detail below.



In May 2019, we issued an unsecured convertible
promissory note (the “May 2019 Note”) in the amount of $455,000 to an accredited investor pursuant to the terms of a
Note Purchase Agreement dated May 2019. The May 2019 Note had a maturity date of September 2021, and was generally convertible
into the Company’s equity securities at a per share conversion price that was computed on the basis of a Cap of $14 million, or
a Discount Rate of 15%, whichever resulted in the issuance of a greater number of equity securities to the investors, and were converted
into shares of our Series Seed-4 Preferred Stock in connection with our preferred stock financing, discussed in further detail below.



From June 2020 through December 2020,
we issued unsecured convertible promissory notes (the “2020 Bridge Notes”) in the amount of approximately $1.57 million to
accredited investors pursuant to the terms of a Note Purchase Agreement dated June 2020, as amended October 2020. The 2020
Bridge Notes have a maturity date of June 2022, and are generally convertible into the Company’s equity securities at a per
share conversion price that will be computed on the basis of a Cap of $40 million or a Discount Rate of 25%, whichever results in the
issuance of a greater number of equity securities to the investors. In August 2021, the 2020 Bridge Notes were amended to provide
that, in addition to the foregoing conversion terms, in the event that the Company consummates an initial public offering of its common
stock prior to the occurrence of a Qualified Financing, a Change of Control or the Maturity (all as defined in the 2020 Bridge Note),
then, at the election of the Company, all accrued but unpaid interest thereon shall be converted into shares of common stock as of immediately
prior to the consummation of the initial public offering at a per share price equal to the lesser of (i) 75% of the per share public
offering price and (ii) the quotient resulting from dividing the $40 million Cap by the Company’s capitalization on a fully
diluted basis, as of immediately prior to closing of the initial public offering.





30







From March 2021 through April 2021,
we issued unsecured convertible promissory notes in the amount of approximately $0.4 million to accredited investors. These notes were
issued as part of the same offering as the 2020 Bridge Notes, accrue interest at a rate of 3% per annum, and mature on June 1, 2022.



The 2020 Bridge Notes, including those issued
from March to April 2021, in the aggregate principal amount of approximately $1,987,500, converted into an aggregate of 545,613 shares
of our common stock in connection with closing of the IPO, based on accrued interest of approximately $58,600 as of November 10, 2021,
and a conversion price of $3.75 per share (75% of the IPO price per share).



From June 2021 through July 2021, we
issued convertible notes payable for total proceeds of approximately $1.86 million to accredited investors, of which proceeds a total
of $0.45 million was not received by the Company until July 2021. The notes were issued at an original issue discount of approximately
$0.24 million with principal outstanding of approximately $2.11 million. The notes are unsecured, have a term of twenty-three months,
and accrue interest at a rate of 3% per annum.



In June 2021, we issued a convertible note
payable to our Chief Executive Officer for total proceeds of $0.10 million. The note is unsecured, has a term of twenty-three months,
and accrues interests at a rate of 3% per annum.



In June 2021, we issued convertible notes
payable for total proceeds of approximately $0.23 million. The notes are unsecured, have a term of twenty-three months, and accrue interest
at a rate of 3% per annum.



All of the convertible notes payable issued in
June 2021 (collectively, the “2021 Notes”) are generally convertible into the Company’s equity securities at a
per share conversion price that will be computed on the basis of a Cap of $40 million or a Discount Rate of 25%, whichever results in
the issuance of a greater number of equity securities to the investors. In the event that the Company consummates an initial public offering
of its common stock prior to the occurrence of a Qualified Financing, a Change of Control or the Maturity (all as defined in the 2021
Notes), then the outstanding principal amount and, at the election of the Company, all accrued but unpaid interest thereon as of the
date of conversion shall be converted into shares of common stock as of immediately prior to the consummation of the initial public offering
at a per share price equal to the lesser of (i) 75% of the per share public offering price and (ii) the quotient resulting
from dividing the $40 million Cap by the Company’s capitalization on a fully diluted basis, as of immediately prior to closing
of the initial public offering. The 2021 Notes, in the aggregate principal amount of approximately $2,442,221, converted into an aggregate
of 658,547 shares of our common stock in connection with the IPO, based on accrued interest of approximately $27,352 as of November 10,
2021, and a conversion price of $3.75 per share (75% of the IPO price per share).



Simple Agreements for Future Equity



From December 2016 through August 2018,
we entered into Simple Agreements for Future Equity (the “SAFEs”) with accredited investors in the aggregate amount of $870,000.
The SAFEs had a Discount Rate of 20%, and were converted into shares of our Series Seed-2 Preferred Stock in connection with our
preferred stock financing, discussed in further detail below.



Preferred Stock Financing



From July 2019 through January 2020,
we issued an aggregate of 2,794,979 shares of our Series Seed-1 Preferred Stock at a purchase price of $1.4034 per share for an
aggregate purchase price of approximately $3.9 million to accredited investors pursuant to the terms of a Series Seed-1, Seed-2,
Seed-3 and Seed-4 Preferred Stock Investment Agreement (the “Preferred Stock Financing”). In connection with the Preferred
Stock Financing, the SAFEs were converted into an aggregate of 774,894 shares of our Series Seed-2 Preferred Stock at a conversion
price of $1.1227 per share; the $7 Million Cap Notes, including accrued interest, were converted into an aggregate of 3,615,580 shares
of our Series Seed-3 Preferred Stock at a conversion price of $0.5841 per share; the $14 Million Cap Notes, including accrued interest,
were converted into an aggregate of 1,331,150 shares of our Series Seed-4 Preferred Stock at a conversion price of $1.1681 per share;
and the May 2019 Note, including accrued interest, was converted into 391,997 shares of our Series Seed-4 Preferred Stock at
a conversion price of $1.1681 per share.



All outstanding shares of Series Seed-1
Preferred Stock, Series Seed-2 Preferred Stock, Series Seed-3 Preferred Stock and Series Seed-4 Preferred Stock will convert
into shares of our common stock on a 4:1 basis (with any fractional shares resulting from the conversion to be cashed out by the Company)
in connection with this offering.





31







Stock Option Exercises



In March 2021, one employee purchased 50,000
shares of our common stock at an exercise price of $0.12 per share, for total consideration of $6,000.00, upon the exercise of stock options
granted pursuant to our 2017 Equity Incentive Plan. In August 2021, six employees and one former employee purchased an aggregate
of 346,980 shares of our common stock at a weighted average exercise price of $0.16 per share, for total consideration of approximately
$55,800, upon the exercise of stock options granted pursuant to our 2017 Equity Incentive Plan. The shares of common stock issued upon
exercise of these stock options were unregistered at the time of issuance, but were subsequently registered under the S-8 Registration
Statement (File No. 333-261044), filed by the Company with the SEC on November 12, 2021, after completion of the IPO.





Stock Option Grants



In June 2021, we granted options to purchase
50,000 shares of our common stock, all of which are outstanding. All such stock options have an exercise price of $1.60 per share. These
stock options were unregistered at the time of issuance, but were subsequently registered under the S-8 Registration Statement (File No.
333-261044), filed by the Company with the SEC on November 12, 2021, after completion of the IPO.





Restricted Stock Grants



On July 29, 2021, we issued 112,500 shares
of restricted stock under our 2017 Equity Incentive Plan to our CFO. These shares were unregistered at the time of issuance, but were
subsequently registered under the S-8 Registration Statement (File No. 333-261044), filed by the Company with the SEC on November 12,
2021, after completion of the IPO.





Warrants



On July 1, 2021, we issued a warrant to purchase
50,000 shares of our common stock to a consultant as partial consideration for services provided to the Company, and issued an additional
50,000 warrants to purchase common stock in November 2021 after completion of the IPO. The warrants are exercisable upon issuance, have
an exercise price of $1.04 per share and have a term of five years.





Applicable Exemptions



No underwriters were used in the foregoing transactions,
and no discounts or commissions were paid for the transactions described in this item. All sales of securities described in this item
were exempt from the registration requirements of the Securities Act in reliance on Section 4(a)(2) of the Securities Act,
Rule 701 promulgated under the Securities Act or Regulation D promulgated under the Securities Act, relating to transactions by
an issuer not involving a public offering. All of the foregoing securities are deemed restricted securities for purposes of the Securities
Act.



During the fiscal year ended December 31,
2021, there were no other unregistered sales of our securities.



Use of Proceeds



On November 10, 2021, our registration statement
on Form S-1 (File No. 333-258411) was declared effective by the Commission for our initial public offering (“IPO”).
At the closing of the offering on November 15, 2021, we sold 3,000,000 shares of common stock at an initial public offering price
of $5.00 per share and received gross proceeds of $15,000,000, which resulted in net proceeds to us of approximately $12,806,000, after
deducting underwriting discounts and commissions of $1,125,000, underwriter non-accountable expenses of $150,000, and underwriter offering-related
transaction costs of $919,000. None of the expenses associated with the initial public offering were paid to directors, officers, persons
owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. ThinkEquity LLC (“ThinkEquity”)
acted as sole book-running manager for the offering.



On November 16, 2021, the underwriters fully
exercised their over-allotment option to purchase an additional 450,000 shares of common stock at the public offering price of $5.00
per share. The Company received gross proceeds of $2,250,000 for the over-allotment, which resulted in net proceeds to us of $2,081,250,
after deducting underwriting discounts and commissions of $168,750.



As partial consideration for the underwriting
services provided by ThinkEquity in connection with the IPO, we issued ThinkEquity warrants to purchase an aggregate of 172,500 shares
of our common stock. The warrants will be exercisable for a four-and-one-half year period commencing 180 days following consummation of
the IPO at an exercise price of $6.25 per share.



There has been no material change in the planned
use of proceeds from our initial public offering as described in our final prospectus filed with the Commission on November 12,
2021, pursuant to Rule 424(b)(4).



Repurchases



None.



Item 6 – [Reserved]





32







Item 7 – Management’s Discussion
and Analysis of Financial Condition and Results of Operations



You should read the following discussion and
analysis of our financial condition and operating results together with our financial statements and related notes included elsewhere
in this Report. This discussion and analysis contains forward-looking statements based upon current beliefs, plans and expectations that
involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Report.



Overview



We are a bioelectronic device company delivering
non-invasive neuromodulation products for treatment of inflammatory conditions. Bioelectronic medicine, also referred to as electroceuticals
or neuromodulation, is the treatment of disease and conditions by preferentially activating electrical functions of the body to modify
central or peripheral nerve activity.



Business Developments



Since our formation in September 2016, we
have devoted substantially all of our efforts to research and development, to regulatory clearance and to early market development and
testing for our first product, released September 2019 in the United States. We are not profitable and have incurred losses in each
year since our inception. Our net loss was $8,494,000 and $3,639,000 for the years ended December 31, 2021 and 2020, respectively.
As of December 31, 2021, we had an accumulated deficit of $19,546,000. We currently have one product approved for sale with two United
States indications and CE Mark. We expect to incur sales and marketing costs to drive adoption and market access in the United States
market, with later expansion under the CE Mark. We expect to incur additional research and development expenses related to extending the
indications for our product(s). We expect to incur additional general and administrative expenses related to scaling our operations and
operating as a public company.



In February 2018, we initiated the FDA pivotal
trial for ClearUP Sinus Pain Relief, a handheld neuromodulation device targeting the symptoms of sinus inflammation, and secured FDA
clearance in January 2019. In February 2020, we were granted the CE Mark for ClearUP and in March 2021, the FDA extended
the use of ClearUP to allow broader marketing. We expect that our operating expenses will increase significantly as we discover, acquire,
validate and develop additional product candidates; seek regulatory approval and, if approved, proceed to commercialization of new products;
obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. Furthermore, we have incurred
and will continue to incur additional costs associated with operating as a public company that we did not experience as a private company.
We expect to continue to incur significant losses for the foreseeable future.



We have funded our operations primarily from
the proceeds from the IPO, issuance and sale of convertible preferred stock and convertible notes payable and the sale of our products.
As of December 31, 2021, we had $12,975,000 in cash and cash equivalents.



We
currently generate sales revenue direct-to-consumer though our own websites, Amazon.com and Walmart.com. We also sell major and specialty
U.S. online retailers such as BestBuy.com and FSAStore.com. Our ability to grow sales revenue will depend on successfully executing
a comprehensive marketing campaign to drive additional sales through existing and new channels. Long-term growth will be commensurate
with our ability to successfully identify, develop, and secure regulatory approval of one or more additional product candidates beyond
ClearUP. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through
private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of
financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such
agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of
our products and/or future product candidates.



We rely heavily on third-party service providers,
including marketing agencies, clinical research organizations and academic research partnerships, finance and accounting support, legal
support, and contract manufacturing organizations to carry out our operations. We expect to increase headcount selectively but will continue
to rely significantly on third-party service providers with specialized expertise and/or facilities.



Components of Results of Operations



Revenue



Revenue is generated by the sale of our ClearUP
product and ancillary products, including accessories and accelerated shipping charges and is net of return and warranty reserve allowances.
We currently sell direct-to-consumer through our own websites, Amazon.com and Walmart.com. We also sell to major and specialty U.S. online
retailers such as BestBuy.com and FSAStore.com. Product revenue and net product average order value include product and ancillary revenues
net of selling expenses but exclude return and warranty reserve allowances.





Cost of Sales



Cost of sales consists primarily of the materials
and services to manufacture our products, the internal personnel costs to oversee manufacturing and supply chain functions, and the shipment
of goods to customers. A significant portion of our cost of sales is currently in fixed and semi-fixed expenses associated with the management
of manufacturing and supply chain. Cost of sales is expected to increase on an absolute basis as sales volume increases. Cost of sales
is expected to decrease as a proportion of revenue with (1) the release of ClearUP Gen 2 and (2) the allocation of fixed and
semi-fixed expenses over increasing unit sales volume.





33







Gross Margin



Our gross margin has been and will continue to
be affected by and likely fluctuate on a quarterly basis due to a variety of factors, including sales volumes, product and channel mix,
pricing strategies, costs of finished goods, and product return rates, new product launches and potential new manufacturing partners
and suppliers. We expect our gross margin to increase with the launch of ClearUP Gen 2 and increasing sales volume over which fixed and
semi-fixed costs are allocated.



Operating Expenses



Research and Development Expenses



Our research and development expenses consist
primarily of costs incurred to conduct research, including the discovery, development and validation of product candidates. Research
and development expenses include personnel costs, including stock-based compensation expense, third-party contractor services, including
development and testing of prototype devices, and maintenance of limited in-house research facilities. We expense research and development
costs as they are incurred. We expect research and development expenses to increase with the discovery and validation of new product
candidates.



Sales and Marketing Expenses



Sales and marketing expenses include personnel
costs and expenses for advertising and other marketing services. Personnel costs consist of salaries, bonuses, benefits and stock-based
compensation expense. We expect sales and marketing expenses to increase as we expand the marketing of our products and pursue sales
growth.



General and Administrative Expenses



General and administrative expenses include personnel
costs, expenses for outside professional services and other expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based
compensation expense. Outside professional services consist of legal, finance, accounting and audit services, and other consulting fees.
We expect general and administrative expenses to increase as we build our operational infrastructure. We expect general and administrative
expenses will decrease as a proportion of revenue as revenue scales against fixed and semi-fixed administrative expenses.



Other Income / Expense, Net



Other expense, net primarily consists of the
fair value adjustments related to the derivative liability for conversion rights, amortization of debt discount included in interest
expense and the loss from the extinguishment of debt from the conversion of the convertible notes to common stock.



