Key Highlights: Pivot continues to progress toward CE Mark certification in 2026 Stage 1 ISO Audit completed with Stage 2 planned for 1H2026 SAN DIEGO, CA / ACCESS Newswire / October 28, 2025 / Modular Medical, Inc. (Nasdaq:MODD) ("Modular Medical" or the "Company"), a leader in innovative insulin delivery, today announced that it is continuing to progress toward CE Mark certification under the European Union Medical Device Regulation ("EU MDR 2017/745"). As part of this process, the Company is pleased to a ...

Group 1: Modular Medical Inc. (MODD) - Modular Medical Inc. experienced a significant stock price increase of 30.68% to $0.9150 after completing a clinical study for its MODD1 insulin pump, which aims to simplify diabetes management [1] - The company plans to submit its Pivot pump product to the FDA for clearance in October 2025 [1] - Insider activity has been notable, with executives purchasing over $500,000 worth of shares, contributing to heightened trading volume of over 4.5 million shares, significantly above the average of around 200,000 [2] Group 2: Galectin Therapeutics Inc. (GALT) - Galectin Therapeutics Inc. saw its stock rise over 14% to $6.78, continuing a remarkable year-to-date gain of over 360% [3] - The company reached a new 52-week high of $5.99 during intraday trading on September 11, 2025 [3] - CEO Joel Lewis indicated ongoing analysis of additional biomarkers for their lead candidate, belapectin, which is designed to treat MASH cirrhosis and portal hypertension [4] Group 3: Exicure Inc. (XCUR) - Exicure Inc. shares rose 11.11% to $4.00, despite no new company-specific news, indicating speculative interest or technical momentum [5] - The company reported a second-quarter net loss of $2.6 million, wider than the $0.6 million loss in Q2 of 2024, primarily due to higher operating expenses from the acquisition of GPCR USA [6] - Exicure is pursuing new clinical directions, including a completed Phase 2 study of GPC-100 for stem cell mobilization in multiple myeloma patients [6] Group 4: PepGen Inc. (PEPG) - PepGen Inc. rebounded 6.67% to $1.44 after a previous decline, with the movement likely driven by technical factors or speculative interest [6] - The company has shifted focus to PGN-EDODM1 for treating myotonic dystrophy type 1 (DM1) after discontinuing its Duchenne muscular dystrophy program [7] - The FREEDOM-DM1 trial is currently underway, with topline data expected in early Q4 2025, which is considered a key near-term catalyst [8] Group 5: BioSig Technologies Inc. (BSGM) - BioSig Technologies Inc. closed at $6.10 with a sharp gain of 37.08%, followed by a 4.09% rise in after-hours trading to $6.35 [8] - The company has officially rebranded as Streamex Corp., effective September 12, 2025, and will trade under the new ticker symbol "STEX" [8] - The rebranding follows a merger with Streamex Exchange Corp., marking a strategic pivot towards real-world asset tokenization, including an exclusive partnership with Monetary Metals for tokenized, yield-bearing gold products [9]

Core Insights - Modular Medical, Inc. has successfully completed a clinical study with its MODD1 pump, which is designed for Type 1 diabetes patients [1] - The MODD1 pump targets the estimated $3 billion adult "almost-pumpers" market with a user-friendly and affordable design [1] - The study involved nine clinicians who currently use continuous glucose monitors and other pumps, providing valuable real-world feedback for product refinement [1] Company Overview - Modular Medical specializes in insulin delivery technology and has developed the first FDA-cleared patch pump specifically for Type 1 diabetes [1] - The company is preparing for the launch of its next-generation Pivot pump product based on insights gained from the clinical study [1] Market Context - The adult "almost-pumpers" market is estimated to be worth $3 billion, indicating significant potential for growth in insulin delivery solutions [1] - The successful completion of the clinical study positions Modular Medical to capitalize on this market opportunity with its innovative product offerings [1]

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)%3A) This section presents the unaudited condensed consolidated financial statements of Modular Medical, Inc. for the period ended June 30, 2025, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with comprehensive notes. The company is a pre-revenue medical device company, and these statements reflect its financial position and performance, highlighting ongoing operating losses and a 'going concern' warning - The company is a pre-revenue medical device company focused on the design, development, and commercialization of innovative insulin pumps[22](index=22&type=chunk) - The financial statements are unaudited and prepared in accordance with GAAP and SEC interim financial reporting rules[25](index=25&type=chunk) - Operating results for the three months ended June 30, 2025, are not necessarily indicative of results for the full fiscal year or any future period[26](index=26&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20March%2031%2C%202025) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | Metric | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :---------------------------- | :-------------------- | | Cash and cash equivalents | $7,522 | $13,095 | $(5,573) | | Total Current Assets | $8,292 | $13,517 | $(5,225) | | Total Assets | $14,171 | $18,735 | $(4,564) | | Total Current Liabilities | $2,050 | $1,265 | $785 | | Total Liabilities | $2,328 | $1,658 | $670 | | Total Stockholders' Equity | $11,843 | $17,077 | $(5,234) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | YoY Change | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Research and development | $5,134 | $3,205 | $1,929 | 60.1% | | Selling, general and administrative | $1,670 | $1,015 | $655 | 64.5% | | Total operating expenses | $6,804 | $4,220 | $2,584 | 61.2% | | Loss from operations | $(6,804) | $(4,220) | $(2,584) | 61.2% | | Net loss | $(6,702) | $(4,137) | $(2,565) | 62.0% | | Net loss per share (Basic & Diluted) | $(0.12) | $(0.12) | $0.00 | 0.0% | | Shares used in computing net loss per share | 54,288 | 33,884 | 20,404 | 60.2% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20three%20months%20ended%20June%2030%2C%202025%20and%202024) This section details changes in the company's equity accounts, including net loss, stock sales, and stock-based compensation, over specific periods | Metric | March 31, 2025 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------- | :---------------------------- | :--------------------------- | :-------------------- | | Total Stockholders' Equity | $17,077 | $11,843 | $(5,234) | | Net loss | — | $(6,702) | $(6,702) | | At-the-market sale of stock, net | — | $728 | $728 | | Stock-based compensation | — | $720 | $720 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20June%2030%2C%202025%20and%202024) This section presents the cash inflows and outflows from operating, investing, and financing activities, showing the net change in cash over specific periods | Cash Flow Activity | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | | Net cash used in operating activities | $(5,372) | $(3,548) | $(1,824) | | Net cash used in investing activities | $(934) | $(842) | $(92) | | Net cash provided by financing activities | $733 | $210 | $523 | | Net decrease in cash and cash equivalents | $(5,573) | $(4,180) | $(1,393) | | Cash and cash equivalents at end of period | $7,522 | $5,052 | $2,470 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, including significant accounting policies and critical disclosures - The company is a pre-revenue medical device company focused on innovative insulin pumps, with FDA clearance for MODD1 and expected initial shipments by October 2025[22](index=22&type=chunk) - The company is preparing a 510(k) premarket notification for an updated tubeless product, the Pivot, intended to replace MODD1 upon regulatory approval[22](index=22&type=chunk) - The company's financial statements include a 'going concern' warning due to continuous operating losses and negative cash flows, necessitating additional capital raises[23](index=23&type=chunk) [NOTE 1 – The Company and Summary of Significant Accounting Policies](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business, its pre-revenue status, and outlines the significant accounting policies applied in preparing the financial statements, including the going concern assessment - Modular Medical, Inc. is a pre-revenue medical device company developing innovative insulin pumps, with FDA clearance for MODD1 and initial shipments expected by October 2025[22](index=22&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern due to ongoing operating losses and negative cash flows, requiring additional capital[23](index=23&type=chunk) - In June 2025, the company sold **1,000,000 shares** of common stock for net proceeds of **$727,500** through an at-the-market sales program, and in March 2025, completed private placements for approximately **$11,367,000**[23](index=23&type=chunk) [NOTE 2 – Consolidated Balance Sheet Detail](index=12&type=section&id=NOTE%202%20%E2%80%93%20CONSOLIDATED%20BALANCE%20SHEET%20DETAIL) This note provides a detailed breakdown of specific accounts within the consolidated balance sheets, offering further insights into asset and liability components | Account | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | | :-------------------------- | :----------------------------- | :---------------------------- | | Prepaid expenses | $693 | $352 | | Other receivables | $77 | $70 | | Machinery and equipment | $6,446 | $5,311 | | Construction-in-process | $719 | $685 | | Accumulated depreciation and amortization | $(2,097) | $(1,687) | | Accrued wages and employee benefits | $444 | $391 | [NOTE 3 – Leases](index=12&type=section&id=NOTE%203%20%E2%80%93%20LEASES) This note details the company's lease commitments, including the operating lease for its San Diego facility and future lease payment obligations - The company's 48-month operating lease