Legal Matters

The Company may be involved in legal matters arising in the ordinary course of business including matters involving proprietary technology. While management believes that such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could become involved in litigation may have a material adverse effect on its business and financial condition of comprehensive loss.

Employment Agreements

At June 30, 2026, the Company had an employment agreement in place with one of its key executives. This executive employment agreement provided, among other things, for the payment of up to twenty-four months of severance compensation for terminations under certain circumstances. As of June 30, 2026, with respect to this agreement, the executive’s annual salary and potential severance payments were $475,000 and $1,425,000, respectively.

Mexico Tax Liability

Since 2004, the Company loaned substantial amounts to its Mexico subsidiary Oculus Technologies of Mexico, S.A. de C.V. at various interest rates to fund their operations. As of June 30, 2026 and March 31, 2026, outstanding principal amounted to approximately $12,728,000 and $12,300,000, respectively. As of June 30, 2026 and March 31, 2026, outstanding technical assistance charges amounted to approximately $10,781,000 and $10,400,000, respectively. As of June 30, 2026 and March 31, 2026, outstanding accrued interest amounted to approximately $33,968,000 and $32,200,000, respectively. The intercompany loans mature March 31, 2032. There is no guarantee that the Company’s Mexican subsidiary will be able to pay any or all of the amounts due. If the Company forgives the debt or if it converts the debt to equity, it would be subject to Mexico income tax at 30%, or approximately $17,162,000, as well as Mexican withholding tax of 15%.

In addition, any interest paid to a foreign lender is subject to Mexico withholding tax of 15%. The Company owes interest on its intercompany technical assistance agreement and royalty withholding of 10% on its technical assistance agreement. This would amount to approximately $5,627,000 and $5,564,000 in Mexico withholding tax at June 30, 2026 and March 31, 2026, respectively, if all of the interest and technical assistance were to be repaid. In general, the Company can then claim a credit for these withholding taxes on their U.S. income tax return. However, because of its substantial U.S. net operating losses, the Company is prevented from claiming any credit on any withholding tax for U.S. income tax purposes.