Results of Operations



Comparison of the Years Ended December 31,
2021 and 2020



The following table summarizes our results of
operations (in thousands):



|                                               |  | Year Ende Ended December 31, |        |   |      |  
|---------------------------------------------- |  | ---------------------------- | ------ | - | ---- | -
|Statement of operations data:                  |  | 2021                         |        |   | 2020 |  
|Revenue                                        |  | $                            | 1,166  |   |      | $
|Cost of sales                                  |  |                              | 1,295  |   |      |  
|Gross loss                                     |  |                              | (129   | ) |      |  
|Operating expenses:                            |  |                              |        |   |      |  
|Research and development                       |  |                              | 878    |   |      |  
|Sales and marketing                            |  |                              | 1,696  |   |      |  
|General and administrative                     |  |                              | 2,929  |   |      |  
|Total operating expenses                       |  |                              | 5,503  |   |      |  
|Loss from operations                           |  |                              | (5,632 | ) |      |  
|Other income (expense):                        |  |                              |        |   |      |  
|Interest expense                               |  |                              | (1,823 | ) |      |  
|Change in fair value of derivative liabilities |  |                              | 436    |   |      |  
|Loss on extinguishment of debt                 |  |                              | (1,636 | ) |      |  
|Other income                                   |  |                              | 162    |   |      |  
|Total other income (expense)                   |  |                              | (2,861 | ) |      |  
|Loss before provision for income taxes         |  |                              | (8,493 | ) |      |  
|Provision for income taxes                     |  |                              | 1      |   |      |  
|Net loss and comprehensive loss                |  | $                            | (8,494 | ) |      | $





34







Revenue



Revenue increased $306,000 (36%) from $860,000
for the year ended December 31, 2020 to $1,166,000 for the year ended December 31, 2021, primarily attributable to increased unit sales
of 21% from approximately 10,400 units for the year ended December 31, 2020 to approximately 12,600 units for the year ended December
31, 2021 and increases in net product average order value for the year ended December 31, 2021 as compared to December 31, 2020 as described
in more detail below. Ancillary revenues were less than 1% of total revenue for both of the years ended December 31, 2020 and 2021.



|                                             |  | Year Ended
    December 31, |       |   |      |  
|-------------------------------------------- |  | --------------------------- | ----- | - | ---- | -
|Statement of operations data (in thousands): |  | 2021                        |       |   | 2020 |  
|Product Revenue                              |  |                             |       |   |      |  
|Direct-to-consumer                           |  | $                           | 691   |   |      | $
|Retail                                       |  |                             | 592   |   |      |  
|Return and Warranty Reserves                 |  |                             | (117  | ) |      |  
|Revenue                                      |  | $                           | 1,166 |   |      | $



Direct-to-consumer product revenue increased $140,000
(25%) from $551,000 for the year ended December 31, 2020 to $691,000 for the year ended December 31, 2021, which increase is primarily
attributable to increased unit sales of 17% from approximately 4,800 units for the year ended December 31, 2020 to approximately 5,600
units for the year ended December 31, 2021. Net product average order value increased to $123.39 for the year ended December 31, 2021
from $114.79 for the year ended December 31, 2020 primarily due to a reduction in consumer pricing incentives during the year ended December
31, 2021 from the year ended December 31, 2020.



Retail channel product revenue increased $177,000
(44%) from $415,000 for the year ended December 31, 2020 to $592,000 for the year ended December 31, 2021, which increase is primarily
attributable to increased unit sales of 25% from approximately 5,600 units for the year ended December 31, 2020 to approximately 7,000
units for the year ended December 31, 2021. Average product order value increased to $84.57 for the year ended December 31, 2021 from
$74.11 for the year ended December 31, 2020 primarily due to our focus on selling product through higher margin retail channel customers
for the year ended December 31, 2021 from the year ended December 31, 2020.



Return and warranty reserves as a percentage of
product revenue was approximately 11.1% for the year ended December 31, 2020, as compared to 9.1% for the year ended December 31, 2021.
We lowered the return and warranty reserve due to lower return rates which we believe were a result of our efforts to provide more effective
online and print media on how to use our products.



Cost of Sales



Cost of sales for the year ended December 31,
2021 was $1,295,000 compared to $1,085,000 for the year ended December 31, 2020, an increase of $210,000 or 19%. The period over period
increase was primarily attributable to increased unit sales of 21% from approximately 10,400 unit for the year ended December 31, 2020
to approximately 12,600 units for the year ended December 31, 2021.



Variable cost of goods sold includes product costs,
fulfillment, shipping and other variances and adjustments. Variable cost of goods sold was $1,039,000 or $82.46 per unit given 12,600
units for the year ended December 31, 2021 as compared to $737,000 or $70.87 per unit given 10,400 units for the year ended December 31,
2020. The increase in variable cost of goods sold was due to increased costs related to global supply chain issues. Fulfillment and shipping
costs are significantly lower for retail channel bulk orders.



Fixed cost of goods sold includes allocation of
fixed and semi-fixed expenses, including, non-cash Company personnel allocation and monthly minimum management, storage and processing
fees from our third-party logistics provider. Fixed cost of goods sold decreased to $256,000 for the year ended December 31, 2021 as compared
to $348,000 for the year ended December 31, 2020 primarily due to lower non-cash Company personnel allocation as the Company refined its
production management processes. Non-cash Company personnel allocation for the fourth quarter of 2021 was $22,500.



Revenue less variable cost of goods sold for
the year ended December 31, 2021 was $127,000 compared to $123,000 for the year ended December 31, 2020. Gross loss for the year ended
December 31, 2021 was $(129,000) compared to $(225,000) for the year ended December 31, 2020.



Our gross margin has been and will continue to
be affected by and likely fluctuate on a quarterly basis due to a variety of factors, including sales volumes, product and channel mix,
pricing strategies, costs of finished goods, and product return rates, new product launches and potential new manufacturing partners
and suppliers. We expect our gross margin to increase with the launch of ClearUP Gen 2 and increasing sales volume over which fixed and
semi-fixed costs are allocated.



Research and Development Expenses



Research and development expenses increased by
$219,000 from $659,000 for the year ended December 31, 2020 compared to $878,000 for the year ended December 31, 2021. The emphasis of
activity in 2020 was primarily related to completion of a four-week at home clinical study supporting the application for a CE Mark for
ClearUP. Activity in 2021 was primarily focused on developing ClearUP Gen 2, and preparation for seeking FDA approval for a second indication
for the ClearUP product line.



Sales and Marketing Expenses



Sales and marketing expenses increased to $1,696,000
for the year ended December 31, 2021, compared to $1,306,000 for the year ended December 31, 2020. The increase of $390,000 primarily
related to $300,000 of increased fourth quarter spending in anticipation of and use of proceeds of our November 2021 IPO to expand our
sales and marketing efforts, including (i) expanding advertising; (ii) growing our social media presence; (iii) upgrading and optimizing
ecommerce infrastructure, online/website design; and (iv) other initiatives marketing initiatives.



General and Administrative Expenses



General and administrative expenses increased
by $1,915,000 from $2,929,000 for the year ended December 31, 2021, compared to $1,014,000 for the year ended December 31, 2020, primarily
due to increase salaries, consulting fees, audit fees and other professional services to upgrade the accounting and finance function
and to obtain an audit.



Other Income (Expense), Net



Other income (expense), net for the year ended
December 31, 2021 is primarily due to the loss on extinguishment of debt upon conversion of the convertible notes payable to common stock
of $1,636,000, amortization of debt discount of $1,747,000 and interest expense of $76,000 offset by the income from the forgiveness
of the PPP loan and the change in the fair value of the conversion feature derivative liabilities. Other income (expense), net for the
year ended December 31, 2020 is primarily due to the amortization of debt discount of $411,000.







35







Liquidity and Capital Resources



Sources of Liquidity



From our inception through December 31, 2021,
we have generated $2,446,000 in revenue from product sales and have incurred operating losses and negative cash flows from our operations.
As of December 31, 2021, we had cash and cash equivalents of $12,975,000, working capital of $13,070,000 and an accumulated deficit of
$19,546,000. We have financed our operations to date primarily through issuances of SAFE instruments, convertible notes and convertible
preferred stock and the proceeds from the IPO in November 2021. In 2019, we sold an aggregate of 2,787,854 shares of our convertible preferred
stock to accredited investors, generating net proceeds of $3,843,000, and borrowings from convertible notes payables issued to investors
in the amount of $1,710,000. In 2020, we borrowed $1,573,000 by issuing convertible notes and issued notes payable to borrow $195,000.
In November 2021, we completed our IPO, generating net proceeds to the Company of approximately $14,887,000. During the year ended December
31, 2021, we borrowed $2,613,000 by issuing convertible notes payable.



In addition, on October 28, 2021, we entered into a Revolving Line
of Credit Note with Tethered LLC (“Tethered”) providing us with a $250,000 revolving line of credit (the “Line of Credit”),
pursuant to which we may request advances until December 3, 2022. Advances drawn under the Line of Credit bear interest at an annual rate
of 6.0%, and each advance will be payable on the maturity date with the interest on outstanding advances payable monthly. We may, at our
option, prepay any borrowings under the Line of Credit, in whole or in part, at any time prior to the maturity date, without premium or
penalty. To date, we have not drawn down on the Line of Credit.



During the years ended December 31, 2021 and 2020,
we incurred net losses of $8,494,000 and $3,639,000, respectively, and used $5,612,000 and $3,027,000 of cash for operations, respectively.
Management expects to incur substantial additional operating losses for at least the next two years to expand our markets, complete development
of new products, obtain regulatory approvals, launch and commercialize our products and continue research and development programs.



Recent
Developments



In April 2021, we issued a convertible note
payable for total proceeds of $115,000. The note is unsecured, has interest accrued at a rate of 3% per annum and has a term of thirteen
months.



On May 11, 2021, the SBA approved forgiveness
of our PPP Loan, including accrued interest. The amount forgiven by the SBA was $157,000.



Effective as of June 7, 2021, the Company reincorporated
as a Delaware corporation.



From June 2021 through July 2021, we issued convertible
notes payables for total proceeds of $1,866,000. The notes were issued at an original issue discount of $244,000 with principal outstanding
of $2,110,000. The notes are unsecured, have a term of twenty-three months, and accrue interest at a rate of 3% per annum.



In June 2021, we issued convertible notes payable
for total proceeds of $132,000. The notes are unsecured, have a term of twenty-three months, and accrue interest at a rate of 3% per
annum.



In June 2021, we issued a convertible notes payable
to our Chief Executive Officer for total proceeds of $100,000. The note is unsecured, has a term of twenty-three months, and accrues
interests at a rate of 3% per annum.



In August 2021, after receiving Board approval
of the same on July 29, 2021, holders of a majority of our issued and outstanding securities authorized our Board, acting in its sole
discretion without further approval of our stockholders, to effect a reverse split of our issued and outstanding common stock, at a ratio
of not less than 1-for-2, but not more than 1-for-15, at any time on or before July 29, 2021. On August 29, 2021, our Board approved
a reverse split ratio of 1-for-4, and on August 31, 2021, we filed a Certificate of Amendment to our Certificate of Incorporation to
implement the reverse stock split.



On October 28, 2021, the Company entered into
a Revolving Line of Credit Note with Tethered LLC (“Tethered”) providing the Company with a $250,000 revolving line of credit
(the “Line of Credit”). The Line of Credit allows the Company to request advances thereunder until December 3, 2022 (the
 “Maturity Date”). Advances drawn under the Line of Credit bear interest at an annual rate of 6.0%, and each advance will
be payable on the Maturity Date with the interest on outstanding advances payable monthly. The Company may, at its option, prepay any
borrowings under the Line of Credit, in whole or in part at any time prior to the Maturity Date, without premium or penalty. The Company
has not drawn down on the Line of Credit as of the date hereof.



In November 2021, the Company completed the IPO
of 3,450,000 shares of common stock, at a public offering price of $5.00 per share, including the exercise in full by the underwriters
of their option to purchase up to 450,000 additional shares of common stock, for aggregate gross proceeds of $17,250,000 and its shares
stared trading on The NASDAQ Capital Market under the ticker symbol “TIVC.” The Company received approximately $14,887,000
in net proceeds after deducting underwriting discounts and commissions and other offering expenses payable by the Company. In connection
with the closing of the IPO, all of the Company’s outstanding shares of convertible preferred stock at the time of the IPO automatically
converted into an aggregate of 2,227,116 shares of common stock and the outstanding convertible notes payable borrowings of $4,384,000
converted into an aggregate of 1,204,160 shares of common stock.



We intend to raise additional capital through
the issuance of additional equity and debt. If financing is not available at adequate levels, we may need to reevaluate our operating
plans. Based on projected activities, management believes the Company has adequate cash and financial resources to operate for at least
the next twelve months.







36







Plan of Operation and Future Funding Requirements



We use our capital resources primarily to fund
operating expenses, primarily marketing and advertising for ClearUP and general operating expenses. We plan to increase our marketing
and advertising investments to drive sales of ClearUP through existing and new channels. We plan to increase our research and development
investments to identify and validate new product candidates, move them through pre-clinical and clinical development, and develop go-to-market
strategies that leverage our existing sales channels and call points. At this time, due to the inherently unpredictable nature of research
and new product adoption, as well as supply chain constraints that we are currently facing, we cannot reasonably estimate the costs we
will incur and the timelines that will be required to complete development, obtain marketing approval and commercialize future product
candidates, if at all. For the same reasons, we are also unable to predict how quickly we will ramp-up revenue from ClearUP product sales
or whether, or when, if ever, we may achieve profitability from the sales of one or more products. Clinical and preclinical development
timelines, the probability of success, and sell-in costs can differ materially from expectations. In addition, we cannot forecast which
product candidates may be best developed and/or monetized through future collaborations, when such arrangements will be secured, if at
all, and to what degree such arrangements would affect our development plans and capital requirements.



We have generated operating losses in each period
since inception. We have incurred an accumulated deficit of $19,456,000 through December 31, 2021. We expect to incur additional
losses in the future as we expand both our marketing and research and development activities. Based on our current plans, we believe that
we have adequate cash and financial resources to operate for at least the next twelve months. We have based this estimate on assumptions
that may prove to be wrong, however, and we could use our capital resources sooner than we expect.



The timing and amount of our operating expenditures
will depend largely on:



| | · | the availability of electronic parts and other components for our products, as well as our ability to source such parts and components
at favorable prices;                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                  
| | · | the timing and progress
    of sales initiatives driving top-line revenue;                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                  
| | · | the timing and adoption
    rate of ClearUP Gen 2 at lower cost of goods;                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                  
| | · | the payment terms and timing
    of commercial contracts entered into for manufacturing and sales of our products to and through online third-party retailers;                                                                                   
| |   |                                                                                                                                                                                                                                                  
| | · | the timing and progress
    of preclinical and clinical development activities;                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                  
| | · | the number and scope of
    preclinical and clinical programs we decide to pursue;                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                  
| | · | the timing and amount of
    milestone payments we may receive under any future collaboration agreements;                                                                                                                                        
| |   |                                                                                                                                                                                                                                                  
| | · | our ability to source new
    business opportunities through licenses and research and development programs and to establish new collaboration arrangements;                                                                                     
| |   |                                                                                                                                                                                                                                                  
| | · | the costs involved in prosecuting
    and enforcing patent and other intellectual property claims;                                                                                                                                               
| |   |                                                                                                                                                                                                                                                  
| | · | the cost and timing of
    additional regulatory approvals beyond those currently held by us; and                                                                                                                                                
| |   |                                                                                                                                                                                                                                                  
| | · | our efforts to enhance
    operational systems and hire additional personnel, including personnel to support finance, sales, marketing, operations and development
    of our product candidates and satisfy our obligations as a public company.