for its San Diego facility commenced February 1, 2023, with annual rent increases of approximately **4%**[43](index=43&type=chunk) | Annual Fiscal Years | Total Future Lease Payments (in thousands) | | :------------------ | :----------------------------------------- | | 2026 | $354 | | 2027 | $405 | | Total | $759 | [NOTE 4 – Stockholders' Equity](index=13&type=section&id=NOTE%204%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) This note provides details on changes in stockholders' equity, including common stock issuances, warrant activity, and stock-based compensation - During the three months ended June 30, 2025, the company sold **1,000,000 shares** of common stock under its at-the-market (ATM) sales program for net proceeds of **$727,500**[46](index=46&type=chunk) - As of June 30, 2025, **18,030,000** common stock purchase warrants were outstanding, a decrease from **18,561,000** at March 31, 2025, due to the exercise of **531,000** warrants[47](index=47&type=chunk) - The company issued **10,000 shares** of common stock with a fair value of approximately **$11,000** to a service provider during the three months ended June 30, 2025[48](index=48&type=chunk) [NOTE 5 – Stock-Based Compensation](index=14&type=section&id=NOTE%205%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note outlines the company's equity incentive plan, details stock option grants, and reports unamortized compensation costs - The 2017 Equity Incentive Plan has been amended to reserve additional shares, with **3,000,000 shares** approved in February 2025, for various awards to employees, directors, and consultants[49](index=49&type=chunk) - Unamortized compensation cost for stock options was approximately **$2,369,550** as of June 30, 2025, expected to be recognized over approximately **1.21 years**[50](index=50&type=chunk) - In April 2025, **1,941,000** performance-based stock options were granted, with expense recognition commenced based on the probability of achieving specific FDA submission and manufacturing validation milestones[51](index=51&type=chunk) [NOTE 6 – Income Taxes](index=15&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note discusses the company's income tax position, including the valuation allowance against deferred tax assets and the absence of unrecognized tax benefits - The company has recorded a full valuation allowance against its federal and state net deferred tax assets, as it is more likely than not that they will not be fully realized[58](index=58&type=chunk) - No liability for unrecognized tax benefits related to uncertain tax positions has been recorded as of June 30, 2025[59](index=59&type=chunk) [NOTE 7 – Commitments and Contingencies](index=16&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's legal proceedings, outstanding purchase orders for equipment, and technology-related purchase commitments - The company is not currently involved in any legal proceedings that are believed to have a material adverse effect on its financial condition or results of operations[60](index=60&type=chunk) - Outstanding purchase orders for machinery and equipment totaled approximately **$2,431,000** at June 30, 2025[62](index=62&type=chunk) - The company had purchase commitments of approximately **$900,000** over the next three years for technology related to its pump products[62](index=62&type=chunk) [NOTE 8 – Business Segment and Concentrations](index=16&type=section&id=NOTE%208%20%E2%80%93%20BUSINESS%20SEGMENT%20AND%20CONCENTRATIONS) This note clarifies the company's single operating segment focused on insulin pump development and identifies significant vendor concentrations - The company operates and manages its business as one reportable and operating segment, focused on the design, development, and commercialization of innovative insulin pumps[64](index=64&type=chunk) | Segment Expense | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :------------------------ | :----------------------------- | :----------------------------- | | Research and development | $1,490 | $973 | | Compensation | $2,916 | $1,748 | | Stock-based compensation | $725 | $535 | | Other operating expenses | $1,673 | $965 | | Net loss | $6,702 | $4,137 | - Vendor A represented **16%** of total accounts payable at June 30, 2025, and **13%** at March 31, 2025. Vendors B and C also represented over **10%** at June 30, 2025[67](index=67&type=chunk) [NOTE 9 – Related Party Transactions](index=17&type=section&id=NOTE%209%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, specifically payments and compensation to family members of executive officers - Payments to a family member of an executive officer (employee) were approximately **$52,700** for the three months ended June 30, 2025, and **$57,300** for the same period in 2024, including stock options[67](index=67&type=chunk) - A second family member of an executive officer received approximately **$18,600** during the three months ended June 30, 2025, for consulting and employment, including stock options[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity. It highlights the company's pre-revenue status, progress in product development (MODD1 FDA clearance, Pivot development), and significant financial challenges, including a 'going concern' warning and Nasdaq listing compliance issues. The discussion details increased operating expenses and ongoing capital requirements - The company is a pre-revenue medical device company focused on developing innovative insulin pumps (MODD1 and Pivot) and received FDA clearance for MODD1 in September 2024[71](index=71&type=chunk) - Substantial doubt exists about the company's ability to continue as a going concern due to ongoing operating losses and negative cash flows, necessitating additional capital raises[73](index=73&type=chunk)[84](index=84&type=chunk) - The company received a Nasdaq non-compliance letter on June 30, 2025, for failing to maintain a minimum bid price of **$1 per share**, with **180 days** to regain compliance[74](index=74&type=chunk) [Company Overview](index=18&type=section&id=Company%20Overview) This section provides an introduction to Modular Medical, Inc., detailing its focus on innovative insulin pumps and recent capital-raising activities - Modular Medical, Inc. is a pre-revenue medical device company developing innovative insulin pumps (MODD1 and Pivot) for type 1 and type 2 diabetes markets[71](index=71&type=chunk) - FDA clearance for the MODD1 pump was received in September 2024, with initial shipments expected by October 2025. The company aims for Pivot product regulatory clearance in H1 2026[71](index=71&type=chunk) - The company raised approximately **$0.7 million** from an ATM sales program in June 2025 and **$11.4 million** from private placements in March 2025[72](index=72&type=chunk) [Recent Developments](index=19&type=section&id=Recent%20Developments) This section highlights recent significant events, including Nasdaq's notification of non-compliance with the minimum bid price requirement - On June 30, 2025, Nasdaq notified the company of non-compliance with the minimum bid price requirement (**$1 per share**) for **30 consecutive business days**[74](index=74&type=chunk) - The company has **180 calendar days** (until December 29, 2025) to regain compliance by maintaining a closing bid price of at least **$1** for **ten consecutive business days**[75](index=75&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there have been no material changes to the company's critical accounting policies and estimates as of the reporting date - As of June 30, 2025, there have been no material changes to the company's significant accounting policies and estimates[77](index=77&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, focusing on key expense categories and their impact on operating loss - Total operating expenses increased by **61.2%** to **$6,804,000** for the three months ended June 30, 2025, from **$4,220,000** in the prior year[13](index=13&type=chunk) - Loss from operations increased by **61.2%** to **$(6,804,000)** for the three months ended June 30, 2025, from **$(4,220,000)** in the prior year[13](index=13&type=chunk) [Research and Development](index=19&type=section&id=Research%20and%20Development) This section details the increase in research and development expenses, attributing it to higher personnel, material, and consulting costs - R&D expenses increased by **$1,929,000 (60.1%)** to **$5,134,000** for the three months ended June 30, 2025, from **$3,205,000** in 2024[78](index=78&type=chunk) - The increase was primarily due to higher personnel costs (approx. **$0.9 million**), material costs (approx. **$0.3 million**), stock-based compensation (approx. **$0.2 million**), consulting costs (approx. **$0.2 million**), and depreciation expense (approx. **$0.2 million**)[79](index=79&type=chunk) - Full-time R&D employee headcount increased to **55** at June 30, 2025, from **36** at June 30, 2024[80](index=80&type=chunk) [Selling, General and Administrative](index=20&type=section&id=Selling%2C%20General%20and%20Administrative) This section explains the increase in selling, general, and administrative expenses, driven by higher personnel, consulting, and marketing costs - SG&A expenses increased by **$655,000 (64.6%)** to **$1,670,000** for the three months ended June 30, 2025, from **$1,015,000** in 2024[81](index=81&type=chunk) - The increase was mainly driven by higher personnel costs (approx. **$0.3 million**), consulting fees (approx. **$0.1 million**), legal and professional services (approx. **$0.1 million**), and sales and marketing expenses (approx. **$0.1 million**)[82](index=82&type=chunk) - Full-time SG&A employee headcount increased to **12** at June 30, 2025, from **4** at June 30, 2024[83](index=83&type=chunk) [Liquidity and Capital Resources; Changes in Financial Condition](index=20&type=section&id=Liquidity%20and%20Capital%20Resources%3B%20Changes%20in%20Financial%20Condition) This section discusses the company's cash position, ongoing operating losses, and the need for additional capital to address its going concern risk - The