Until such time, if ever, as we can generate
substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings.
We may also consider entering into collaboration arrangements or selectively partnering with third parties for clinical development and
commercialization. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional
debt would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants
that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional
funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements
with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product
candidates or grant licenses on terms that may not be favorable to us. If we are not able to secure adequate additional funding, we may
be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail
planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations
and prospects.





37







Cash Flows



The following table summarizes our cash flows for the period indicated
(in thousands):



|                                                         |  | Year Ended
    December 31, |       
|-------------------------------------------------------- |  | --------------------------- | ------
|                                                         |  | 2021                        |       
|Cash used in operating activities                        |  | $                           | (5,612
|Cash provided by financing activities                    |  |                             | 17,543
|Net increase (decrease) in cash and
    cash equivalents |  | $                           | 11,931



Operating Activities



Net cash used in operating activities for the
year ended December 31, 2021, was $5,612,000, which consisted primarily of net loss of $8,494,000 decreased by non-cash charges
of $3,285,000 and increased by a net change of $403,000 in our net operating assets. The non-cash charges primarily consisted of debt
discount amortization of $1,747,000, loss on extinguishment of debt from conversion of convertible notes payable to common stock of $1,636,
stock-based compensation of $57,000, accounts receivable allowances of $66 and issuance of warrant for consulting services of $280,000
offset by the change in fair value remeasurement of derivative liabilities of $436,000 and the forgiveness of the PPP loan of $157,000.
The change in our net operating assets and liabilities was primarily due to an increase in inventory and prepaid expenses, offset by
an increase in accounts payable in 2021.



Net cash used in operating activities for the
year ended December 31, 2020, was $3,027,000, which consisted primarily of net loss of $3,639,000 decreased by non-cash charges
of $568,000 and decreased by a net change of $44,000 in our net operating assets. The non-cash charges primarily consisted of debt discount
amortization of $411,000, stock-based compensation of $78,000, and change in fair value remeasurement of derivative liabilities of $27,000.
The change in our net operating assets and liabilities was primarily due to an increase in inventory, accompanied by a decrease in accrued
liabilities in 2020.



Investing Activities



We had no investing activities during the years
ended December 31, 2021 and 2020.



Financing Activities



Our financing activities provided $17,543,000
of cash during the year ended December 31, 2021, which consisted primarily of the proceeds from the IPO, net of issuance costs,
of $14,887,000, convertible notes payable borrowings of $2,613,000 and from issuance of common stock from exercise of stock options of
$62,000 offset by notes payable repayment of $19,000.



Our financing activities provided $1,760,000
of cash during the year ended December 31, 2020, which consisted primarily of convertible notes payable borrowings of $1,573,000,
borrowings of $156,000 in the form of the federal Paycheck Protection Program and borrowings of $39,000 to finance our insurance policies.



Known Trends or Uncertainties





As discussed in this
Annual Report, the world has been affected due to the COVID-19 pandemic. The pandemic has negatively impacted our business in various
ways over the last two years, including, more recently, as a result of global supply chain constraints at least partially attributable
to the pandemic. Until the pandemic has passed, there remains uncertainty as to the effect of COVID-19 on our business in both the short
and long-term.



Inflation



Inflation
has increased during the periods covered by this Annual Report, and is expected to continue to increase for the near future. Inflationary
factors, such as increases in the cost of our products (and components thereof), interest rates, overhead costs and transportation costs
may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position
or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due
to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, employee availability
and wage increases, trade tariffs imposed on certain products from China and increased product pricing due to semiconductor product shortages.



Off-Balance Sheet Arrangements



We have not entered into any off-balance sheet arrangements.



Contractual Obligations and Commitments



Convertible Promissory Notes



From June 2020 through December 2020,
we issued unsecured convertible promissory notes (the “2020 Bridge Notes”) in the amount of approximately $1.57 million to
accredited investors pursuant to the terms of a Note Purchase Agreement dated June 1, 2020, as amended in October 2020.
The 2020 Bridge Notes have a maturity date of June 1, 2022, and are generally convertible into the Company’s equity securities
at a per share conversion price that will be computed on the basis of a Cap of $40 million or a Discount Rate of 25%, whichever results
in the issuance of a greater number of equity securities to the investors. In August 2021, the 2020 Bridge Notes were amended to
provide that, in addition to the foregoing conversion terms, in the event that the Company consummates an initial public offering of
its common stock prior to the occurrence of a Qualified Financing, a Change of Control or the Maturity (all as defined in the 2020 Bridge
Note), then the outstanding principal amount and, at the election of the Company, all accrued but unpaid interest thereon as of the date
of conversion shall be converted into shares of common stock as of immediately prior to the consummation of the initial public offering
at a per share price equal to the lesser of (i) 75% of the per share public offering price and (ii) the quotient resulting
from dividing the $40 million Cap by the Company’s capitalization on a fully diluted basis, as of immediately prior to closing
of the initial public offering.



From March 2021 through April 2021,
we issued unsecured convertible promissory notes in the amount of approximately $0.4 million to accredited investors. These notes were
issued as part of the same offering as the 2020 Bridge Notes, accrue interest at a rate of 3% per annum, and mature on June 1, 2022.





38









The 2020 Bridge Notes, including those issued
from March to April 2021, having aggregate principal amount of approximately $1,987,500, converted into an aggregate of 545,613
shares of our common stock in connection with this offering, based on accrued interest of approximately $58,595 as of November 10,
2021, and a conversion price of $3.75 per share (75% of the initial public offering price per share).



From June 2021 through July 2021, we
issued convertible notes payables for total proceeds of approximately $1.86 million to accredited investors. The notes were issued at
an original issue discount of approximately $0.24 million with principal outstanding of approximately $2.11 million. The notes are unsecured,
have a term of twenty-three months, and accrue interest at a rate of 3% per annum.



In June 2021, we issued a convertible note
payable to our Chief Executive Officer for total proceeds of $0.10 million. The note is unsecured, has a term of twenty-three months,
and accrues interests at a rate of 3% per annum.



In June 2021, we issued convertible notes
payable for total proceeds of approximately $0.23 million. The notes are unsecured, have a term of twenty-three months, and accrue interest
at a rate of 3% per annum.



All
of the convertible notes payableoutstanding at the time of the IPO of $4,384,000 converted to 1,204,160 shares of common stock
on November 10, 2021.



Warrants



On July 1, 2021, the Company issued a warrant
to purchase 50,000 shares of our common stock to a consultant as partial consideration for services provided to the Company and issued
an additional 50,000 warrants to purchase common stock in November 2021. The warrants are exercisable upon issuance, have an exercise
price of $1.04 per share and have a term of five years.



In November 2021, the Company issued warrants
to purchase 172,680 shares of common stock to employees of Think Equity, the underwriters of the IPO. The warrants may be exercised at
any time on or after May 9, 2022, have an exercise price of $6.25 per share and have a term of five years.



Office Lease



The Company leased office space in Newark, California
under a cancelable operating lease agreement, which was terminated in December 2021.



The Company executed a noncancelable operating
lease for approximately 9,091 square feet of office space in Hayward, California in November 2021 as its headquarters. There lease
expires in October 2025 and there is no option to renew for an additional term. The Company is obligated to pay, on a pro-rata basis,
real estate taxes and operating costs related to the premises.



Lease cost recorded during the year ended December 31, 2021 was $49,000.
Rent expense recorded during the year ended December 31, 2020 was $55,000.



We enter into contracts in the normal course
of business with our contract manufacturer and other vendors to assist in the manufacturing of our products and performance of our research
and development activities and other services for operating purposes. These contracts generally provide for termination on notice, and
therefore are cancelable contracts and not included in the table of contractual obligations and commitments.



Critical Accounting Policies and Significant Judgments and Estimates



The preparation of our financial statements in
conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect
the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable,
due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those
estimates.



We believe that the accounting policies described
below involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in
fully understanding and evaluating our financial condition and results of our operations.



Revenue Recognition



The Company recognizes revenue from product sales
in accordance with Financial accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
606, Revenue from Contracts with Customers (“Topic 606”). The standard applies to all contracts with customers, except contracts
that are within scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.





39







Under Topic 606, an entity recognizes revenue
when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects
to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines
are in within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance
obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it
is entitled to in exchange for the goods or services it transfers to the customer. At contract inceptions, once the contract is determined
to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that
are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the
amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is
satisfied.



The Company sells its products direct-to-consumer
and third-party online retailers. Revenue is recognized when control of the promised goods is transferred to the customers or retailer,
in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue
associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue
reversal in the future periods for the expected consideration in the transaction.



Based on the Company’s assessment, it was
determined that there were no contract assets as of December 31, 2021 and 2020 because receivables outstanding are unconditional
and only the passage of time is required before payment of that consideration is due. The Company may receive payments at the onset of
the contract and before goods have been delivered. In such instances, the Company records a deferred revenue liability. The Company recognizes
these contract liabilities as sales after the revenue criteria are met.



The Company relies on third parties to have procedures
in place to detect and prevent credit card fraud, as the Company has exposure to losses from fraudulent charges. The Company records
the losses related to chargebacks as incurred.



The Company has also elected to exclude from
the measurement of the transaction price sales taxes remitted to governmental authorities.



Stock-Based Compensation



We measure all stock options and other stock-based
awards granted to our employees, directors, consultants and other non-employee service providers based on the fair value on the date
of the grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on
a straight-line basis based on the grant date fair value over the associated service period of the award, which is typically the vesting
term. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on grant date
fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition
is probable. Non-employee option awards are measured at the earlier of the commitment date for performance by the counterparty or the
date when the performance is complete, and compensation expense is recognized in the same manner as if we had paid cash for goods or
services.



We classify stock-based compensation expense
in our statement of operations in the same way the award recipient’s payroll costs are classified or in which the award recipients’
service payments are classified.



We use the Black-Scholes option pricing model
to estimate the fair value of stock options on the date of grant. Using the Black-Scholes option pricing model requires management to
make significant assumptions and judgments. We determined these assumptions for the Black-Scholes option-pricing model as discussed below.



| | • | Expected
    Term—The expected term represents the period that the stock-based awards are expected to be outstanding. As we do
    not have sufficient historical experience for determining the expected term of the stock option awards granted, we based our expected
    term for awards issued to employees and non-employees using the simplified method which is presumed to be the midpoint between the
    vesting date and the end of the contracted term.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Risk-Free
    Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant
    for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Expected
    Volatility—Since we do not have a trading history of common stock, the expected volatility was derived from the
    average historical stock volatilities of the common stock of several public companies within the industry that we consider to be
    comparable to our business over a period equivalent to the expected term of the stock-based awards.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Dividend
    Rate—The expected dividend rate is zero as we have not paid and do not anticipate paying any dividends in the foreseeable
    future.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



40







| | • | Fair Value
    of Common Stock—Prior to our initial public offering (“IPO”), the fair value of the shares of common
    stock underlying the stock-based awards was determined by our board of directors with input from management. Because there was no
    public market for our common stock, our board of directors determined the fair value of our common stock at the time of grant of
    the stock-based award by considering a number of objective and subjective factors, including having valuations of the common stock
    performed by a third-party valuation specialist, as further described below.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





As of December 31, 2021, the total compensation
cost related to nonvested service-based awards not yet recognized is $690,000. The weighted-average period over which the nonvested awards
is expected to be recognized is 3.5 years. The aggregate intrinsic value of stock options outstanding as of December 31, 2021 was
$1,163,000, of which $902,000 related to vested options and $261,000 related to unvested options.





Common Stock Valuations



The fair value of the shares of common stock
underlying our stock-based awards prior to our IPO was determined by our board of directors with input from management and contemporaneous
third-party valuations. We believe that our board of directors had the relevant experience and expertise to determine the fair value
of our common stock prior to our IPO. Given the absence of a public trading market of our common stock, and in accordance with the American
Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation,
our board of directors exercised reasonable judgment and considered numerous and subjective factors to determine the best estimate of
the fair value of our common stock at each grant date. These factors include:



| | • | contemporaneous
    valuations of our common stock performed by independent third-party specialists;
| | - | ----------------------------------------------------------------------------------------------------



| | • | the prices,
    rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | • | the prices
    of common or convertible preferred stock sold to third-party investors by us;
| | - | --------------------------------------------------------------------------------------------



| | • | lack of marketability
    of our common stock;
| | - | ----------------------------------------------



| | • | our actual
    operating and financial performance;
| | - | ---------------------------------------------------



| | • | current business
    conditions and projections;
| | - | ------------------------------------------------



| | • | hiring of key
    personnel and the experience of our management;
| | - | -----------------------------------------------------------------



| | • | the history
    of the company and notable milestones;
| | - | ------------------------------------------------------



| | • | our stage of
    development;
| | - | -----------------------------



| | • | likelihood
    of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company given prevailing market
    conditions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | the market
    performance of comparable publicly traded companies; and
| | - | -----------------------------------------------------------------------



| | • | the U.S. and
    global capital market conditions.
| | - | --------------------------------------------------



In valuing our common stock, our board of directors
determined the equity value of our business using the hybrid method with input from management and contemporaneous third-party valuations.
The hybrid method is based upon the probability-weighted value across two scenarios, being (i) successfully consummating an initial
public offering and (ii) alternative scenarios in which an initial public offering is not consummated. The hybrid method can be
a useful alternative to explicitly modeling all probability-weighted expected return scenarios in situations when the company has transparency
into one or more near term exits but is unsure about what will occur if current plans do not materialize. In the first scenario, the
potential exit date, the probability exit value and the likelihood of interim financings were considered. In the second scenario, which
was assigned the residual probability, the potential exit date, the equity volatility, the assumed interest rate, the dividend yield
and equity inflection points at which the allocation of proceeds changes were considered. The valuation method considers the total number
of shares authorized and outstanding, as well as recent issuances of both preferred and common stock.



Application of these approaches involves the
use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding the time to the liquidation
event and volatility. Changes in these estimates and assumptions or the relationships between these assumptions impact our valuations
as of each valuation date and may have a material impact on the valuation of common stock.





41







Following our IPO, the fair value of each share
of underlying common stock will be based on the closing price of our common stock as reported by the Nasdaq Capital Market, or such other
national securities exchange that our common stock is listed on, on the date of grant or as otherwise provided in the proposed 2021 Equity
Incentive Plan. Future expense amounts for any particular period could be affected by changes in our assumptions or market conditions.



Emerging Growth Company Status



We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until December 31,
2026. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements
that are applicable to other public companies that are not emerging growth companies. These exemptions include:



● reduced disclosure about our executive compensation arrangements;



● no non-binding stockholder advisory votes on executive compensation
or golden parachute arrangements; and



● exemption from the auditor attestation requirement in the
assessment of our internal control over financial reporting.





We have taken advantage of reduced reporting requirements
in this Report and may continue to do so until such time that we are no longer an emerging growth company. We will remain an “emerging
growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.07
billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of
our IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years
or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Section 107 of
the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised
accounting standards. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will
adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.





In addition, we are also a smaller reporting
company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth
company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take
advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates
is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than
$100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is
less than $700.0 million measured on the last business day of our second fiscal quarter.



Derivative Instruments



The Company issued certain convertible notes
in 2018, 2019, 2020 and 2021, which notes contained put options. These embedded put options are not considered clearly and closely related
to the debt host and result in embedded derivatives that must be bifurcated and accounted for separately from the debt host. Accordingly,
the Company has recorded these as a derivative financial liability.



Derivative financial liabilities are initially
recorded at fair value, with gains and losses arising for changes in fair value recognized in the statement of operations at each period
end while such instruments are outstanding. The liability is being valued using a probability weighted expected return model. The derivative
financial liability related to convertible notes issued in 2018 and 2019 was derecognized upon conversion of the convertible notes in
2019 to preferred stock. The derivative financial liability related to convertible notes issued in 2020 and 2021 was derecognized upon
conversion of the convertible notes to common stock in 2021.



Recent Accounting Pronouncements



For a description of recent accounting pronouncements,
see Note 2 of the notes to our audited financial statements for the year ended December 31, 2021, included elsewhere in this Form 10-K.



Item 7A – Quantitative
and Qualitative Disclosures About Market Risk



Not applicable.



Item 8 - Financial
Statements and Supplementary Data



See the financial statements included elsewhere
in this Report beginning at page F-1, which are incorporated herein by reference.





42







Item 9 – Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure



None.



Item 9A. Controls and
Procedures



Evaluation of Disclosure Controls and Procedures



Our Chief Executive Officer and our Chief Financial
Officer, after evaluating our “disclosure controls and procedures” (as defined in Securities Exchange Act of 1934 (the “Exchange
Act”) Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this Report (the “Evaluation Date”),
have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in Securities and Exchange Commission rules and forms, and to ensure that information required to be
disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, where appropriate, to allow timely decisions regarding required disclosure.



Management Report on Internal Control over
Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. GAAP. Management assessed our internal control over financial reporting as of August 31,
2021, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included
evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting
policies, and our overall control environment.



Based on this assessment, management has concluded
that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with
U.S. GAAP. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.



Inherent Limitations on Effectiveness of Controls



Our management, including the CEO and CFO, does
not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors
and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that
the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks.
Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies
or procedures.



Changes in Internal Control over Financial
Reporting



No change in the Company’s internal controls
over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the Company’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



Item 9B - Other Information



None.



Item 9C – Disclosure
Regarding Foreign Jurisdictions that Prevent Inspections



Not applicable.





43







PART III



Item 10 – Directors, Executive Officers,
and Corporate Governance



Information required by Item 10 is incorporated
by reference from the Company’s definitive proxy statement, to be filed with the Commission within 120 days after the fiscal year
ended December 31, 2021.



Item 11 – Executive Compensation



Information required by Item 11 is incorporated
by reference from the Company’s definitive proxy statement, to be filed with the Commission within 120 days after the fiscal year
ended December 31, 2021.



Item 12 - Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters



Information required by Item 12 is incorporated
by reference from the Company’s definitive proxy statement, to be filed with the Commission within 120 days after the fiscal year
ended December 31, 2021.



Item 13 – Certain Relationships and
Related Transactions, and Director Independence



Information required by Item 13 is incorporated
by reference from the Company’s definitive proxy statement, to be filed with the Commission within 120 days after the fiscal year
ended December 31, 2021.



Item 14 – Principal Accounting Fees
and Services



Information required by Item 14 is incorporated
by reference from the Company’s definitive proxy statement, to be filed with the Commission within 120 days after the fiscal year
ended December 31, 2021.





44







PART IV



Item 15 – Exhibits,
Financial Statement Schedules



(a)



| | (1) | Financial Statements.
                                            The  financial statements are included in this Annual Report on Form 10-K
                                            beginning on page F-1.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Financial Statement
                                            Schedules. All financial statement schedules have been omitted since the information is either
                                            not applicable or required or was included in the financial statements or notes included
                                            in this Annual Report on Form 10-K.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | List of Exhibits required
                                            by Item 601 of Regulation S-K. See part (b) below.
| | --- | ------------------------------------------------------------------------------------------------------------------------



(b)       Exhibits.
The following exhibits are filed or furnished with this report.



EXHIBIT INDEX



|Exhibit
    number |  |  | Exhibit description                                                                                                        | Incorporated
    by Reference (Form Type) |  | Filing
    Date |  | Filed
    herewith
|------------------ |  |  | -------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- |  | --------------- |  | ------------------
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|3.1                |  |  | Certificate
    of Incorporation, dated June 3, 2021.                                                                      | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|3.2                |  |  | Certificate
    of Amendment of Certificate of Incorporation, dated August 31, 2021.                                       | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|3.3                |  |  | Amended
    and Restated Certificate of Incorporation, dated November 12, 2021.                                            | 8-K                                       |  | 11/15/21        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|3.4                |  |  | Bylaws,
    dated June 7, 2021.                                                                                            | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|3.5                |  |  | Amended
    and Restated Bylaws, dated November 12, 2021.                                                                  | 8-K                                       |  | 11/15/21        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|4.1                |  |  | Specimen Stock Certificate.                                                                                                | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|4.2                |  |  | Form of
    Representative’s Warrant.                                                                                      | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|4.3                |  |  | Warrant
    to Purchase Common Stock issued to Hannover International, Inc., dated July 1, 2021.                           | S-1A                                      |  | 10/29/2021      |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|4.4                |  |  | Description of Securities.                                                                                                 |                                           |  |                 |  | X                 
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.1               |  |  | Series Seed-1,
    Seed-2, Seed-3 and Seed-4 Preferred Stock Investment Agreement, dated July 16, 2019.                    | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.2               |  |  | First
    Amendment to Series Seed-1, Seed-2, Seed-3 and Seed-4 Preferred Stock Investment Agreement, dated July 18, 2019. | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.3(a)#           |  |  | 2017
    Equity Incentive Plan, as amended, dated April 13, 2017.                                                          | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.3(b)#           |  |  | Form Agreements
    under 2017 Equity Incentive Plan.                                                                      | S-1                                       |  | 8/3/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.4(a)#           |  |  | 2021
    Equity Incentive Plan, dated August 7, 2021.                                                                      | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.4(b)#           |  |  | Form Agreements
    under 2021 Equity Incentive Plan.                                                                      | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.5#              |  |  | Form of
    Restricted Stock Purchase Agreement.                                                                           | S-1A                                      |  | 9/9/2021        |  |                   
|                   |  |  |                                                                                                                            |                                           |  |                 |  |                   
|10.6#              |  |  | Form of
    Indemnification Agreement for directors and officers.                                                          | S-1A                                      |  | 9/9/2021        |  |                   





45







|10.7   |  |  | Form of
    Note Purchase Agreement, dated June 17, 2020, and Unsecured Convertible Promissory Note.                                                                                  | S-1  |  | 8/3/2021   |  |  
|------ |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  | ---------- |  | -
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.8   |  |  | Form of
    Unsecured Convertible Promissory Note.                                                                                                                                    | S-1  |  | 8/3/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.9   |  |  | Form of
    Note Amendment Agreement, dated October 14, 2020                                                                                                                          | S-1  |  | 8/3/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.10† |  |  | Master
    Services Agreement, between Tivic Health Systems, Inc. and Extron Logistics LLC, dated April 27, 2019.                                                                     | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.11† |  |  | Letter
    Agreement, between Tivic Health Systems, Inc. and Future Electronics Corp., dated April 6, 2020.                                                                           | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.12† |  |  | Form of
    United States Special Product Agreement for Bonded Inventory, between Tivic Health Systems, Inc. and Future Electronics Corp.                                             | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.13  |  |  | Form of
    Note Purchase Agreement, dated June 17, 2021, and Unsecured Convertible Promissory Note.                                                                                  | S-1  |  | 8/3/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.14  |  |  | Form of
    Unsecured Convertible Promissory Note.                                                                                                                                    | S-1  |  | 8/3/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.15  |  |  | Form of
    (OID) Unsecured Convertible Promissory Note.                                                                                                                              | S-1  |  | 8/3/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.16# |  |  | Executive
    Offer Letter, between Tivic Health Systems, Inc. and Briana Benz, dated July 29, 2021.                                                                                  | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.17# |  |  | Restricted
    Stock Purchase Agreement, between Tivic Health Systems, Inc. and Briana Benz, dated July 30, 2021.                                                                     | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.18# |  |  | Executive
    Offer Letter, between Tivic Health Systems, Inc. and Jennifer Ernst, dated July 31, 2021.                                                                               | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.19  |  |  | Form of
    Note Amendment Agreement.                                                                                                                                                 | S-1A |  | 9/9/2021   |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.20  |  |  | Revolving
    Line of Credit Note, between the Company and Tethered LLC, dated October 28, 2021.                                                                                      | S-1A |  | 10/29/2021 |  |  
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|10.21  |  |  | Sublease Agreement,
    between the Company and Czarnowski Display Services, Inc., dated November 17, 2021.                                                                           |      |  |            |  | X
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|23.1   |  |  | Consent of Rosenberg Rich Baker Berman, P.A.                                                                                                                                          |      |  |            |  | X
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|31.1   |  |  | Certification of Chief
    Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002   |      |  |            |  | X
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|31.2   |  |  | Certification of Chief
    Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002   |      |  |            |  | X
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  
|32.1   |  |  | Certification of Chief
    Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 |      |  |            |  | X
|       |  |  |                                                                                                                                                                                       |      |  |            |  |  



| | # | Indicates management contract
    or compensatory plan.
| | - | -------------------------------------------------------



| | † | Portions of the exhibit,
    marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive
    harm if publicly disclosed.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 16. Form 10-K Summary



None.





46







SIGNATURES



Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



March 31, 2022



| | TIVIC HEALTH SYSTEMS, INC.
| | --------------------------
| |                           
| | By:                       
| |                           
| |                           



Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.



|NAME                   |  | TITLE                                             |  | DATE              
|---------------------- |  | ------------------------------------------------- |  | ------------------
|                       |  |                                                   |  |                   
|/s/
    Jennifer Ernst |  | Chief
    Executive Officer (Principal Executive) |  | March 31,
    2022
|Jennifer Ernst         |  |                                                   |  |                   
|                       |  |                                                   |  |                   
|/s/
    Briana Benz    |  | Chief
    Financial Officer                       |  | March 31,
    2022
|Briana Benz            |  | (Principal Financial
    and Accounting Officer)  |  |                   
|                       |  |                                                   |  |                   
|/s/
    Sheryle Bolton |  | Chair
    of the Board of Directors               |  | March 31,
    2022
|Sheryle
    Bolton     |  |                                                   |  |                   
|                       |  |                                                   |  |                   
|/s/
    Karen Drexler  |  | Director                                          |  | March 31,
    2022
|Karen
    Drexler      |  |                                                   |  |                   
|                       |  |                                                   |  |                   
|/s/
    Dean Zikria    |  | Director                                          |  | March 31,
    2022
|Dean Zikria            |  |                                                   |  |                   





47









TIVIC HEALTH SYSTEMS, INC.



INDEX TO FINANCIAL STATEMENTS



|                                                                           | Page     
|-------------------------------------------------------------------------- | ---------
|Report
    of Independent Registered Public Accounting Firm (PCAOB ID #89) | F-2      
|                                                                           |          
|Balance
    Sheets                                                         | F-3      
|                                                                           |          
|Statements
    of Operations and Comprehensive Loss                        | F-4      
|                                                                           |          
|Statements
    of Shareholders’ Equity                                     | F-5      
|                                                                           |          
|Statements
    of Cash Flows                                               | F-6      
|                                                                           |          
|Notes
    to Financial Statements                                          | F-7 - F24





F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors of Tivic Health Systems, Inc.



Opinion on the Financial Statements



We have audited the accompanying balance sheets
of Tivic Health Systems, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of
operations, stockholder’s equity (deficit), and cash flows for the years ended December 31, 2021 and 2020, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of Tivic Health Systems, Inc. as of December 31, 2021 and 2020, and the results of their
operations and their cash flows for the years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted
in the United States of America.



Basis for Opinion



These consolidated financial statements are the
responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to Tivic Health Systems, Inc. in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. Tivic Health Systems, Inc. is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.



/s/ Rosenberg Rich Baker Berman, P.A.



We have served as Tivic Health Systems, Inc. auditor
since 2020.



Somerset, New Jersey

March 31, 2022





F-2







Tivic Health Systems, Inc.

Balance Sheets

December 31, 2021 and 2020

(in thousands, except share and
per share data)



|                                                                                                                                                                                                                             |  | December 31,
2021 |         |   | December 31,
2020 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | -
|ASSETS                                                                                                                                                                                                                       |  |                   |         |   |                   |  
|Current assets                                                                                                                                                                                                               |  |                   |         |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                    |  | $                 | 12,975  |   |                   | $
|Accounts receivable, net                                                                                                                                                                                                     |  |                   | 51      |   |                   |  
|Inventory, net                                                                                                                                                                                                               |  |                   | 429     |   |                   |  
|Prepaid expenses and other current assets                                                                                                                                                                                    |  |                   | 834     |   |                   |  
|Total current assets                                                                                                                                                                                                         |  |                   | 14,289  |   |                   |  
|Property and equipment, net                                                                                                                                                                                                  |  |                   | 11      |   |                   |  
|Right-of-use assets, operating lease                                                                                                                                                                                         |  |                   | 687     |   |                   |  
|Other assets                                                                                                                                                                                                                 |  |                   | 49      |   |                   |  
|Total assets                                                                                                                                                                                                                 |  | $                 | 15,036  |   |                   | $
|                                                                                                                                                                                                                             |  |                   |         |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                                               |  |                   |         |   |                   |  
|Current liabilities                                                                                                                                                                                                          |  |                   |         |   |                   |  
|Accounts payable                                                                                                                                                                                                             |  | $                 | 789     |   |                   | $
|Other accrued expenses                                                                                                                                                                                                       |  |                   | 267     |   |                   |  
|Operating lease liability, current                                                                                                                                                                                           |  |                   | 163     |   |                   |  
|Notes payable, current                                                                                                                                                                                                       |  |                   | -       |   |                   |  
|Conversion feature derivative liability                                                                                                                                                                                      |  |                   | -       |   |                   |  
|Total current liabilities                                                                                                                                                                                                    |  |                   | 1,219   |   |                   |  
|Operating lease liability                                                                                                                                                                                                    |  |                   | 545     |   |                   |  
|Notes payable                                                                                                                                                                                                                |  |                   | -       |   |                   |  
|Convertible notes payable, net of debt discount                                                                                                                                                                              |  |                   | -       |   |                   |  
|Total liabilities                                                                                                                                                                                                            |  |                   | 1,764   |   |                   |  
|Stockholders’ equity (deficit)                                                                                                                                                                                               |  |                   |         |   |                   |  
|Convertible preferred stock, $0.0001 par value, none and 10,113,621 shares authorized at December 31, 2021 and 2020, respectively; 0and 8,908,600 shares issued and outstanding at December 31, 2021 and 2020, respectively  |  |                   | -       |   |                   |  
|Preferred stock, $0.0001 par value, 10,000,000 and none shares authorized at December 31, 2021 and 2020, respectively, no shares issued and outstanding at December 31, 2021 and 2020, respectively                          |  |                   | -       |   |                   |  
|Common stock, $0.0001 par value, 200,000,000 and 25,000,000 shares authorized at December 31, 2021 and 2020, respectively; 9,715,234 and 2,324,479 shares issued and outstanding at December 31, 2021 and 2020, respectively |  |                   | 1       |   |                   |  
|Additional paid in capital                                                                                                                                                                                                   |  |                   | 32,817  |   |                   |  
|Accumulated deficit                                                                                                                                                                                                          |  |                   | (19,546 | ) |                   |  
|Total stockholders’ equity (deficit)                                                                                                                                                                                         |  |                   | 13,272  |   |                   |  
|Total liabilities and stockholders’ equity (deficit)                                                                                                                                                                         |  | $                 | 15,036  |   |                   | $



The accompanying notes are an integral part of
these financial statements.





F-3







Tivic Health Systems,
Inc.