company is pre-revenue and has incurred continuous operating losses and negative cash flows, leading to a cash balance of **$7.5 million** and an accumulated deficit of **$91 million** at June 30, 2025[84](index=84&type=chunk) - Substantial doubt exists about the company's ability to continue as a going concern, requiring additional capital through equity or debt securities[84](index=84&type=chunk) - Cash used in operating activities was approximately **$5.4 million** for the three months ended June 30, 2025, compared to **$3.5 million** for the same period in 2024[85](index=85&type=chunk) [Purchase Obligations](index=22&type=section&id=Purchase%20Obligations) This section outlines the company's outstanding commitments for machinery, equipment, and technology-related purchases - At June 30, 2025, the company had outstanding purchase orders for machinery and equipment totaling approximately **$2.4 million**[89](index=89&type=chunk) - The company also had purchase commitments of approximately **$0.9 million** over the next three years for technology related to its pump products[89](index=89&type=chunk) [Recently Issued Accounting Pronouncements](index=22&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 1 for details on recently issued accounting pronouncements, including ASU No. 2024-03 - Details on recently issued accounting pronouncements, including ASU No. 2024-03 regarding disaggregation of income statement expenses, are provided in Note 1 to the financial statements[41](index=41&type=chunk)[90](index=90&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that quantitative and qualitative disclosures about market risk are not required for this quarterly report - Quantitative and qualitative disclosures about market risk are not required for this report[91](index=91&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. Furthermore, no material changes in internal control over financial reporting occurred during the three months ended June 30, 2025 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[93](index=93&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[94](index=94&type=chunk) [Disclosure Controls and Procedures](index=22&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms management's evaluation and conclusion that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2025[93](index=93&type=chunk) [Changes in Internal Control over Financial Reporting](index=22&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section states that no material changes in internal control over financial reporting occurred during the three months ended June 30, 2025 - No change in internal control over financial reporting materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended June 30, 2025[94](index=94&type=chunk) [PART II — OTHER INFORMATION](index=23&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information not included in the financial statements [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or results of operations - The company is not currently involved in any litigation that is believed to have a material adverse effect on its financial condition or results of operations[97](index=97&type=chunk) [Item 1A. Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks, including substantial doubt about the company's ability to continue as a going concern due to expected operating losses and cash burn, and the risk of delisting from Nasdaq due to non-compliance with the minimum bid price requirement - Substantial doubt exists about the company's ability to continue as a going concern due to expected operating losses and cash burn, requiring additional capital[99](index=99&type=chunk) - The company received a Nasdaq non-compliance letter on June 30, 2025, for failing to meet the **$1** minimum bid price requirement[101](index=101&type=chunk) - Failure to regain Nasdaq compliance could lead to delisting, adversely affecting stock liquidity, ability to raise capital, and investor confidence[104](index=104&type=chunk) [Item 2. Unregistered Sales of Equity Securities](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities) This item reports the issuance of 20,833 shares to a non-employee director upon the vesting of a restricted stock unit award on March 31, 2025 - On March 31, 2025, **20,833 shares** were issued to one of the company's non-employee directors upon vesting of a restricted stock unit award[106](index=106&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults in the payment of principal, interest, or other material defaults with respect to any of its indebtedness - There has been no default in the payment of principal, interest, or any other material default with respect to any of the company's indebtedness[107](index=107&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is not applicable to the company[108](index=108&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) The company reported no other information required under this item - No other information was reported under this item[109](index=109&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and financial information formatted in Inline XBRL - Exhibits include Third Amended and Restated Articles of Incorporation and Certificates of Amendment[111](index=111&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[111](index=111&type=chunk) - The financial information from the quarterly report is formatted in Inline Extensible Business Reporting Language (Inline XBRL)[111](index=111&type=chunk) [Signatures](index=26&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q report, duly authorized by the registrant's principal executive and financial officers - The report was signed by James E. Besser (Chief Executive Officer) and Paul DiPerna (Chairman, President, Chief Financial Officer, and Treasurer) on August 14, 2025[115](index=115&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: March 31, 2025 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: 001-41277 MODULAR MEDICAL, INC. (Exact name of registrant as specified in its charter) | Nevada | 87-0620495 | | - ...

[Report Overview](index=1&type=section&id=Report%20Overview) This Quarterly Report on Form 10-Q for December 31, 2024, details Modular Medical, Inc.'s financial status as a non-accelerated filer - Filing Type: **Quarterly Report on Form 10-Q** for the period ended December 31, 2024[1](index=1&type=chunk) - Registrant: **MODULAR MEDICAL, INC.**[1](index=1&type=chunk) - Filer Status: **Non-accelerated Filer** and **Smaller reporting company**[4](index=4&type=chunk) - Outstanding Shares: **40,665,220 common stock shares** as of February 10, 2025[5](index=5&type=chunk) [PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Modular Medical, Inc.'s unaudited condensed consolidated financial statements and notes for the periods ended December 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$12.1 million** from **$13.8 million**, primarily due to lower cash, impacting equity | Metric | Dec 31, 2024 (in thousands) | Mar 31, 2024 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $6,986 | $9,232 | | Total Current Assets | $7,331 | $9,697 | | Property and equipment, net | $3,958 | $2,975 | | Total Assets | $12,149 | $13,807 | | Total Current Liabilities | $1,383 | $1,455 | | Total Liabilities | $1,887 | $2,272 | | Total Stockholders' Equity | $10,262 | $11,535 | | Accumulated Deficit | $(79,826) | $(65,929) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net loss for the three months ended December 31, 2024, was **$4.8 million**, an improvement from **$5.3 million** prior year | Metric (in thousands) | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2024 | Nine Months Ended Dec 31, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $3,853 | $3,838 | $10,760 | $9,765 | | General and administrative | $1,001 | $1,431 | $3,310 | $3,445 | | Total operating expenses | $4,854 | $5,269 | $14,070 | $13,210 | | Loss from operations | $(4,854) | $(5,269) | $(14,070) | $(13,210) | | Net loss | $(4,804) | $(5,269) | $(13,897) | $(13,189) | | Net loss per share (Basic and diluted) | $(0.13) | $(0.23) | $(0.39) | $(0.64) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased to **$10.3 million** due to a **$13.9 million** net loss, partially offset by equity offerings | Metric (in thousands) | March 31, 2024 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Total Stockholders' Equity | $11,535 | $10,262 | | Accumulated Deficit | $(65,929) | $(79,826) | | Common Stock Shares Outstanding | 32,464 | 40,665 | - Issuance of common stock in equity offering, net: **$7,344 thousand** (nine months ended Dec 31, 2024)[15](index=15&type=chunk) - At-the-market sales of stock, net: **$2,114 thousand** (nine months ended Dec 31, 2024)[17](index=17&type=chunk) - Proceeds from exercise of common stock purchase warrants: **$1,251 thousand** (nine months ended Dec 31, 2024)[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities used **$11.4 million**, investing **$1.5 million**, financing generated **$10.7 million**, leading to a **$2.2 million** cash decrease | Cash Flow Activity (in thousands) | Nine Months Ended Dec 31, 2024 | Nine Months Ended Dec 31, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(11,410) | $(10,449) | | Net cash used in investing activities | $(1,545) | $(1,217) | | Net cash provided by financing activities | $10,709 | $9,914 | | Net decrease in cash and cash equivalents | $(2,246) | $(1,752) | | Cash and cash equivalents at end of period | $6,986 | $2,047 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies, financial components, equity, stock compensation, taxes, commitments, and related party transactions [NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Modular Medical, Inc. received FDA clearance for its MODD1 insulin pump in September 2024 but faces going concern doubts due to operating losses - Company Overview: **Pre-revenue medical device company** focused on the design, development, and commercialization of innovative insulin pumps, specifically the MODD1 two-part patch pump[21](index=21&type=chunk) - Regulatory Milestone: Received **FDA clearance** to market