Statements of Operations and Comprehensive Loss

Years Ended December 31, 2021 and 2020

(in thousands, except share and
per share data)



|                                                      |  | Years
    Ended December 31, |          
|----------------------------------------------------- |  | ---------------------------- | ---------
|                                                      |  | 2021                         |          
|Revenue                                               |  | $                            | 1,166    
|Cost of sales                                         |  |                              | 1,295    
|Gross loss                                            |  |                              | (129     
|Operating expenses:                                   |  |                              |          
|Research and development                              |  |                              | 878      
|Sales and marketing                                   |  |                              | 1,696    
|General and administrative                            |  |                              | 2,929    
|Total operating expenses                              |  |                              | 5,503    
|Loss from operations                                  |  |                              | (5,632   
|Other income (expense):                               |  |                              |          
|Interest expense                                      |  |                              | (1,823   
|Change in fair value of derivative liabilities        |  |                              | 436      
|Loss on extinguishment of debt                        |  |                              | (1,636   
|Other income                                          |  |                              | 162      
|Total other income (expense)                          |  |                              | (2,861   
|Loss before provision for income taxes                |  |                              | (8,493   
|Provision for income taxes                            |  |                              | 1        
|Net loss and comprehensive
    loss                   |  | $                            | (8,494   
|Net loss per share - basic and diluted                |  | $                            | (2.43    
|Weighted-average number of shares - basic and diluted |  |                              | 3,493,267



The accompanying notes are an integral part of
these financial statements.





F-4







Tivic Health Systems, Inc.

Statements of Stockholders’ Equity (Deficit)

Years Ended December 31, 2021 and 2020

(in thousands except share and
per share data)



|                                                                         |  | Convertible         |            |   |                  |   |    |         |  |  | Additional  |  |  |               |   |  | Total   |  
|------------------------------------------------------------------------ |  | ------------------- | ---------- | - | ---------------- | - | -- | ------- |  |  | ----------- |  |  | ------------- | - |  | ------- | -
|                                                                         |  | Preferred
    Stock |            |   | Common
    Stock |   |    | Paid-in |  |  | Accumulated |  |  | Stockholders' |  
|                                                                         |  | Shares              |            |   | Amount           |   |    | Shares  |  |  | Amount      |  |  | Capital       |   |  | Deficit |  
|Balances
    at January 1, 2020                                          |  |                     | 8,901,475  |   |                  |   | 1  |         |  |  | 2,300,000   |  |  |               | - |  |         |  
|Issuance
    of convertible preferred 
    stock,  net of issuance costs |  |                     | 7,125      |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Exercise
    of stock options                                            |  |                     | -          |   |                  |   | -  |         |  |  | 24,479      |  |  |               | - |  |         |  
|Stock-based
    
    compensation expense                                |  |                     | -          |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Net
    loss                                                             |  |                     | -          |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Balances
    at December
    31, 2020                                    |  |                     | 8,908,600  |   |                  | $ | 1  |         |  |  | 2,324,479   |  |  | $             | - |  |         | $
|Conversion
    of convertible preferred 
    stock to common stock       |  |                     | (8,908,600 | ) |                  |   | (1 | )       |  |  | 2,227,116   |  |  |               | - |  |         |  
|Conversion
    of convertible notes
    payable to common stock          |  |                     |            |   |                  |   |    |         |  |  | 1,204,160   |  |  |               | - |  |         |  
|Issuance
    of common stock, net of 
    issuance costs                 |  |                     |            |   |                  |   |    |         |  |  | 3,562,500   |  |  |               | 1 |  |         |  
|Exercise
    of stock options                                            |  |                     | -          |   |                  |   | -  |         |  |  | 396,979     |  |  |               | - |  |         |  
|Issuance
    of warrants                                                 |  |                     | -          |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Stock-based
    compensation expense                                     |  |                     | -          |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Net
    loss                                                             |  |                     | -          |   |                  |   | -  |         |  |  | -           |  |  |               | - |  |         |  
|Balances
    at December
    31, 2021                                    |  |                     | 0          |   |                  | $ | 0  |         |  |  | 9,715,234   |  |  | $             | 1 |  |         | $



The accompanying notes are an integral part of
these financial statements.





F-5







Tivic Health Systems, Inc.

Statements of Cash Flows

Years Ended December 31, 2021 and 2020

(in thousands)



|                                                                                 |  | Years Ended December 31, |       
|-------------------------------------------------------------------------------- |  | ------------------------ | ------
|                                                                                 |  | 2021                     |       
|Cash flows from operating activities                                             |  |                          |       
|Net loss                                                                         |  | $                        | (8,494
|Adjustments to reconcile net loss to net cash used in operating activities:      |  |                          |       
|Stock based compensation                                                         |  |                          | 57    
|Depreciation                                                                     |  |                          | 8     
|Change in fair value of derivative liabilities                                   |  |                          | (436  
|Amortization of debt discount                                                    |  |                          | 1,747 
|Loss on extinguishment of debt                                                   |  |                          | 1,636 
|Amortization of right-of-use asset                                               |  |                          | 16    
|Noncash interest                                                                 |  |                          | 76    
|Forgiveness of PPP loan                                                          |  |                          | (157  
|Issuance of common stock warrant                                                 |  |                          | 280   
|Accounts receivable allowances                                                   |  |                          | 66    
|Reserve for inventory obsolescence                                               |  |                          | (8    
|Changes in operating assets and liabilities:                                     |  |                          |       
|Accounts receivable                                                              |  |                          | (66   
|Inventory                                                                        |  |                          | (181  
|Prepaid expenses and other current assets                                        |  |                          | (707  
|Accounts payable                                                                 |  |                          | 419   
|Accrued expenses                                                                 |  |                          | 128   
|Lease liabilities                                                                |  |                          | 4     
|Net cash used in operating activities                                            |  |                          | (5,612
|Cash flows from financing activities                                             |  |                          |       
|Proceeds from notes payable borrowings                                           |  |                          | -     
|Repayment of notes payable borrowings                                            |  |                          | (19   
|Proceeds from convertible notes payable borrowings                               |  |                          | 2,513 
|Proceeds from convertible notes payable borrowings – related party               |  |                          | 100   
|Proceeds from exercise of stock options                                          |  |                          | 62    
|Proceeds from issuance of common stock, net of issuance costs                    |  |                          | 14,887
|Proceeds from issuance of convertible preferred stock, net of issuance costs     |  |                          | -     
|Net cash provided by financing activities                                        |  |                          | 17,543
|Net increase (decrease) in cash and cash equivalents                             |  |                          | 11,931
|Cash and cash equivalents                                                        |  |                          |       
|Beginning of period                                                              |  |                          | 1,044 
|End of period                                                                    |  | $                        | 12,975
|                                                                                 |  |                          |       
|Supplemental disclosures of cash flow information                                |  |                          |       
|Cash paid for income tax                                                         |  | $                        | 1     
|Cash paid for interest                                                           |  | $                        | -     
|Supplemental disclosure on noncash financing activities                          |  |                          |       
|Issuance of conversion feature derivative liability                              |  | $                        | 1,355 
|Conversion of convertible notes payable and accrued interest to common stock     |  | $                        | 4,384 
|Conversion of convertible preferred stock to common stock                        |  | $                        | 1     
|Reclassify conversion feature derivative liability to additional paid in capital |  | $                        | 1,636 
|Issuance of common stock warrant                                                 |  | $                        | 328   
|Recognition of right-of-use asset and operating lease liability                  |  | $                        | 704   



The accompanying notes are an integral part of
these financial statements.





F-6









Tivic Health Systems, Inc.

Notes to Financial Statements

December 31, 2021 and 2020



(in thousands except share and
per share data)



|1. | Formation
    and Business of the Company
|-- | -----------------------------------------



Tivic Health Systems, Inc. (the
 “Company”), was incorporated in the state of California on September 22, 2016 for the purpose of developing and
commercializing microcurrent therapy solutions to address inflammation. The Company's primary product, ClearUP, is a medical device
intended to relieve sinus and nasal inflammation. The Company is headquartered in Hayward, California.



Effective as of June 7, 2021,
the Company reincorporated as a Delaware corporation, which included establishment of $0.0001 par value for convertible preferred stock
and common stock. The financial statements have been retroactively adjusted as if the change in corporation status occurred on January 1,
2020.



The Company has experienced losses
and negative cash flows from operations. During the year ended December 31, 2021, the Company incurred a net loss of $8,494 and
used $5,612 of cash for operations. At December 31, 2021, the Company had an accumulated deficit of $19,546. Cash and cash equivalents
at December 31, 2021 were $12,975. Management expects to incur substantial additional operating losses for at least the next two
years to expand its markets, complete development of new products, obtain regulatory approvals, launch and commercialize our products
and continue research and development programs. The Company believes it has adequate cash and financial resources to operate for at least
the next twelve months from the date of issuance of these financial statements.



Our future capital requirements will depend upon many factors, including
without limitation progress with developing, manufacturing and marketing our technologies, the time and costs involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements,
marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions
in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase
orders for our products and services from customers currently identified in our sales pipeline as well as new customers. We also will
be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including our planned research
and development efforts, will require significant uses of working capital. There can be no assurance that we will generate revenue and
cash as expected in our current business plan. We may seek additional funds through equity or debt offerings and/or borrowings under additional
notes payable, lines of credit or other sources. We do not know whether additional financing will be available on commercially acceptable
terms or at all, when needed. If adequate funds are not available or are not available on commercially acceptable terms, our ability to
fund our operations, support the growth of our business or otherwise respond to competitive pressures could be significantly delayed or
limited, which could materially adversely affect our business, financial conditions, or results of operations.



|2. | Summary of Significant
    Accounting Policies
|-- | ----------------------------------------------



Basis of Presentation



The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. The accompanying financial statements do not include any
adjustment that might be necessary if the Company is unable to continue as a going concern.



Reverse Stock Split



In August 2021, the Company’s
Board of Directors and stockholders approved an amendment to the Company’s certificate of incorporation to effect a 1-for-4 reverse
stock split of the issued and outstanding shares of the Company’s common stock which was effected on August 31, 2021. The
par value of the common stock was not adjusted as a result of the reverse stock split. Accordingly, all common stock, convertible preferred
stock conversion ratios, stock options and related per share amounts in these audited annual financial statements have been retroactively
adjusted for all periods presented to give effect to the reverse stock split.



Use of Estimates



The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the
reporting period. Actual results could differ materially from those estimates. The Company evaluates its estimates and assumptions on
an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances
dictate.



Fair Value of Financial Instruments



The Company discloses and recognizes
the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in
an orderly transaction between market participants at the reporting date. The hierarchy gives the highest priority to valuations based
upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to
valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three
levels of the fair value hierarchy as follows:





F-7







Level 1     Inputs
that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
at the measurement date;



Level 2     Inputs
other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that
are not considered to be active;



Level 3     Inputs
are unobservable in which there is little or no market data available, which require the reporting entity to develop its own assumptions
that are unobservable.



Assets and liabilities measured at
fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The
Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management
to make judgments and consider factors specific to the asset or liability.



Cash and Cash Equivalents



The Company considers all highly liquid
investments with original maturities of three months or less at date of purchase to be cash equivalents. As of December 31, 2021
and 2020, cash equivalents was $12,793 and $639, respectively.



Accounts Receivable



Trade accounts receivable are recorded
at the invoiced amount, net of allowances for doubtful accounts and returns and warranty reserves. The allowance for doubtful accounts
is based on our assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for doubtful
accounts by considering the age of each outstanding invoice, each customer’s expected ability to pay, and the collection history
with each customer, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible
are charged against the allowance for doubtful accounts when identified. As of December 31, 2021 and 2020, the allowance for doubtful
accounts activity was $82 and $5, respectively. As of December 31, 2021 and 2020, the reserve for sales returns was $16 and $31,
respectively.





Inventory



Inventories are stated at the lower
of cost or net realizable value, with cost determined on a first-in, first-out (FIFO) basis. Inventories are reviewed periodically to
identify slow-moving inventory based on anticipated sales activity. As of December 31, 2021 and 2020, the reserve for obsolescence
was $0 and $8, respectively.



Property and Equipment



Property and equipment are recorded
at cost net of accumulated depreciation. Depreciation is computed on a straight-line method over the estimated useful lives of the assets,
four years. Depreciation expense was $8 and $8 for the years ended December 31, 2021 and 2020, respectively. Upon retirement or
sale of assets, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected
in operations. Repairs and maintenance costs that do not improve or extend the lives of the respective assets are charged to operations
as incurred.



Impairment of Long-Lived Assets



The Company evaluates its long-lived
assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount
of these asset may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset
to the future undiscounted cash flows the asset is expected to generate over its remaining life. When indications of impairment are present
and the estimated undiscounted future cash flows from the use of these assets is less than the assets’ carrying value, the related
assets will be written down to fair value. There were no impairments of the Company’s long-lived assets for the periods presented.



Derivative Instruments



The Company issued certain convertible
notes in 2020 and 2021 which contained put options. These embedded put options are not considered clearly and closely related to the
debt host and result in embedded derivatives that must be bifurcated and accounted for separately from the debt host. Accordingly, the
Company has recorded these as a derivative financial liability.





F-8







Derivative financial liabilities are
initially recorded at fair value, with gains and losses arising for changes in fair value recognized in the statement of operations at
each period end while such instruments are outstanding. The liability is being valued using a probability weighted expected return model.
The convertible notes issued in 2020 and 2021 were derecognized upon conversion of the convertible notes in 2021. See Note 8 for further
discussion of the convertible notes and the embedded derivative liability.



Debt Discounts



Debt discounts and debt issuance costs
incurred in connection with the issuance of debt are capitalized and amortized to interest expense based on the related debt agreements
using the effective-interest method.



Commitments and Contingencies



Liabilities for loss contingencies
arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed
as incurred.



Revenue Recognition



The Company recognizes revenue from
product sales in accordance with Financial accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 606, Revenue from Contracts with Customers (“Topic 606”). The adoption of this guidance did not have a material impact
on the Company’s financial statements. The standard applies to all contracts with customers, except contracts that are within scope
of other standards, such as leases, insurance, collaboration arrangements and financial instruments.



Under Topic 606, an entity recognizes
revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity
expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines
are in within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance
obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it
is entitled to in exchange for the goods or services it transfers to the customer. At contract inceptions, once the contract is determined
to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that
are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the
amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is
satisfied.



The Company sells its products through
direct sales and independent distributors. Revenue is recognized when control of the promised goods is transferred to the customers or
distributor, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services.
Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant
revenue reversal in the future periods for the expected consideration in the transaction.



The Company may offer an extended warranty
to its customers. The extended warranty is considered a separate performance obligation. The Company allocates the transaction price
based on estimated relative standalone selling prices of the promised product and services underlying each performance obligation. The
Company determines standalone selling prices based on the price at which the performance obligation is sold separately. As of December 31,
2021 and 2020, the Company's deferred revenue for unrecognized extended warranties was $12 and $14, respectively, and is included in
 “Other Accrued Expenses” on the accompanying balance sheets.



Based on the Company’s assessment,
it was determined that there were no contract assets as of December 31, 2021 and 2020 because receivables outstanding are unconditional
and only the passage of time is required before payment of that consideration is due. The Company may receive payments at the onset of
the contract and before goods have been delivered. In such instances, the Company records a deferred revenue liability. The Company recognizes
these contract liabilities as sales after the revenue criteria are met. As of December 31, 2021 and 2020, the contract liability
related to the Company’s deferred revenues approximated $3 and $2, respectively, and are included in “Other Accrued Expenses”
on the accompanying balance sheets.



The Company relies on a third party
to have procedures in place to detect and prevent credit card fraud as the Company has exposure to losses from fraudulent charges. The
Company records the losses related to chargebacks as incurred.



The Company has also elected to exclude
from the measurement of the transaction price sales taxes remitted to governmental authorities.





F-9







Sales Tax



Sales tax collected from customers
and remitted to governmental authorities is accounted for on a net basis and therefore, is excluded from net sales.



Shipping and Handling



Shipping and handling fees paid by
customers are recorded within net sales, with the related expenses recorded in cost of sales. Shipping and handling fees paid by customers
in the years ended December 31, 2021 and 2020 were $5 and $6, respectively. Shipping costs for delivery of product to customers
in the years ended December 31, 2021 and 2020 were $90 and $71, respectively.



Product Warranty



The Company offers a one-year limited
warranty on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims
and costs incurred to satisfy those claims. Estimated warranty costs are expensed to cost of sales.



Sales and Marketing Expenses



Sales and marketing expenses are expensed
as incurred and consist primarily of merchandising, customer service and targeted online marketing costs, such as display advertising,
keyword search campaigns, search engine optimization and social media and offline marketing costs such as television, radio and print
advertising. Sales and marketing expenses also include payroll costs and stock-based compensation expense for employees involved in marketing
activities. Sales and marketing expenses are primarily related to growing and retaining the customer base. Advertising and other promotional
costs to market the Company’s products and services amounted to $660 and $688 for the years ended December 31, 2021 and 2020,
respectively.



Research and Development Expenses



Research and development expenses include
costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee
benefits, materials, supplies, depreciation on and maintenance of research equipment, the cost of services provided by outside contractors,
and the allocable portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, and general
support services. All costs associated with research and development are expensed as incurred.



Stock-Based Compensation



The Company accounts for stock-based
compensation arrangements with employees and non-employee consultants using a fair value method which requires the recognition of compensation
expense for costs related to all stock-based payments, including stock options. The fair value method requires the Company to estimate
the fair value of stock-based payment awards to employees and non-employees on the date of grant using an option pricing model.



Stock-based compensation costs are
based on the fair value of the underlying option calculated using the Black-Scholes option-pricing model and recognized as expense on
a straight-line basis over the requisite service period, which is the vesting period. The Company measures equity-based compensation
awards granted to non-employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial
reporting period.



Determining the appropriate fair value
model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term,
risk-free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company-specific historical
and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar
companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected
term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development
and focus on the life science industry. The Company uses the simplified method, which is the average of the final vesting tranche date
and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise
data to provide a reasonable basis upon which to estimate the expected term. The risk-free interest rate is based on a treasury instrument
whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company
has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they
occur.





F-10







Segment Reporting



Operating segments are identified as
components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief
Executive Officer to make decisions with respect to resource allocation and assessment of performance. To date, the Company has viewed
its operations and manages its business as one operating segment.



Net Loss per Common Share



Basic net loss per share is computed
using the “two-class” method which includes the weighted average number of shares of common stock outstanding during the
period and other securities that participate in dividends (a participating security). The Company’s convertible preferred stock
are participating securities as defined by ASC 260-10, Earnings per Share. During the periods where the Company incurs net losses,
the Company allocates no loss to participating securities because these securities have no contractual obligation to share in the losses
of the Company. Under the two-class method, basic net loss per share applicable to common stockholders is computed by dividing the net
loss applicable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per
share is computed similar to basic net loss per share except that the denominator is increased to include the number of additional shares
for the potential dilutive effects of warrants, convertible preferred stock and stock options outstanding during the period calculated
in accordance with the treasury stock method, or the two-class method, whichever is more dilutive. The Company allocates net earnings
on a pari passu (equal) basis to both common and preferred stockholders. Net losses are not allocated to preferred stockholders
as they do not have an obligation to share in the Company’s net losses. For all periods presented, basic and diluted net loss per
share are the same, as any additional share equivalents would be anti-dilutive.



Income Taxes



Income taxes are accounted for under
the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred taxes to the amounts expected to be realized.



The Company recognizes benefits of
uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical
merit, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Company’s
policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.
To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.



Concentration of Credit Risk and
Other Risks and Uncertainties



Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist of cash and cash equivalents and accounts receivable. Cash and
cash equivalents include a checking account held at one financial institution in the United States. At times, such deposits may be in
excess of insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk
exists with respect to the financial institution. The Company has not experienced any losses on its deposits of cash and cash equivalents.
As of December 31, 2021 and 2020, the Company had cash and cash equivalents balances exceeding FDIC insured limits by $12,543 and
$107, respectively.



The Company extends credit to customers
in the normal course of business and performs credit evaluations of its customers. Concentrations of credit risk with respect to accounts
receivable exist to the full extent of amounts presented in the financial statements.



As of December 31, 2021, the Company
had two customers whose accounts receivable balances each totaled more than 10% or more of the Company’s total accounts receivable
(54% and 39%) compared with one such customer at December 31, 2020 (100%).



For the year ended December 31,
2021, the Company had two customers who individually accounted for 10% or more of the Company’s total revenue (22% and 12%) compared
with two customers for the year ended December 31, 2020 (23% and 15%).



COVID-19



In March 2020, the World Health
Organization declared the outbreak of the COVID-19 virus a global pandemic. The pandemic continues to cause major disruptions to businesses
and markets worldwide as the virus spreads or has a resurgence in certain jurisdictions. A number of countries as well as many states
and cities within the United States have implemented measures in an effort to contain the virus, including physical distancing, travel
restrictions, border closures, limitations on public gatherings, work from home and closure of or restrictions on nonessential businesses.
The effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on global
economic conditions remains uncertain.





F-11







Leases



At the inception of an arrangement,
the Company determines whether the arrangement is or contains a lease based on the circumstances present. The Company accounts for a
contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s
economic benefits. The Company determines the initial classification and measurement of its operating right-of-use (“ROU”)
assets and operating lease liabilities at the lease commencement date, and thereafter if modified. The lease term includes any renewal
options that the Company is reasonably assured to exercise. The Company’s policy is to not record leases with a lease term of 12
months or less on its balance sheets. The Company’s only existing lease is for office space.



The ROU asset represents the right
to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The
present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;
otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term.



Lease expense for operating leases
is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating
expense in the statement of operations.



The Company's facility lease contracts
often include lease and non-lease components. The Company has elected the practical expedient offered by the standard to not separate
lease from non-lease components and accounts for them as a single lease component.



The Company has elected, for all classes of underlying assets,
not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is
recognized on a straight-line basis over the lease term.



Recently adopted accounting standards and recently issued
accounting pronouncements



Recently adopted accounting standards:



ASU 2016-02, Leases (Topic 842)



In February 2016, the Financial
Accounting Standards Board (“FASB”) issued ASU 2016-02, which changes how lessees account for leases. For most leases qualified
as operating, the standard requires a liability to be recorded on the balance sheet based on the present value of future lease obligations
with a corresponding right-of-use asset. For leases classified as operating leases, the Company is now required to recognize lease costs
on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Similar to capital leases
under the previous accounting standard, leases are accounted for as finance leases when the relevant criteria are met. On June 3,
2020, the FASB extended the adoption date for all other entities, including emerging growth companies (“EGCs”), as defined
by the SEC, that have elected to defer adoption until the standard is effective for non-public business entities, to annual periods beginning
after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, with early adoption permitted.
The Company adopted the accounting standard update effective January 1, 2021. The adoption of this ASU did not have a material impact
to the Company’s financial statements.



ASU 2019-12 - Simplifying the Accounting for Income Taxes



In December 2019, the FASB issued
ASU 2019-12 which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in
Accounting Standards Codification ("ASC") 740, Income Taxes. Additionally, the ASU simplifies GAAP by amending
the requirements related to the accounting for "hybrid" tax regimes and also by adding the requirement to evaluate when a step
up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction.
Certain of the provisions are to be applied retrospectively with other provisions applied prospectively.



The Company adopted this new ASU effective January 1,
2021. The adoption of this ASU did not have a material impact to the Company’s financial statements.





F-12







Recently issued accounting pronouncements:



ASU 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments and Subsequent Amendments



In June 2016, the Financial Accounting
Standards Board (“FASB”) issued ASU 2016-13 (which was then further clarified in subsequent ASUs), which requires that credit
losses for certain types of financial instruments, including accounts receivable, be estimated based on expected credit losses among other
changes. This guidance is effective for annual and interim periods beginning after December 15, 2019 for SEC filers, December 15,
2020 for public business entities that are not SEC filers, and December 15, 2021 for all other entities, including EGCs that have
elected to defer adoption until the guidance becomes effective for non-public entities, with early adoption permitted. The Company elected
to defer adoption of the ASU as an ECG. The Company is currently evaluating the impact of the accounting standard update on its financial
statements.



ASU 2021-04 - Earnings Per Share
(Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Based Compensation (Topic 718), and Derivatives
and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding
Equity-Classified Written Call Options



In May 2021, the FASB issued ASU
2021-04 which clarified an issuer's accounting for modification or exchanges of freestanding equity-classified written call options that
remain equity classified after modification or exchange. The provisions of ASU No. 2021-04 are effective for annual reporting periods
beginning after December 15, 2021, and interim reporting periods within those annual periods, with early adoption permitted, including
adoption in any interim period for public business entities for periods for which financial statements have not yet been issued or made
available for issuance. This ASU shall be applied on a prospective basis. The Company is currently evaluating the impact of the accounting
standard update on its financial statements.



|3. | Financial Instruments
    and Fair Value Measurements
|-- | -----------------------------------------------------



The Company’s financial instruments
consist of money market funds and conversion right liability. The following tables show the Company’s cash equivalents and conversion
right liability’s carrying value and fair value at December 31, 2021 and 2020:



|                   |  | As of
    December 31, 2021 |       
|------------------ |  | --------------------------- | ------
|                   |  | Carrying
    Amount         |       
|Assets             |  |                             |       
|Money market funds |  | $                           | 12,793
|Total assets       |  | $                           | 12,793



|                                        |  | As of
    December 31, 2020 |    
|--------------------------------------- |  | --------------------------- | ---
|                                        |  | Carrying
    Amount         |    
|Assets                                  |  |                             |    
|Money market funds                      |  | $                           | 639
|Total assets                            |  | $                           | 639
|                                        |  |                             |    
|Liabilities                             |  |                             |    
|Conversion feature derivative liability |  | $                           | 717
|Total liabilities                       |  | $                           | 717



Cash equivalents – Cash equivalents
of $12,793 and $639 as of December 31, 2021 and 2020, respectively, consisted of money market funds. Money market funds are classified
as Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.



Conversion feature derivative
liability – The fair value of the conversion feature derivative liability is derived through the Monte Carlo method and is
based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
The conversion right liability outstanding when the Preferred Stock Series Seed was issued in July 2019 was reclassified
to additional paid-in capital.





F-13







|                                                   |  | Conversion
    Right Liability |       
|-------------------------------------------------- |  | ------------------------------ | ------
|Balance at January 1, 2020                         |  |                                | -     
|Issuance of convertible rights                     |  |                                | 690   
|Changes in fair value                              |  |                                | 27    
|Balance at December 31, 2020                       |  |                                | 717   
|Issuance of convertible rights                     |  |                                | 1,355 
|Changes in fair value                              |  |                                | (436  
|Reclassification to additional paid-in
    capital |  |                                | (1,636
|Balance at December 31, 2021                       |  | $                              | -     



Certain assets and liabilities are
carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer
a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs.



There have been no changes to the valuation
methods utilized by the Company during the years ended December 31, 2021 and 2020. The Company evaluates transfers between levels
at the end of each reporting period. There were no transfers of financial instruments between levels during the years ended December 31,
2021 and 2020.



|4. | Accounts Receivable Factoring
|-- | -----------------------------



The Company entered into an accounts
receivable factoring arrangement with a financial institution (the “Factor”) in May 2020. Pursuant to the terms of the
arrangement, the Company, from time to time, sells to the Factor certain of its accounts receivable balances on a non-recourse basis
for credit approved accounts. During the year ended December 31, 2020, the Company factored accounts receivable in the amount of
$58 for a factored amount of $54. During the year ended December 31, 2021, the Company factored accounts receivable in the amount
of $68 for a factored amount of $61. The fees related to factoring was $7 and $5 for the years ended December 31, 2021 and 2020,
respectively, and recorded in general and administrative expenses. At December 31, 2021 and 2020, the outstanding amount of unpaid
advances to the Factor was $0 and $4, respectively.



|5. | Inventory, net
|-- | --------------



|                              |  | December 31,
    2021 |     |  | December 31,
    2020 |  
|----------------------------- |  | --------------------- | --- |  | --------------------- | -
|Raw materials                 |  | $                     | 281 |  |                       | $
|Work in process               |  |                       | -   |  |                       |  
|Finished goods                |  |                       | 148 |  |                       |  
|Inventory at cost             |  |                       | 429 |  |                       |  
|Less reserve for obsolescence |  |                       | -   |  |                       |  
|Inventory, net                |  | $                     | 429 |  |                       | $



|6. | Commitments
|-- | -----------



The Company leased office space in
Newark, California under a cancelable operating lease agreement, which was terminated in December 2021.



The Company executed a noncancelable
operating lease for approximately 9,091 square feet of office space in Hayward, California in November 2021 as its headquarters.
There lease expires in October 2025 and there is no option to renew for an additional term. The Company is obligated to pay, on
a pro-rata basis, real estate taxes and operating costs related to the premises.



The lease cost for the year ended December 31,
2021 is as follows:



|Operating lease cost  |  | $ | 21 | 
|--------------------- |  | - | -- | 
|Short term lease cost |  |   | 28 | 
|Total lease cost      |  | $ | 49 | 





F-14







Amounts reported in the balance sheet
for leases where the Company is the lessee as of December 31, 2021 are as follows:



|Right-of-use assets,
    operating lease |  | $ | 503  |  
|---------------------------------------- |  | - | ---- | -
|Operating lease liabilities, current     |  | $ | 163  |  
|Operating lease liabilities, non-current |  |   | 545  |  
|Total operating lease liabilities        |  | $ | 708  |  
|Remaining lease term (in years)          |  |   | 3.83 |  
|Discount rate                            |  |   | 6.0  | %



Other information related to leases
for the year ended December 31, 2021 is as follows:



|Cash paid for amounts included in the measurement
    of lease liabilities |  | $ | - | 
|-------------------------------------------------------------------------- |  | - | - | 



Future minimum lease payments remaining
as of December 31, 2021 under the operating lease by fiscal year are as follows:



|Fiscal Year                     |  |   |    
|------------------------------- |  | - | ---
|2022                            |  | $ | 202
|2023                            |  |   | 206
|2024                            |  |   | 210
|2025                            |  |   | 178
|Total minimum lease payments    |  |   | 796
|Less imputed interest           |  |   | (88
|Present value of lease payments |  | $ | 708



Rent expense recorded during the year
ended December 31, 2020 was $55.



At December 31, 2021, there were
no purchase commitments with third-party suppliers.



Contingencies



From time to time, the Company may
have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for
such matters when future expenditures are probable and such expenditures can be reasonably estimated. The Company recorded no liabilities
for contingent matters as of December 31, 2021.



|7. | Notes Payable
|-- | -------------



On April 18, 2020, the Company
applied for a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”), as administered by the U.S. Small Business Administration (the “SBA”). The loan, in the principal amount of
$156, was disbursed by Bank of the West (“Lender”) on May 7, 2020, pursuant to a Paycheck Protection Program Promissory
Note and Agreement (the “Note and Agreement”).



The program was later amended by the
Paycheck Protection Flexibility Act of 2020 whereby debtors were granted a minimum maturity date of the five-year anniversary of the
funding date and a deferral of ten months from the end of the covered period. The PPP Loan bears interest at a fixed rate of 1.00%
per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence after
the sixteen-month anniversary of the funding date. The Company did not provide any collateral or guarantees for the PPP Loan, nor did
the Company pay any facility charge to obtain the PPP Loan. The Note and Agreement provides for customary events of default, including
those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay
the principal of the PPP Loan at any time without incurring any prepayment charges.