and sell its MODD1 pump in the United States in September 2024[21](index=21&type=chunk) - Liquidity and Going Concern: **Incurred operating losses** and negative cash flows since inception, raising substantial doubt about the company's ability to continue as a going concern[22](index=22&type=chunk) - Reportable Segment: Operates in **one business segment**[28](index=28&type=chunk) [NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL](index=13&type=section&id=NOTE%202%20%E2%80%93%20CONSOLIDATED%20BALANCE%20SHEET%20DETAIL) This note provides a detailed breakdown of property and equipment, net, and accrued expenses as of December 31, 2024, and March 31, 2024 | Property and Equipment, net (in thousands) | Dec 31, 2024 | Mar 31, 2024 | | :--------------------------------------- | :----------- | :----------- | | Machinery and equipment | $4,912 | $3,209 | | Computer equipment and software | $66 | $66 | | Construction-in-process | $300 | $283 | | Leasehold improvements | $33 | $33 | | Office equipment | $46 | $63 | | Less: accumulated depreciation and amortization | $(1,399) | $(679) | | **Total** | **$3,958** | **$2,975** | | Accrued Expenses (in thousands) | Dec 31, 2024 | Mar 31, 2024 | | :--------------------------------------- | :----------- | :----------- | | Accrued wages and employee benefits | $300 | $243 | | Other | $151 | $37 | | **Total** | **$451** | **$280** | [NOTE 3 – LEASES](index=13&type=section&id=NOTE%203%20%E2%80%93%20LEASES) The company holds an operating lease for its San Diego facility, with **$914 thousand** in lease liabilities as of December 31, 2024 - Lease term: **48-month operating lease** for San Diego facility, commenced February 1, 2023[48](index=48&type=chunk) - Initial base monthly rent: **$36,000** with annual increases of approximately **4%**[48](index=48&type=chunk) | Lease Payments (in thousands) | Amount | | :---------------------------- | :----- | | Total future lease payments | $990 | | Less: Imputed interest | $(76) | | Present value of lease liability | $914 | - Cash paid for lease liabilities: Approximately **$337,000** for the nine months ended December 31, 2024 (compared to **$365,000** for the same period in 2023)[50](index=50&type=chunk) [NOTE 4

Part I [Item 1. Business Overview](index=6&type=section&id=ITEM%201.%20BUSINESS) Modular Medical is a pre-revenue medical device company developing the **MODD1** insulin pump to expand the market by offering a simpler, more affordable two-part patch pump [Overview](index=6&type=section&id=Overview) - **Modular Medical** is a pre-revenue medical device company focused on designing, developing, and commercializing innovative insulin pumps to increase adoption in the diabetes marketplace[20](index=20&type=chunk) - The company's initial product, an innovative two-part patch pump, aims to fundamentally alter the trade-offs between **cost and complexity**, expanding the wearable insulin delivery device market beyond 'super users' to the mass market for both **Type 1** and **Type 2** diabetes patients[20](index=20&type=chunk) [Differentiation](index=6&type=section&id=Differentiation) - **Modular Medical** believes existing insulin pumps have shortcomings in complexity, cumbersomeness, cost, outdated style, and pump mechanism limitations, which deter adoption[21](index=21&type=chunk)[22](index=22&type=chunk) - The company's **MODD1** pump addresses these issues by being easy to afford, learn, and use, with a revolutionary design and proprietary pumping method that allows for precision, low-cost manufacture, and high reproducibility[22](index=22&type=chunk)[24](index=24&type=chunk) - The **MODD1** features a two-part system (one reusable, one disposable), a one-button interface, 90-day reusable/3-day disposable components, no external controller, and a slim, lightweight profile[26](index=26&type=chunk) [Diabetes Classifications and Therapies](index=7&type=section&id=Diabetes%20Classifications%20and%20Therapies) - Diabetes is classified into **Type 1** (**T1D**), an autoimmune condition requiring daily insulin, and **Type 2** (**T2D**), characterized by insulin resistance or insufficient production, with **1.6 million T2D** individuals in the U.S. requiring intensive insulin therapy[27](index=27&type=chunk) - Current therapies include **Multiple Daily Injection** (**MDI**) and **Continuous Subcutaneous Insulin Infusion** (**CSII**) via insulin pumps, with **CSII** generally offering better glycemic control and reduced hypoglycemia[28](index=28&type=chunk) - Despite benefits, pump adoption is limited due to complexity, cumbersome design, and high costs, leading to a segment of '**Almost Pumpers**' who are aware of benefits but deterred by current products[29](index=29&type=chunk) [Market](index=8&type=section&id=Market) - Globally, approximately **537 million** people lived with diabetes in 2021, projected to increase to **783 million** by 2045. In the U.S., **34 million** people have diabetes, including **1.8 million** with **T1D** and **1.6 million T2D** requiring **MDI therapy**[32](index=32&type=chunk)[33](index=33&type=chunk) - Only **33%** of **T1D** Americans and very few **T2D** intensively treated with insulin currently use pumps, totaling about **670,000** users, despite pumps offering better glycemic control and lower healthcare costs[35](index=35&type=chunk) - The '**Almost Pumpers**' segment, representing about **32%** of the **T1D** market, is a **$1.9 billion** growth opportunity, seeking less expensive, less time-consuming, less intimidating pumps without separate controllers[36](index=36&type=chunk) - The company estimates a total addressable market of approximately **$3 billion**, assuming cartridge revenue of **$4,100 per patient per year**, by converting '**Almost Pumpers**' with an easier-to-use, learn, and access technology eligible for insurance reimbursement[41](index=41&type=chunk) [Diabetes Care is at an Inflection Point](index=11&type=section&id=Diabetes%20Care%20is%20at%20an%20Inflection%20Point) - The **insulin pump market** is at an inflection point due to increased diabetes awareness post-COVID-19, widespread adoption of **telehealth**, and a shift towards **Pharmacy Benefits Manager** (**PBM**) reimbursement for patch pumps, simplifying access[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - The rise of **Continuous Glucose Monitoring** (**CGM**) devices like Freestyle Libre has made glucose measurement easier and more affordable, increasing patient comfort with technology and wearables, creating a natural market for new pumps[39](index=39&type=chunk)[46](index=46&type=chunk) [Our Insulin Pump](index=11&type=section&id=Our%20Insulin%20Pump) - **Modular Medical's** pump uses proprietary insulin measurement methods and high-volume consumer electronics parts to break the cost-vs-functionality curve, creating a modern, cost-effective design[49](index=49&type=chunk) - The **MODD1** pump features a simple button for insulin delivery, a low-power Bluetooth and **NFC** chip for smartphone communication, a three-day disposable cartridge with an integrated coin cell battery, and a soft 6mm cannula with automatic needle removal[52](index=52&type=chunk)[53](index=53&type=chunk) - The company submitted a **510(k)** premarket notification to the **FDA** in January 2024 and is responding to comments received in March 2024, while also preparing for production with manufacturing partner **Phillips-Medisize**[50](index=50&type=chunk) [Technological Advantages](index=13&type=section&id=Technological%20Advantages) - The **MODD1's** adoption of ultra-high volume, miniaturized technologies from consumer electronics allows for easier manufacturing scale-up, lower **cost of goods** (estimated **50% lower** than competitors), and high availability of components[56](index=56&type=chunk)[58](index=58&type=chunk) - The **MODD1** is smaller and lighter than **Insulet's Omnipod** (**20g empty** vs. **26g**, **23g filled** vs. **28g**) but holds **3mL** (**300 units**) of insulin, **50% more** than **Omnipod's 2mL** reservoir, addressing the needs of **Type 1** and **Type 2** patients requiring higher doses[58](index=58&type=chunk)[61](index=61&type=chunk) - The new pumping modality is expected to provide the most even basal insulin delivery in the industry, and the device can be removed and replaced without insulin loss, unlike other patch pumps[59](index=59&type=chunk)[61](index=61&type=chunk) - Future plans include **MODD1+** with phone-based control and **AID** capability for **CGM** integration, and **MODD2**, a full-featured, multi-chamber pump for fully autonomous closed-loop insulin delivery and broader drug delivery applications[62](index=62&type=chunk)[63](index=63&type=chunk)[85](index=85&type=chunk) [Our Solution](index=15&type=section&id=Our%20Solution) - **Modular Medical's** pump is designed to address existing market shortcomings, appealing to '**Almost-Pumpers**' and dissatisfied current pump users by offering a simpler, less expensive, and easier-to-prescribe product[64](index=64&type=chunk)[65](index=65&type=chunk) - The company's immediate goal is to obtain regulatory approvals and commercialize its pump, with a long-term goal of becoming a leading provider of insulin pump therapy by focusing on consumer and clinical needs[67](index=67&type=chunk) - Business strategies include using innovative proprietary technology for a simpler, more affordable pump, and maintaining low costs during design and development, leveraging the expertise of its **President**, **Paul DiPerna**[68](index=68&type=chunk)[69](index=69&type=chunk) [Commercialization Strategy: Overcoming the Insurance Hurdles](index=17&type=section&id=Commercialization%20Strategy%3A%20Overcoming%20the%20Insurance%20Hurdles) - The commercialization strategy aims to establish **MODD1** as the preferred option for new pump patients by expanding the market to '**Almost Pumpers**' and newly motivated **CGM** users[70](index=70&type=chunk) - **MODD1's** lower manufacturing cost (**50% less** than **Omnipod**) enables offering the pump with no upfront cost to patients, driving preferred status with a **20% discount** for payors and using existing **PBM/CMS** codes for reimbursement[71](index=71&type=chunk) - The company plans to simplify the 'insurance journey' and training by providing free samples and streamlined training at the clinician's office, supported by **telehealth**[71](index=71&type=chunk) - Europe is a large potential market, with **MODD1** targeting mid-2025 for European and UK approval, aiming to offer a cost-effective solution to increase pump uptake in single-payor healthcare systems[72](index=72&type=chunk) [Marketing](index=18&type=section&id=Marketing) - **MODD1's** marketing strategy focuses on maximizing adoption through a '**frictionless launch**' program, reducing reimbursement effort and cost for **HCPs**, and encouraging patient trials with free samples, insurance verification, and **telehealth** support[73](index=73&type=chunk) - The company will leverage **MODD1's 300-unit chamber** to appeal to **Type 2** patients requiring higher insulin doses and work with health plans to establish **MODD1** as a first-line pump for both **Type 1** and **Type 2** patients[73](index=73&type=chunk) - A soft launch and clinical study program in major markets are planned post-**510(k)** clearance, expected to commence in early 2025, to gather feedback and develop competitive claims[73](index=73&type=chunk) [Tie-in with telehealth](index=20&type=section&id=Tie-in%20with%20telehealth) - **Telehealth** is seen as a force multiplier for diabetes treatment, enabling a small group of endocrinologists to serve a large market more effectively[75](index=75&type=chunk) - **MODD1** is designed for affordability and self-

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial information of Modular Medical, Inc [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of Modular Medical, Inc. for the period ended December 31, 2023, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies, financial instrument fair values, leases, stockholders' equity, stock-based compensation, income taxes, and commitments and contingencies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a summary of the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Cash and cash equivalents | $3,799 | $2,047 | $(1,752) | | Total Current Assets | $4,046 | $2,342 | $(1,704) | | Property and equipment, net | $1,721 | $2,634 | $913 | | Total Assets | $7,245 | $6,199 | $(1,046) | | Accounts payable | $285 | $704 | $419 | | Total Current Liabilities | $979 | $1,439 | $460 | | Total Liabilities | $2,169 | $2,354 | $185 | | Total Stockholders' Equity | $5,076 | $3,845 | $(1,231) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table outlines the Company's financial performance, including revenues, expenses, and net loss for the specified periods Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $3,619 | $2,197 | $9,204 | $6,804 | | General and administrative | $1,650 | $1,161 | $4,006 | $3,502 | | Total operating expenses | $5,269 | $3,358 | $13,210 | $10,306 | | Loss from operations | $(5,269) | $(3,358) | $(13,210) | $(10,306) | | Net loss | $(5,269) | $(3,358) | $(13,189) | $(10,308) | | Net loss per share (Basic and diluted) | $(0.23) | $(0.27) | $(0.64) | $(0.86) | | Shares used in computing net loss per share | 22,540 | 12,274 | 20,708 | 12,045 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This table details changes in the Company's equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Common Stock (Shares) | 10,949 | 21,299 | | Common Stock (Amount) | $11 | $21 | | Additional Paid-In Capital | $53,524 | $65,472 | | Accumulated Deficit | $(48,459) | $(61,648) | | Total Stockholders' Equity | $5,076 | $3,845 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table presents the Company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Nine Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Net loss | $(13,189) | $(10,308) | | Stock-based compensation expense | $2,043 | $2,121 | | Net cash used in operating activities | $(10,449) | $(8,184) | | Purchases of property and equipment | $(1,217) | $(573) | | Net cash used in investing activities | $(1,217) | $(573) | | Proceeds from issuance of common stock and warrants, net | $9,733 | $7,372 | | Exercise of common stock warrants | $181 | — | | Net cash provided by financing activities | $9,914 | $7,372 | | Net decrease in cash and cash equivalents | $(1,752) | $(1,385) | | Cash and cash equivalents at end of period | $2,047 | $7,691 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes Modular Medical, Inc.'s business, development stage, and key accounting policies, including going concern considerations and recent accounting pronouncements - **Modular Medical, Inc.** is a development-stage medical device company focused on designing, developing, and commercializing an **innovative two-part patch insulin pump (MODD1)** to increase pump adoption in the diabetes marketplace for both type 1 and type 2 diabetes[20](index=20&type=chunk) - The Company expects to continue incurring **operating losses and cash outflows**, raising **substantial doubt about its ability to continue as a going concern** within one year, dependent on **raising additional capital** through equity or debt securities[22](index=22&type=chunk)[23](index=23&type=chunk) - The Company changed its computation of **weighted-average shares of common stock outstanding (WASO)** to include pre-funded warrants, which reduced the previously reported **loss per share by $0.04** and **$0.09** for the three and nine months ended December 31, 2022, respectively[42](index=42&type=chunk)[43](index=43&type=chunk) - The Company adopted **ASU No. 2016-13 (CECL model)** effective April 1, 2023, with **no impact** on its results of operations and financial position, and is currently evaluating the impact of recently issued ASUs on Segment Reporting and Income Tax Disclosures[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) [NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL](index=13&type=section&id=NOTE%202%20%E2%80%93%20CONSOLIDATED%20BALANCE%20SHEET%20DETAIL) This note provides detailed breakdowns of specific balance sheet accounts, including property and equipment, and accrued expenses Consolidated Balance Sheet Detail (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Machinery and equipment | $820 | $2,509 | | Construction-in-process | $1,003 | $499 | | Total property and equipment, net | $1,721 | $2,634 | | Accrued wages and employee benefits | $267 | $304 | | Total Accrued expenses | $339 | $373 | [NOTE 3 – LEASES](index=13&type=section&id=NOTE%203%20%E2%80%93%20LEASES) This note details the Company's operating lease commitments, including a new facility lease and future payment obligations - The Company commenced a **new 48-month operating lease** for a facility on Thornmint Road, San Diego, CA, on February 1, 2023, with an initial base monthly rent of **$36,000** and annual increases of approximately **4%**[53](index=53&type=chunk) - **Cash paid for lease liabilities** was approximately **$365,000** for the nine months ended December 31, 2023, a significant increase from **$119,000** for the same period in 2022[55](index=55&type=chunk) Operating Lease Commitments (in thousands) | Annual Fiscal Years | Operating Lease (in thousands) | | :------------------ | :----------------------------- | | 2024 | $111 | | 2025 | $452 | | 2026 | $470 | | 2027 | $405 | | Total future lease payments | $1,438 | | Present value of lease liability | $1,277 | [NOTE 4 – STOCKHOLDERS' EQUITY](index=13&type=section&id=NOTE%204%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note outlines changes in stockholders' equity, including common stock issuances, public offerings, and warrant activities - On November 22, 2023, the Company entered into an **"at the market" (ATM) agreement** with Leerink Partners LLC to sell up to **$6,500,000 of common stock**, with **no shares sold** as of December 31, 2023[57](index=57&type=chunk) - In May 2023, the Company completed a **public offering**, selling **8,816,900 shares of common stock and warrants**, generating aggregate gross proceeds of approximately **$9,390,000**, plus an additional **$1,408,000** from an over-allotment option[58](index=58&type=chunk)[59](index=59&type=chunk) Common Stock Warrants Activity (in thousands) | Type | Number of Shares (in thousands) | Exercise Price | Expiration | | :--- | :------------------------------ | :------------- | :--------- | | Balance as of March 31, 2023 | 7,565 | | | | Issuance of common stock warrants | 605 | $1.32 | May 2027 | | Issuance of common stock warrants | 5,070 | $1.22 | May 2028 | | Warrants exercised | (148) | $1.22 | May 2028 | | Balance as of December 31, 2023 | 13,092 | | | [NOTE 5 – STOCK-BASED COMPENSATION](index=16&type=section&id=NOTE%205%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details the Company's stock-based compensation plans, including share reserves, unamortized costs, and option activity - Stockholders approved an increase of **2,000,000 shares** reserved for issuance under the Amended 2017 Equity Incentive Plan in January 2023[64](index=64&type=chunk) - As of December 31, 2023, the **unamortized compensation cost** related to stock options was approximately **$2,512,000**, expected to be recognized over a weighted-average period of approximately **1.4 years**[65](index=65&type=chunk) Non-Vested Stock Options Activity | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :----- | :--------------- | :------------------------------------- | | Granted | 250,000 | $0.91 | | Vested | (41,668) | $0.91 | | Non-vested shares at December 31, 2023 | 208,332 | $0.91 | Stock Option Activity | Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (in Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | Aggregate Intrinsic Value | | :---------------------- | :----------------- | :----------------------------------------------------- | :------------------------------ | :----------------- | :------------------------------ | :------------------------ | | $0.93 - $2.00 | 2,246,118 | 8.55 | $1.48 | 653,549 | $1.83 | $62,794 | | $3.95 - $7.51 | 943,145 | 7.45 | $5.29 | 734,459 | $5.59 | — | | $8.61 - $17.70 | 509,130 | 7.48 | $10.53 | 448,562 | $10.35 | — | | Total | 3,698,393 | 8.12 | $3.70 | 1,836,570 | $5.47 | $62,794 | [NOTE 6 – INCOME TAXES](index=18&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note discusses the Company's income tax position, including deferred tax assets and valuation allowances - The Company has recorded a **full valuation allowance** against its federal and state net deferred tax assets, as management believes it is more likely than not that these assets will not be fully realized[74](index=74&type=chunk) - All tax returns for **fiscal 2016 to fiscal 2023** may be subject to examination by U.S. federal and state tax authorities[75](index=75&type=chunk) [NOTE 7 – COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the Company's legal proceedings, purchase obligations, and other contractual commitments - The Company is **not currently involved in any legal proceedings, claims, or assessments** that are expected to have a material adverse effect on its financial condition or results of operations[76](index=76&type=chunk) - As of December 31, 2023, the Company had outstanding **purchase orders for machinery and equipment** totaling approximately **$592,000**[78](index=78&type=chunk) - In December 2023, the Company signed a **device integration agreement** with a provider of connected-care and remote monitoring diabetes technology solutions for an obligation of approximately **$575,000 over three years**[78](index=78&type=chunk) [NOTE 8 – SUBSEQUENT EVENTS](index=19&type=section&id=NOTE%208%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the balance sheet date, including capital raises and plan approvals - In January 2024, the Company sold **153,879 shares of common stock** for net proceeds of approximately **$278,000** under its ATM Agreement[79](index=79&type=chunk) - In January 2024, the Company received approximately **$550,000** from the exercise of warrants to purchase **445,744 shares of common stock**[79](index=79&type=chunk) - On February 13, 2024, stockholders approved increases in the shares reserved for the Equity Incentive Plan by **3,000,000 shares** and the authorized shares of common stock to **100,000,000**[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting its status as a development-stage medical device company focused on the MODD1 insulin pump. It discusses the ongoing operating losses, liquidity concerns, and the need for additional capital, alongside detailed analysis of research and development and general and administrative expenses, and cash flow activities [Company Overview](index=20&type=section&id=Company%20Overview) This section provides an overview of Modular Medical, Inc.'s business, product development, and going concern status - **Modular Medical, Inc.** is a development-stage medical device company focused on designing, developing, and commercializing the **MODD1, a novel two-part patch insulin pump**, to expand the wearable insulin delivery device market for both type 1 and type 2 diabetes[83](index=83&type=chunk) - In January 2024, the Company made the **premarket 510(k) submission** of its MODD1 insulin pump to the U.S. Food and Drug Administration (FDA) and expects initial feedback during the quarter ending June 30, 2024[83](index=83&type=chunk) - The Company's current operating plan and historical losses raise **substantial doubt about its ability to continue as a going concern**, necessitating **additional capital** through equity or debt securities[84](index=84&type=chunk) [Economic Disruptions](index=21&type=section&id=Economic%20Disruptions) This section discusses potential impacts of economic factors like COVID-19, inflation, and interest rates on the Company's operations and capital access - While the U.S. national emergency for COVID-19 expired in May 2023, there is **no assurance** that the pandemic will not impact the Company's operational and financial performance in the future[85](index=85&type=chunk) - **Mounting inflationary cost pressures** and **rising interest rates** by the U.S. Federal Reserve since mid-2022 have negatively impacted the global economy and could affect the Company's future access to capital markets[86](index=86&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no material changes to the Company's critical accounting policies and estimates as of December 31, 2023 - As of December 31, 2023, there have been **no material changes** to the Company's significant accounting policies and estimates previously disclosed in its Annual Report on Form 10-K for the year ended March 31, 2023[88](index=88&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, focusing on key expense categories and their drivers [Research and Development Expenses](index=21&type=section&id=Research%20and%20Development) This section details the increase in R&D expenses, driven by employee costs, stock-based compensation, and pre-submission testing for FDA 510(k) - **R&D expenses increased by $1,422 thousand (64.7%)** to **$3,619 thousand** for the three months ended December 31, 2023, primarily due to higher employee-related costs, stock-based compensation, and consulting costs for pre-submission testing for FDA 510(k)[89](index=89&type=chunk)[90](index=90&type=chunk) - For the nine months ended December 31, 2023, **R&D expenses rose by $2,400 thousand (35.3%)** to **$9,204 thousand**, driven by increases in employee-related costs, consulting costs, stock-based compensation, and materials costs for MODD1 pump production[89](index=89&type=chunk)[91](index=91&type=chunk) - **R&D employee headcount increased to 36 from 32**, and expenses are expected to decrease for the remainder of fiscal 2024 following the FDA 510(k) submission in January 2024[92](index=92&type=chunk) [General and Administrative Expenses](index=23&type=section&id=General%20and%20Administrative) This section analyzes the rise in G&A expenses, attributed to legal, facility, marketing, and employee-related costs - **G&A expenses increased by $489 thousand (42.1%)** to **$1,650 thousand** for the three months ended December 31, 2023, mainly due to higher legal/professional services, rent/facility, marketing, employee-related costs, and depreciation, partially offset by decreased consulting[94](index=94&type=chunk)[95](index=95&type=chunk) - For the nine months ended December 31, 2023, **G&A expenses increased by $504 thousand (14.4%)** to **$4,006 thousand**, primarily due to higher facility-related costs, employee-related costs, depreciation, marketing, and legal/professional services, partially offset by reduced stock-based compensation and consulting services[94](index=94&type=chunk)[96](index=96&type=chunk) - **G&A employee headcount increased to four from three**, and expenses are expected to decrease for the remainder of fiscal 2024[97](index=97&type=chunk) [Liquidity and Going Concern](index=23&type=section&id=Liquidity%20and%20Going%20Concern) This section discusses the Company's cash position, accumulated deficit, and the need for additional capital to address going concern doubts - As of December 31, 2023, the Company had a **cash balance of approximately $2.0 million** and an **accumulated deficit of $61.4 million**, with **net losses of $13.2 million** for the nine months ended December 31, 2023[98](index=98&type=chunk) - These financial conditions raise **substantial doubt about the Company's ability to continue as a going concern** for at least one year, necessitating additional capital[98](index=98&type=chunk) - Recent capital raising efforts include **$9.7 million net proceeds** from a May 2023 public offering, **$278,000 net proceeds** from ATM sales in January 2024, and **$550,000** from warrant exercises in January 2024[98](index=98&type=chunk) - **Cash used in operating activities increased to approximately $10.5 million** for the nine months ended December 31, 2023, from **$8.2 million** in the prior year, primarily due to increased net losses[100](index=100&type=chunk) [Purchase Obligations](index=24&type=section&id=Purchase%20Obligations) This section outlines the Company's outstanding purchase orders for equipment and commitments under a device integration agreement - As of December 31, 2023, the Company had outstanding **purchase orders for machinery and equipment** and related expenditures totaling approximately **$0.6 million**[103](index=103&type=chunk) - A **device integration agreement** signed in December 2023 creates an obligation of approximately **$0.6 million over three years** for technology integration and license fees[103](index=103&type=chunk) [Recently Adopted and Issued Accounting Pronouncements](index=24&type=section&id=Recently%20Adopted%20and%20Issued%20Accounting%20Pronouncements) This section refers to Note 1 for details on recently adopted and issued accounting pronouncements - Details regarding recently adopted and issued accounting pronouncements are provided in **Note 1** of the Notes to the Condensed Consolidated Financial Statements[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2023, and reported no material changes in internal control over financial reporting during the three months ended December 31, 2023 - Management concluded that the Company's **disclosure controls and procedures were effective** as of December 31, 2023[107](index=107&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during the three months ended December 31, 2023[108](index=108&type=chunk) [PART II — OTHER INFORMATION](index=25&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently involved in any litigation that is believed to have a material adverse effect on its financial condition or results of operations - The Company is **not currently involved in any litigation, claims, or assessments** that are expected to have a material adverse effect on its financial condition or results of operations[110](index=110&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended March 31, 2023 - The Company reports **no material changes** to the risk factors set forth in its Annual Report on Form 10-K filed on June 26, 