All or a portion of the PPP Loan may
be forgiven by the SBA upon application to the Lender by the Company within 10 months after the last day of the covered period. The Lender
will have 90 days to review borrower’s forgiveness application and the SBA will have an additional 60 days to review the Lender’s
decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented
payroll costs, covered rent payments, and covered utilities, and certain covered mortgage interest payments during the twenty-four-week
period beginning on the date of the first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation
of an individual employee earning more than $100, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll
costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100 or less annually
are reduced by more than 25%.  The Company obtained forgiveness of the PPP Loan on May 11, 2021.





F-15









On August 10, 2020, the Company
entered into an agreement with Alliant Insurance Services, Inc. to finance its 2020 to 2021 insurance premiums with First Insurance
Funding Corp. in the amount of $39. The interest rate on the note payable is 4.20% and the note is payable with a down payment at borrowing
of $6 and nine equal monthly instalment payments beginning in September 2020. The outstanding balance as of December 31, 2020
was $19. The note was paid off in 2021.



On October 28, 2021, the Company
entered into a Revolving Line of Credit Note with Tethered LLC (“Tethered”) providing the Company with a $250,000 revolving
line of credit (the “Line of Credit”). The Line of Credit allows the Company to request advances thereunder until December 3,
2022 (the “Maturity Date”). Advances drawn under the Line of Credit bear interest at an annual rate of 6.0%, and each advance
will be payable on the Maturity Date with the interest on outstanding advances payable monthly. The Company may, at its option, prepay
any borrowings under the Line of Credit, in whole or in part at any time prior to the Maturity Date, without premium or penalty. The Company
has not drawn down on the Line of Credit as of December 31, 2021.



|8. | Convertible Notes Payable
|-- | -------------------------



In the year ended December 31,
2020, the Company issued convertible notes payable to various investors for total proceeds of $1,595. The notes are unsecured, have interest
accrued at a rate of 3% per annum and have a term of two years.



In March and April, 2021, the
Company issued convertible notes payable to various investors for total proceeds of $415. The notes are unsecured, have interest accrued
at a rate of 3% per annum and mature on June 1, 2022.



In June 2021, the Company issued
convertible note payable to various investors for total proceeds of $332. The notes are unsecured, have interest accrued at a rate of
3% per annum and mature on June 1, 2023.



In June 2021, the Company issued
convertible notes payable to various investors for $1,592 with original issue discount of $176, and total proceeds of $1,416. The notes
are unsecured, have interest accrued at a rate of 3% per annum and mature on June 1, 2023.



In July 2021, the Company issued
convertible note for $518 with original issue discount of $68, and total proceeds of $450. The note is unsecured, has interest accrued
at a rate of 3% per annum and matures on June 1, 2023. The combined original issue discount for the June and July convertible
notes is $244.



The Notes issued in 2021 and 2020 have
the following terms and conditions for conversion:



Auto Conversion upon Qualified
Financing



Qualified Financing is defined as the
closing of an equity financing undertaken by the Company before the Maturity Date, principally for capital raising purposes, in which
the aggregate amount of gross proceeds (not including cancellation of the indebtedness represented by all Notes and other convertible
securities that will convert) received by the Company is at least $2,000 in the aggregate.



The Notes shall be automatically canceled
on the date of the initial closing of a Qualified Financing, and the outstanding Principal Amount and, at the election of the Company,
all accrued but unpaid interest thereon, shall be automatically converted at a conversion price per share equal to the lesser of:



(x) a Discount Percentage of the
price per share of Qualified Securities sold to the investors in a Qualified Financing of 25%,



and



(y) the quotient of (A) the
Cap value divided by (B) the number of outstanding shares of the Company, on a Fully Diluted Basis, as determined immediately prior
to the Qualified Financing. The Cap value is $40 million.



The conversion shall be deemed to occur
immediately prior to the consummation of the Qualified Financing. In the event of a conversion of the Notes in connection with a Qualified
Financing, the Company may, solely at its option, elect to convert the Notes into Shadow Preferred.



Shadow Preferred means the shares of
a series of Preferred Stock issued in the Qualified Financing, having the identical rights, privileges, preferences and restrictions
as the shares of Qualified Securities, other than with respect to:



|(i) | the per share
    liquidation preference; and
|--- | ---------------------------------------------



|(ii) | the percentage
    of the conversion price to determine the per share dividend rights.
|---- | --------------------------------------------------------------------------------------





F-16







Conversion Upon Change in Control



In the event of a Change in Control
prior to the Maturity Date or prior to the conversion of this Note, the outstanding Principal Amount and, at the election of the Company,
all accrued but unpaid interest thereon, on the date of conversion will be converted, immediately prior to the consummation of the transaction
constituting a Change in Control, into that number of shares of Common Stock, as follows:



At the election of the holders,



(i) the outstanding Principal Amount
and accrued interest will be converted into that number of Preferred Conversion Stock equal to the quotient obtained by dividing
(x) the outstanding principal amount and all accrued interest by (y) the Preferred Conversion Price,





or



(ii)  Holder shall receive an
amount equal to 1.5X the principal amount outstanding. Accrued interest which is not converted into Common Stock shall be paid to Holder
in cash.



Conversion at Maturity



Based on the terms and conditions of
the note, the following would occur at maturity:



The outstanding Principal Amount and
all accrued interest shall convert into Preferred Conversion Stock equal to the quotient obtained by dividing (x) the outstanding
Principal Amount and accrued interest by (y) the Preferred Conversion Price.



The conversion features in the Notes
met the accounting definition of an embedded derivative and required separate accounting. The Company value the embedded derivative on
the Notes using the Monte Carlo simulation method which included significant estimates regarding the expected time to conversion, volatility,
and discount rate. The estimated fair value of these derivatives was recorded as a discount to the Notes and a derivative liability.
The debt discount was amortized to interest expense over the expected term of the Notes. The liability was remeasured to fair value at
year end with the offsetting amount recorded in other income, expense.



On November 10, 2021, upon the
conversion of the convertible notes payable to common stock, the derivative liability associated with the converted notes was marked
to market fair value and reclassified to Additional Paid in Capital. The Company recorded a loss on extinguishment of debt of $1,636
upon conversion of the convertible notes payable.



Convertible notes issued, converted
and outstanding are as follows:



|                                      |  | Convertible
    Notes Payable |       
|------------------------------------- |  | ----------------------------- | ------
|Balance at January 1, 2020            |  |                               | -     
|Issuance of convertible notes payable |  |                               | 1,572 
|Matured                               |  |                               | -     
|Balance at December 31, 2020          |  | $                             | 1,572 
|Issuance of convertible notes payable |  |                               | 2,857 
|Converted to common stock             |  |                               | (4,429
|Balance at December 31, 2021          |  |                               | -     



Debt discount related to convertible
notes are as follows:



|                                                                                            |  | Debt Discount |       
|------------------------------------------------------------------------------------------- |  | ------------- | ------
|Balance at January 1, 2020                                                                  |  |               | -     
|Debt discount recognized                                                                    |  |               | 690   
|Amortized to interest expense                                                               |  |               | (412  
|Balance at December 31, 2020                                                                |  | $             | 278   
|Debt discount recognized                                                                    |  |               | 1,600 
|Amortized to interest expense                                                               |  |               | (1,747
|Reclassified to additional paid-in capital
    upon conversion of convertible notes payable |  |               | (131  
|Balance at December 31, 2021                                                                |  |               | -     





F-17







|9. | Convertible Preferred
    Stock
|-- | -------------------------------



In July 2019, the Company raised
$3,843 by issuing 2,787,854 shares of Series Seed Convertible Preferred Stock. Coincident with the issuance of Series Seed
Preferred Stock, $870 of SAFEs converted to 774,894 shares of Series Seed Preferred Stock and $4,124 of convertible notes, including
accrued interest, converted to 5,338,727 shares of Series Seed Preferred Stock.



The Company is authorized to issue
up to 10,113,621 of convertible preferred stock with $0.0001 par value. 4,000,000 shares have been designated as Series Seed-1 convertible
preferred stock, 774,894 shares have been designated as Series Seed-2 convertible preferred stock, 3,615,580 shares have been designated
as Series Seed-3 convertible preferred stock and 1,723,147 shares have been designated as Series Seed-4 convertible preferred
stock (collectively, “Series Seed Preferred” or “preferred stock“). At December 31, 2020, the Company
had 8,908,600 of Series Seed Preferred issued and outstanding, respectively. In connection with the Initial Public Offering (“IPO”)
on November 10, 2021, all of the Company’s convertible preferred stock outstanding at the time of the IPO automatically converted
into an aggregate of 2,227,116 shares of common stock.



The holders of preferred stock have
the rights, preferences, privileges and restrictions as set forth below:



Dividends:



The holders of preferred stock are
entitled to receive dividends prior to and in preference to any declaration of payment of dividends on common stock, when and if declared
by the Board of Directors. Any additional dividends will be paid ratably to holders of common and preferred stock, with the holders of
preferred stock participating on an as-if converted basis. No dividends have been declared or paid prior to conversion to common stock
in November 2021.



Voting Rights:



The holders of each share of preferred
stock are entitled to voting rights equal to the number of shares of common stock into which the shares could be converted. As long as
2,419,099 shares of preferred stock remain outstanding, the holders of preferred stock, voting together as a class, shall be entitled
to elect two members of the Company’s Board of Directors. The holders of common stock, voting together as a single class, shall
be entitled to elect two members of the Company’s Board of Directors. Remaining members of the Company’s Board of Directors
will be elected by the holders of a majority of the shares of preferred stock and common stock, voting together as a single class.



Liquidation Rights / Redemption
Provision:



In the event of any liquidation, dissolution
or winding up of the Company or a deemed liquidation event, whether voluntary or involuntary, the holders of preferred stock have liquidation
preferences, before any distribution or payment is made to holders of any common stock, an amount per share equal to the original issue
price of $5.6136 for Series Seed-1 preferred stock, $4.4908 for Series Seed-2 preferred stock, $2.3364 for Series Seed-3
preferred stock and $4.6724 for Series Seed-4 preferred stock as adjusted for stock splits, stock dividends, combinations, recapitalizations
and the like, plus any declared but unpaid dividends. If the assets and funds to be distributed among the holders of preferred stock
are insufficient to permit the payment to such holders, then the entire assets and funds of the Company legally available for distribution
will be distributed ratably among the holders of preferred stock in proportion to the preferential amount each such holder is otherwise
entitled to receive.



Upon completion of the payment of the
full liquidation preference of preferred stock, the remaining assets of the Company, if any, shall be distributed ratably to the holders
of preferred stock and common stock on a pari passu basis.



Redemption:



The preferred stock is not redeemable.
Upon certain change in control events that are outside of the Company’s control, including liquidation, sale or transfer of control
of the Company, the preferred stock is contingently redeemable.



Conversion:



Each share of preferred stock is convertible
into shares of common stock, at the option of the holder, at any time after date of issuance. Each share of preferred stock automatically
converts to the number of shares of common stock determined in accordance with the conversion rate upon the earlier of (i) written
consent of a majority of the then outstanding shares of preferred stock, voting together as a single class or (ii) the closing of
a public offering, in which the gross cash proceeds are at least $20,000. At December 31, 2020, the conversion price for each share
of Series Seed-1 preferred stock, Series Seed-2 preferred stock, Series Seed-3 preferred stock and Series Seed-4
preferred stock is $5.6136, $4.4908, $2.3364 and $4.6724, respectively. The conversion price is subject to downward adjustment if the
Company issues options or convertible securities with exercise or conversion terms more favorable than the preferred stock.





F-18







Protective Provisions:



The holders of preferred stock have
certain protective provisions. As long as 2,419.099 of the shares of Series Seed Preferred remain outstanding (as adjusted for any
stock splits, stock dividends, combinations, subdivisions, recapitalizations, reorganizations, reclassifications or the like), the Company
shall not, either directly or by amendment, merger, consolidation, reclassification or otherwise, amend, alter or repeal any provision
of the Company’s Certificate of Incorporation or Bylaws in a manner that would adversely alter the rights, preferences, and privileges
of the Series Seed Preferred without first obtaining approval of the majority of the outstanding shares of Series Seed Preferred.



|10. | Preferred
                                            Stock
|--- | -----------------------------------------------------------



There were no series of preferred stock designated and no
shares issued or outstanding at December 31, 2021 and 2020.



The Company’s board of directors
is authorized, without action by its stockholders, to designate and issue up to 10,000,000 shares of preferred stock in one or more series,
and to fix the voting rights, designations, powers, preferences, the relative, participating, optional or other special rights, if any,
and any qualifications, limitations and restrictions thereof, applicable to the shares of any series of preferred stock that they may
designate in the future.



|11. | Common Stock
|--- | ------------



At December 31, 2021 and 2020,
there were 9,715,234 and 2,324,479 shares issued and outstanding, respectively.



On November 10, 2021, the Company
completed an initial public offering (the “IPO”) of 3,450,000 shares of common stock, at a public offering price of $5.00
per share, including the exercise in full by the underwriters of their option to purchase up to 450,000 additional shares of common stock,
for aggregate gross proceeds of $17,250 and its shares stared trading on The NASDAQ Capital Market under the ticker symbol “TIVC.”
The Company received approximately $14,887 in net proceeds after deducting underwriting discounts and commissions and other offering
expenses payable by the Company. In connection with the closing of the IPO, all of the Company’s outstanding shares of convertible
preferred stock at the time of the IPO automatically converted into 2,227,116 shares of common stock and the outstanding convertible
notes payable borrowings of $4,384,000 converted to 1,204,160 shares of common stock.



Common stockholders are entitled to
dividends if and when declared by the Board of Directors subject to the rights of the preferred stockholders. As of December 31,
2021, no dividends on common stock had been declared by the Company. At December 31, 2021 and 2020, the Company had reserved shares
of common stock for issuance as follows:



|                                                    |  | December 31, |           |  | December 31, | 
|--------------------------------------------------- |  | ------------ | --------- |  | ------------ | 
|                                                    |  | 2021         |           |  | 2020         | 
|Convertible preferred stock outstanding             |  |              | -         |  |              | 
|Warrants to purchase common stock                   |  |              | 272,680   |  |              | 
|Options issued and outstanding                      |  |              | 607,219   |  |              | 
|Shares available for future
    stock option grants |  |              | 707,250   |  |              | 
|Total                                               |  |              | 1,587,149 |  |              | 



|12. | Common Stock Warrants
|--- | ---------------------



In July 2021, the Company entered
into a consulting agreement, pursuant to which 50,000 warrants to purchase common stock were granted and an additional 50,000 warrants
to purchase common stock were granted in November 2021. The warrants are exercisable upon issuance, have an exercise price of $1.04
per share and have a term of five years. The consulting agreement is effective as of February 2021, has a monthly fee of $5 and a
term of two years. The warrant were accounted for as an equity instrument.



The Company estimated the fair value
of warrants granted in July 2021 and November 2021 using the Black-Scholes options valuation model. The fair value of the warrants
of $280 is recognized as a General and Administrative expense and Additional Paid-In Capital.



In November 2021, the Company issued
warrants to purchase 172,680 shares of common stock to employees of Think Equity, the underwriters of the IPO. The warrants may be exercised
at any time on or after May 9, 2022, have an exercise price of $6.25 per share and a term of five years. The warrants were accounted
for as an equity instrument.



The Company estimated the value of the warrants in November 2021 using the Black-Scholes options valuation model. The fair value of the
warrants of $328 is recognized as issuance costs of the common stock issued in the IPO and Additional Paid- In Capital.





F-19







The fair value of the warrants was estimated on the date
of grant using the following assumptions:



|                         |  | 2021               |  
|------------------------ |  | ------------------ | -
|Expected life (in years) |  | 5.0                |  
|Expected volatility      |  | 50.29%
    - 85.37 | %
|Risk-free interest rate  |  | 0.89%
    - 1.26   | %
|Dividend yield           |  | 0                  | %



A summary of the Company’s outstanding warrants as
of December 31, 2021 is as follows:



|Class of Shares |  | Number of Warrants |  |  | Exercise Price |  |  | Expiration Date   | 
|--------------- |  | ------------------ |  |  | -------------- |  |  | ----------------- | 
|Common Stock    |  | 50,000             |  |  | $1.07          |  |  | July 1, 2026      | 
|Common Stock    |  | 50,000             |  |  | $1.07          |  |  | November 15, 2026 | 
|Common Stock    |  | 172,680            |  |  | $6.25          |  |  | November 10, 2026 | 



|13. | Equity Incentive Plans
|--- | ----------------------



2021 Equity Incentive Plan



In 2021, the Company adopted the 2021
Equity Incentive Plan (the “2021 Plan”). As of December 31, 2021, there were 937,500 shares of common stock authorized
and 707,250 shares available for issuance under the 2021 Plan. Options granted under the 2021 Plan may be Incentive Stock Options or Non-statutory
Stock Options, as determined by the Compensation Committee of the Company’s board of directors, who is responsible for administering
the 2021 Plan, at the time of grant. Stock Purchase Rights may also be granted under the 2021 Plan. The term shall be no more than ten
years from the date of grant thereof. In the case of an Incentive Stock Option granted to an optionee who, at the time the option is granted,
owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term
of the option shall be five years from the date of grant or such shorter term as may be provided in the option Agreement. To the extent
outstanding awards under the 2021 Plan are forfeited or lapse unexercised, the shares of common stock subject to such awards will be available
for future issuance under the 2021 Plan. The 2021 Plan provides that additional shares will automatically be added to the shares authorized
for issuance under the 2021 Plan on January 1 of each year. The number of shares added each year will be equal to the lesser of:
(i) 5.0% of the outstanding on December 31st of the preceding calendar year or (ii) such number of shares determined by
the board of directors, in its discretion.



In the case of an Incentive Stock Option,
(i) granted to an employee who, at the time of grant of such option, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant; (ii) granted to any other employee, the per share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant. In the case of a Non-statutory Stock Option, the per share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, options may be granted with
a per share exercise price other than as required above pursuant to a merger or other corporate transaction.



The options may include provisions
permitting exercise of the option prior to full vesting. Any unvested shares so purchased shall be subject to repurchase by the Company
at the original exercise price of the option.



2017 Equity Incentive Plan



In 2017, the Company adopted the 2017
Equity Incentive Plan (the “2017 Plan”). On November 10, 2021, the 2017 Plan was replaced by the 2021 Plan, and future
issuances of incentive instruments will be governed by that plan. To the extent that outstanding awards under the 2017 Plan are forfeited
or lapse unexercised, the shares of common stock subject to such awards will no longer be available for future issuance.



The following table summarizes the
option activity for the years ended December 31, 2021 and 2020:



|                              |  |           |          | Options Outstanding | 
|----------------------------- |  | --------- | -------- | ------------------- | 
|                              |  |           |          |                     | 
|                              |  | Shares    |          |                     | 
|                              |  | Available |          |                     | 
|                              |  | For       |          | Number of           | 
|                              |  | Grant     |          | Options             | 
|Balances, January 1, 2020     |  |           | 397,519  |                     | 
|                              |  |           |          |                     | 
|Options granted               |  |           | (246,448 | )                   | 
|Options forfeited / cancelled |  |           | 4,558    |                     | 
|Options expired               |  |           | 1,692    |                     | 
|Options exercised             |  |           | -        |                     | 
|Balances, December 31, 2020   |  |           | 157,321  |                     | 
|Shares reserved for issuance  |  |           | 937,500  |                     | 
|Reserved shares cancelled     |  |           | (182,842 | )                   | 
|Options granted               |  |           | (280,250 | )                   | 
|Options forfeited / cancelled |  |           | 25,784   |                     | 
|Options expired               |  |           | 49,737   |                     | 
|Options exercised             |  |           | -        |                     | 
|Balances, December 31, 2021   |  |           | 707,250  |                     | 
|                              |  |           |          |                     | 
|At December 31, 2021          |  |           |          |                     | 
|Vested and exercisable        |  |           |          |                     | 





F-20







The weighted-average grant date fair
value per share of stock options granted in 2021 and 2020 was $1.95 and $0.44, respectively. The aggregate intrinsic value of options
vested and exercisable as of December 31, 2021 is calculated based on the difference between the exercise price and the current
fair value of our common stock. The intrinsic value of options exercised in 2021 and 2020 was $523 and $1, respectively.



The following table sets forth the status of the Company’s non-vested
restricted common stock awards issued to employees:



|                                    |  | Number of
Shares |          |   | Weighted-
Average
 Grant-Date
 Fair Value 
Per Share |     
|----------------------------------- |  | ---------------- | -------- | - | ---------------------------------------------------- | ----
|Non-vested as of January 1, 2020    |  |                  | 119,792  |   | $                                                    | -   
|Vested                              |  |                  | (119,792 | ) | $                                                    | -   
|Non-vested as of December 31, 2020  |  |                  | -        |   | $                                                    | -   
|Issuance of restricted common stock |  |                  | 112,500  |   | $                                                    | 0.36
|Vested                              |  |                  | (11,719  | ) | $                                                    | 0.36
|Non-vested as of December 31, 2021  |  |                  | 100,781  |   | $                                                    | 0.36



The fair value of restricted stock awards vested during the years ended
December 31, 2021 and 2020 was $17 and $0, respectively.



Stock-Based Compensation



Options generally vest over four years
whereby 25% vest upon the first anniversary of the issuance date and 1/48th per month thereafter. Stock-based compensation expense recognized
during the years ended December 31, 2021 and 2020 was $57 and $78, respectively. As of December 31, 2021, there were total unrecognized
compensation costs of $690 related to share-based payment awards which is expected to be recognized over a weighted-average amortization
period of 3.5 years.



The grant date fair market value of
the shares of common stock underlying stock options has historically been determined by the Company’s Board of Directors. Because
there has been no public market for the Company’s common stock, the Board of Directors exercises reasonable judgment and considers
a number of objective and subjective factors to determine the best estimate of the fair market value, which include valuations performed
by an independent third-party, important developments in the Company's operations, sales of the Company’s convertible preferred
stock, actual operating results, financial performance, the conditions in the life sciences industry, the economy in general, the stock
price performance and volatility of comparable public companies, and the lack of liquidity of the Company's common stock.



The Company estimated the fair value
of share-based payment awards using the Black-Scholes options valuation model. The fair value of share-based payment awards is being
amortized on a straight-line basis over the requisite service period of the awards. The fair value of share-based payment awards was
estimated on the date of grant using the following assumptions:



|                         |  | 2021               |   |  | 2020               |  
|------------------------ |  | ------------------ | - |  | ------------------ | -
|Expected life (in years) |  | 5.50
    – 6.08    |   |  | 5.00
    - 6.05    |  
|Expected volatility      |  | 49.60%
    - 51.57 | % |  | 46.39%
    - 52.10 | %
|Risk-free interest rate  |  | 1.07%
    - 1.33   | % |  | 0.22%
    - 1.42   | %
|Dividend yield           |  | 0                  | % |  | 0                  | %



Expected
Term: The Company uses the simplified method to calculate expected term described in the Securities and Exchange Commission’s
Staff Accounting Bulletin No. 107, which takes into account vesting term and expiration date of the options.



Volatility:Volatility is based on an average of the historical volatilities of comparable publicly traded companies for the expected
term.





F-21







Risk
Free Interest Rate: The risk-free rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding
with the expected term of the option.



Dividend
Yield: The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable
future, and therefore, used an expected dividend yield of zero in the valuation model.



No income tax benefits have been recognized
relating to stock-based compensation expenses and no tax benefits have been realized from exercised stock options.



Total Stock-Based Compensation



Total stock-based compensation expense
recorded related to share-based payment awards was allocated to research and development and general and administrative expense as follows:



|                                   |  | 2021 |    |  | 2020 |  
|---------------------------------- |  | ---- | -- |  | ---- | -
|Cost of sales                      |  | $    | -  |  |      | $
|Research and development           |  |      | 6  |  |      |  
|Sales and marketing                |  |      | 1  |  |      |  
|General and administrative         |  |      | 50 |  |      |  
|Total stock-based
    compensation |  | $    | 57 |  |      | $



|14. | Income Taxes
|--- | ------------



The provision for income taxes differs
from the amount which would result by applying the federal statutory income tax rate to pre-tax loss for the years ended December 31,
2021 and 2020.



A reconciliation of the provision computed
at the federal statutory rate to the provision for income taxes included in the accompanying statements of operations for the Company
is as follows.



|                                           |  | For the Years Ended |    
|------------------------------------------ |  | ------------------- | ---
|                                           |  | December 31, 2021   |    
|Income tax provision at statutory rate     |  |                     | 21 
|State income taxes, net of federal benefit |  |                     | 5  
|Interest expense                           |  |                     | -3 
|Loss on extinguishment of debt             |  |                     | -4 
|Other                                      |  |                     | -  
|Change in valuation allowance              |  |                     | -19
|Effective income tax rate                  |  |                     | 0  



For the years ended December 31,
2021 and 2020, the Company’s effective tax rate is below the federal statutory income tax rate of 21% primarily due to state income
taxes, net of federal benefit and the Company’s position to establish a full valuation allowance on its deferred tax assets.



The tax effects of temporary differences
and carryforwards that give rise to significant portions of the net deferred tax assets are presented below:



|                                 |  | For the Years Ended |       
|-------------------------------- |  | ------------------- | ------
|                                 |  | December 31, 2021   |       
|Deferred tax assets:             |  |                     |       
|Net operating loss carryforwards |  | $                   | 4,172 
|Derivative liability             |  |                     | -     
|Research and development credits |  |                     | 98    
|Lease liability                  |  |                     | 198   
|Other temporary differences      |  |                     | 63    
|Total deferred tax assets        |  |                     | 4,531 
|Valuation allowance              |  |                     | (4,339
|Deferred tax assets recognized   |  |                     | 192   
|Deferred tax liabilities:        |  |                     |       
|Debt discount                    |  |                     | -     
|Right-of-use assets              |  |                     | (192) 
|Total deferred tax liabilities   |  |                     | (192) 
|Net deferred tax assets          |  | $                   | -     





F-22







The Company has recorded a valuation
allowance for its deferred tax assets that it does not believe will be realizable at a more likely than not level based on analysis of
all available sources of taxable income. The valuation allowance increased by $1,616 and $885 for the years ended December 31, 2021
and 2020, respectively due to current and previous year losses and credits claimed.



At December 31, 2021 and 2020,
the Company had federal net operating loss carryforwards of approximately $14,965 and $9,370, respectively, which will begin to expire
in 2036. Approximately $14,520 of federal net operating losses can be carried forward indefinitely. At December 31, 2021 and 2020,
the Company had state net operating loss carryforwards for California of approximately $14,546 and 9,184, respectively, which will begin
to expire in 2031. The Company also has state research and development credit carryforward of approximately $178 at December 31,
2021. The California state credits carryforward indefinitely.



Federal and state tax laws impose substantial
restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for
tax purposes, as defined in Section 382 of the Internal Revenue code. Accordingly, the Company’s ability to utilize these
carryforwards may be limited as a result of such ownership changes. Such a limitation could result in limitation in the use of net operating
losses in future years and possibly a reduction of the net operating losses available. The Company has not performed a study to determine
if any ownership changes have occurred which could potentially limit the utilization of the tax attribute carryforwards.



A reconciliation of the beginning and
ending amount of gross unrecognized tax positions is as follows:



|                                                    |  | For the
    Years Ended |   
|--------------------------------------------------- |  | ----------------------- | --
|                                                    |  | December 
    31, 2021  |   
|Unrecognized tax benefits, beginning of year        |  | $                       | 33
|Additions related to current year tax
    positions |  |                         | 20
|Net deferred tax assets                             |  | $                       | 53



During the years ended December 31,
2021 and 2020, the amount of unrecognized tax benefits increased by $20 and $7, respectively, due to additional research and development
credits generated during those years. As of December 31, 2021 and 2020, the total amount of unrecognized tax benefits was $53 and
33, respectively. The reversal of the uncertain tax benefits would not affect the Company’s effective tax rate to the extent that
it continues to maintain a full valuation allowance against its deferred tax assets.



The Company recognizes interest and
penalties related to unrecognized tax benefits in the provision for income taxes line item in the statements of operations and comprehensive
loss. As of December 31, 2021, and 2020, the Company had not accrued any interest or penalties related to uncertain tax positions.
The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months. The unrecognized tax
benefits may change during the next year for items that arise in the ordinary course of business



The Company files tax returns in U.S.
Federal and state jurisdictions. The tax periods from 2016 to 2021 remain open to examination in all jurisdictions. In addition, any
tax losses that were generated in prior years and carried forward may also be subject to examination by the respective authorities. The
Company is not currently under examination by income tax authorities for federal or state purposes



In March 2020, the Coronavirus
Aid, Relief and Economic Security (CARES) Act (the “Act”) was signed into law. The Act includes provisions relating to refundable
payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum
tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for
qualified improvement property. The Company was able to defer $35 related to certain payroll taxes, received a PPP loan of $156 and an
EIDL grant of $8 during the year ended December 31, 2020. The PPP loan was forgiven in May 2021.





F-23







|15. | Net Loss per Share
|--- | ------------------



| |  |                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The
    following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per
    share for the periods presented due to their antidilutive effect:
| |  |                                                                                                                                                                                                                  



|                                            |  | For the Years Ended December 31, |        
|------------------------------------------- |  | -------------------------------- | -------
|                                            |  | 2021                             |        
|Convertible preferred stock (as converted)  |  |                                  | -      
|                                            |  |                                  |        
|Common stock warrants                       |  |                                  | 272,680
|Common stock options issued and outstanding |  |                                  | 607,219
|Total                                       |  |                                  | 879,899



|                                                      |  | For
    the Years Ended December 31, |          
|----------------------------------------------------- |  | ------------------------------------ | ---------
|                                                      |  | 2021                                 |          
|Net loss                                              |  | $                                    | (8,494   
|Weighted-average number of shares - basic and diluted |  |                                      | 3,493,267
|Net loss per share - basic and diluted                |  | $                                    | (2.43    



|16. | Related Party Transactions
|--- | --------------------------



| | Dr. Subinoy
    Das is both a consultant and investor in the Company. The Company entered into a consulting agreement with Dr. Das on May 1,
    2019 to provide support for research and clinical activities. On December 30, 2020, the Board granted Dr. Das 28,323 Non-statutory
    Stock Options to replace amounts accrued for his services for fiscal years ended December 31, 2020 and 2019. The fair value
    of this grant is $13 and was expensed in the year ended December 31, 2020. The Company recognized a gain on settlement of $117
    which is included in research and development expense for the year ended December 31, 2020. The consulting agreement was terminated
    in 2021.  No amounts were paid to Dr. Das in the year ended December 31, 2021.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In June 2021, the Company issued
a convertible note payable to its Chief Executive Officer for total proceeds of $100. The note is unsecured, has a term of twenty-three
months and accrues interest at a rate of 3% per annum. The note, including accrued interest expense, converted to common stock on November 10,
2021.



The Company engaged a former employee
and investor in December 2021 as a consultant. There were no consulting fees paid in the year ended December 31, 2021. The
Company owed the investor $3 at December 31, 2021.





F-24