2023[111](index=111&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Repurchases of Equity Securities](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Repurchases%20of%20Equity%20Securities) The Company issued unregistered common stock in December 2023, including 6,375 shares to non-employee directors under the Outside Director Compensation Plan and 20,834 shares to a non-employee director upon vesting of a restricted stock unit award - On December 29, 2023, the Company issued **6,375 shares to four non-employee directors** and **20,834 shares to one non-employee director** upon RSU vesting, all as unregistered common stock under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act[112](index=112&type=chunk) [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults in the payment of principal, interest, or other material defaults with respect to any of its indebtedness - There has been **no default** in the payment of principal, interest, or any other material default with respect to any of the Company's indebtedness[113](index=113&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is **not applicable** to the Company[114](index=114&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - **No other information** is provided under this item[115](index=115&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Sales Agreement, FDA Submission and Clearance Milestone Bonus Program, certifications from executive officers, and Inline XBRL documents - Key exhibits include the **Sales Agreement (ATM Agreement)** dated November 22, 2023, the **Two-Part FDA Submission and Clearance Milestone Bonus Program**, and certifications from the Principal Executive Officer and Principal Financial Officer[116](index=116&type=chunk) [Signatures](index=27&type=section&id=Signatures) The report is duly signed on behalf of Modular Medical, Inc. by James E. Besser, Chief Executive Officer, and Paul DiPerna, Chairman, President, Chief Financial Officer, and Treasurer, on February 13, 2024 - The report was signed by **James E. Besser (Chief Executive Officer)** and **Paul DiPerna (Chairman, President, Chief Financial Officer, and Treasurer)** on February 13, 2024[120](index=120&type=chunk)

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial information for Modular Medical, Inc., including statements, notes, and management's discussion [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of Modular Medical, Inc. for the period ended September 30, 2023, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies and financial statement components [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of September 30, 2023, and March 31, 2023 Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2023 (Unaudited) | March 31, 2023 | | :-------------------------------- | :--------------------------------------- | :-------------------------- | | Cash and cash equivalents | $6,330 | $3,799 | | Total Current Assets | $6,463 | $4,046 | | Total Assets | $10,059 | $7,245 | | Total Current Liabilities | $1,112 | $979 | | Total Liabilities | $2,121 | $2,169 | | Total Stockholders' Equity | $7,938 | $5,076 | - Total assets increased by approximately **$2.8 million** from March 31, 2023, to September 30, 2023, primarily driven by an increase in cash and cash equivalents[10](index=10&type=chunk) - Total stockholders' equity increased by approximately **$2.8 million**, reflecting new equity issuances[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, presenting revenues, expenses, and net loss for the three and six months ended September 30, 2023, and 2022 Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Research and development | $2,980 | $2,385 | $5,584 | $4,607 | | General and administrative | $1,210 | $1,064 | $2,357 | $2,341 | | Total operating expenses | $4,190 | $3,449 | $7,941 | $6,948 | | Net loss | $(4,183) | $(3,450) | $(7,920) | $(6,949) | | Net loss per share (Basic and diluted) | $(0.19) | $(0.28) | $(0.40) | $(0.58) | - Net loss increased for both the three-month and six-month periods ended September 30, 2023, compared to the prior year, primarily due to increased operating expenses[12](index=12&type=chunk) - Research and development expenses increased by **24.9%** for the three months and **21.2%** for the six months ended September 30, 2023, reflecting continued investment in product development[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section details changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit, for the period ended September 30, 2023 Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Metric | March 31, 2023 | June 30, 2023 | September 30, 2023 | | :---------------------- | :------------- | :------------ | :----------------- | | Common Stock (Amount) | $11 | $21 | $21 | | Additional Paid-In Capital | $53,524 | $63,731 | $64,296 | | Accumulated Deficit | $(48,459) | $(52,196) | $(56,379) | | Total Stockholders' Equity | $5,076 | $11,556 | $7,938 | - Total stockholders' equity increased significantly from March 31, 2023, to June 30, 2023, primarily due to the issuance of common stock and warrants in an equity offering, with net proceeds of **$9.733 million**[15](index=15&type=chunk) - The accumulated deficit continued to grow, reaching **$(56.379) million** as of September 30, 2023, reflecting ongoing net losses[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities for the six months ended September 30, 2023, and 2022 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(6,484) | $(5,526) | | Net cash used in investing activities | $(718) | $(81) | | Net cash provided by financing activities | $9,733 | $7,372 | | Net increase in cash and cash equivalents | $2,531 | $1,765 | | Cash and cash equivalents at end of period | $6,330 | $10,841 | - Operating activities continued to consume cash, with a net use of **$6.48 million** for the six months ended September 30, 2023, an increase from **$5.53 million** in the prior year[18](index=18&type=chunk) - Financing activities provided significant cash inflows of **$9.73 million** in 2023, primarily from a public offering of common stock and warrants, enabling a net increase in cash despite operating and investing outflows[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies and specific account breakdowns [NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note provides an overview of Modular Medical, Inc., its business as a development-stage medical device company focused on insulin pumps, and a summary of its significant accounting policies. It also highlights the company's liquidity challenges and going concern risk, emphasizing the need for additional capital - Modular Medical, Inc. is a development-stage medical device company focused on designing and commercializing an innovative two-part patch insulin pump (MODD1) for both Type 1 and Type 2 diabetes markets[22](index=22&type=chunk) - The company expects to incur operating losses and cash outflows for the foreseeable future, raising substantial doubt about its ability to continue as a going concern without securing additional capital[24](index=24&type=chunk)[25](index=25&type=chunk) - The condensed consolidated financial statements are unaudited and prepared in accordance with GAAP and SEC rules for interim reporting, with certain disclosures condensed or omitted[28](index=28&type=chunk) [NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL](index=13&type=section&id=NOTE%202%20%E2%80%93%20CONSOLIDATED%20BALANCE%20SHEET%20DETAIL) This note provides a detailed breakdown of specific balance sheet accounts, including property and equipment, net, and accrued expenses, showing changes between March 31, 2023, and September 30, 2023 Property and equipment, net (in thousands) | Property and equipment, net | September 30, 2023 | March 31, 2023 | | :--------------------------------------- | :----------------- | :------------- | | Machinery and equipment | $2,372 | $820 | | Construction-in-process | $161 | $1,003 | | Total property and equipment, net | $2,286 | $1,721 | Accrued expenses (in thousands) | Accrued expenses | September 30, 2023 | March 31, 2023 | | :------------------------------ | :----------------- | :------------- | | Accrued wages and employee benefits | $191 | $267 | | Other | $25 | $72 | | Total Accrued expenses | $216 | $339 | - Machinery and equipment significantly increased from **$820 thousand** to **$2.372 million**, while construction-in-process decreased from **$1.003 million** to **$161 thousand**, indicating assets moving from construction to in-service[53](index=53&type=chunk) [NOTE 3 – LEASES](index=13&type=section&id=NOTE%203%20%E2%80%93%20LEASES) This note details the Company's lease arrangements, including the expiration of a previous lease and the commencement of a new 48-month operating lease for its Thornmint Road facility, along with future minimum lease payments - The Company's 39-month lease at W. Bernardo Drive expired on June 30, 2023, and a **$100,000** security deposit was refunded[54](index=54&type=chunk) - A new 48-month operating lease for the Thornmint Road facility commenced on February 1, 2023, with an initial base monthly rent of **$36,000** and annual increases of approximately **4%**[55](index=55&type=chunk) Operating Lease (in thousands) | Annual Fiscal Years | Operating Lease | | :------------------ | :----------------------------- | | 2024 | $219 | | 2025 | $452 | | 2026 | $470 | | 2027 | $405 | | Total future lease payments | $1,546 | | Present value of lease liability | $1,359 | [NOTE 4 – STOCKHOLDERS' EQUITY](index=14&type=section&id=NOTE%204%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, primarily focusing on the May 2023 public offering of common stock and warrants, which generated significant gross proceeds, and provides a summary of outstanding warrants - In May 2023, the Company completed a public offering, issuing **8,816,900** shares of common stock and warrants to purchase **4,408,450** shares, generating aggregate gross proceeds of approximately **$9.39 million**[58](index=58&type=chunk) - The underwriter exercised its over-allotment option in full, purchasing an additional **1,322,534** shares and **661,267** warrants, adding approximately **$1.408 million** in gross proceeds[59](index=59&type=chunk) Warrant Summary | Warrant Type | Number of Shares (in thousands) | Exercise Price | Expiration | | :------------- | :------------------------------ | :------------- | :--------- | | Common stock | 1,348 | $0.01 | — | | Common stock | 768 | $6.00 | Jan-Feb 2027 | | Common stock | 4,011 | $6.60 | Feb 2027 | | Common stock | 1,438 | $6.60 | Nov 2027 | | Common stock | 605 | $1.32 | May 2027 | | Common stock | 5,070 | $1.22 | May 2028 | | Total | 13,240 | | | [NOTE 5 – STOCK-BASED COMPENSATION](index=16&type=section&id=NOTE%205%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details the Company's Amended 2017 Equity Incentive Plan, including the number of shares reserved, the recognition of stock-based compensation expense, and the activity of stock options and restricted stock units (RSUs) during the period - The 2017 Equity Incentive Plan was amended to increase shares reserved for issuance by an additional **2,000,000** shares in January 2023, allowing for a broad range of awards to employees, directors, and consultants[65](index=65&type=chunk) - Unamortized stock-based compensation cost for stock options was approximately **$2.645 million** as of September 30, 2023, expected to be recognized over a weighted-average period of **1.7 years**[66](index=66&type=chunk) Stock-Based Compensation Metrics | Metric | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Weighted-average grant date fair value of options granted | $1.00 per share | $4.17 per share | | Options outstanding (Sep 30, 2023) | 2,912,664 | | | RSUs granted (Six months ended Sep 30, 2023) | 250,000 | | [NOTE 6 – INCOME TAXES](index=17&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note explains the Company's accounting for income taxes, including the determination of deferred tax assets and liabilities and the establishment of a full valuation allowance due to the unlikelihood of realizing federal and state net deferred tax assets - The Company has recorded a full valuation allowance against its federal and state net deferred tax assets, as management believes it is more likely than not that these assets will not be fully realized[73](index=73&type=chunk) - The Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions as of September 30, 2023[74](index=74&type=chunk) [NOTE 7 – COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's commitments and contingencies, including its involvement in legal proceedings, indemnification agreements with officers and directors, and significant purchase obligations for machinery and equipment - The Company is not currently involved in any litigation believed to have a material adverse effect on its financial condition or results of operations[75](index=75&type=chunk) - The Company has indemnification agreements with its officers and directors but has not estimated the maximum potential liability due to limited history of claims[76](index=76&type=chunk)[77](index=77&type=chunk) - As of September 30, 2023, the Company had outstanding purchase orders for machinery and equipment and related expenditures totaling approximately **$996 thousand**[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting its status as a development-stage medical device company, ongoing operating losses, and the critical need for additional capital to address going concern risks. It also details changes in research and development and general and administrative expenses - The Company is a development-stage medical device company focused on an innovative insulin pump (MODD1) and has historically financed operations through equity offerings[82](index=82&type=chunk)[83](index=83&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern due to ongoing operating losses and negative cash flows, necessitating additional capital raises[83](index=83&type=chunk)[97](index=97&type=chunk) - Economic disruptions, including inflation and rising interest rates, pose risks to the Company's ability to access capital markets on favorable terms[85](index=85&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This subsection analyzes the Company's operating expenses, specifically research and development (R&D) and general and administrative (G&A) costs, detailing the drivers behind their changes for the three and six months ended September 30, 2023, compared to the prior year [Research and Development](index=20&type=section&id=Research%20and%20Development) This section details the changes in research and development expenses, highlighting increases due to employee-related costs, material costs, and headcount growth for product development Research and Development Expenses (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change (2022 to 2023) | % Change | | :---------------------- | :------------------------------ | :------------------------------ | :-------------------- | :------- | | Research and development | $2,980 | $2,385 | $595 | 24.9% | | Research and development (Six months) | $5,584 | $4,607 | $977 | 21.2% | - R&D expenses increased primarily due to higher employee-related costs (**$377 thousand** for three months, **$786 thousand** for six months) and increased material costs (**$165 thousand** for three months, **$342 thousand** for six months) related to pre-submission activities for the MODD1 insulin pump[89](index=89&type=chunk)[90](index=90&type=chunk) - R&D employee headcount increased from **28** to **35** year-over-year, and stock-based compensation expenses within R&D were **$373 thousand** and **$739 thousand** for the three and six months ended September 30, 2023, respectively[91](index=91&type=chunk) [General and Administrative](index=22&type=section&id=General%20and%20Administrative) This section analyzes changes in general and administrative expenses, attributing increases to facility, marketing, and employee costs, partially offset by reduced stock-based compensation General and Administrative Expenses (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change (2022 to 2023) | % Change | | :---------------------- | :------------------------------ | :------------------------------ | :-------------------- | :------- | | General and administrative | $1,210 | $1,064 | $146 | 13.7% | | General and administrative (Six months) | $2,357 | $2,341 | $16 | 0.7% | - G&A expenses increased for the three months ended September 30, 2023, due to higher facility-related (**$120 thousand**), marketing (**$85 thousand**), depreciation (**$72 thousand**), and employee-related costs (**$70 thousand**), partially offset by decreases in stock-based compensation (**$190 thousand**) and consulting (**$90 thousand**)[94](index=94&type=chunk) - For the six months, G&A expenses saw increases in facility-related (**$230 thousand**), employee-related (**$150 thousand**), depreciation (**$110 thousand**), and marketing (**$80 thousand**) costs, largely offset by significant decreases in stock-based compensation (**$495 thousand**) and consulting (**$238 thousand**)[95](index=95&type=chunk) [Liquidity and Going Concern](index=22&type=section&id=Liquidity%20and%20Going%20Concern) This section discusses the Company's liquidity position, ongoing net losses, and the critical need for additional capital to sustain operations and address going concern risks - The Company incurred net losses of **$7.9 million** for the six months ended September 30, 2023, and **$13.9 million** for the year ended March 31, 2023, resulting in an accumulated deficit of **$56.4 million**[97](index=97&type=chunk) - Cash balance at September 30, 2023, was approximately **$6.3 million**, and the Company used **$6.48 million** in operating activities for the six months ended September 30, 2023[97](index=97&type=chunk)[98](index=98&type=chunk) - The Company's ability to continue as a going concern depends on raising additional capital, likely through equity or debt, to fund R&D and operations; failure to do so may require curtailing initiatives and reducing costs[97](index=97&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023[105](index=105&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended September 30, 2023[106](index=106&type=chunk) [PART II — OTHER INFORMATION](index=24&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This part covers other essential information, including legal proceedings, risk factors, equity sales, defaults, and exhibits, providing a comprehensive overview beyond financial statements [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently involved in any litigation that is expected to have a material adverse effect on its financial condition or results of operations - The Company is not currently involved in any litigation, claims, or assessments that are believed to have a material adverse effect on its financial condition or results of operations[108](index=108&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) There are no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended March 31, 2023 - No material changes to the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended March 31, 2023, were identified[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section reports recent unregistered sales of common stock, including issuances to non-employee directors under the compensation plan and upon vesting of restricted stock units, as well as shares issued to a service provider - On September 29, 2023, the Company issued **6,265** shares to non-employee directors and **20,834** shares upon vesting of a restricted stock unit award[110](index=110&type=chunk) - On August 14, 2023, **1,428** shares of unregistered common stock were issued to a service provider[110](index=110&type=chunk) - These issuances were made pursuant to exemptions from registration under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act[110](index=110&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults in the payment of principal, interest, or other material defaults with respect to any of its indebtedness - There has been no default in the payment of principal, interest, or any other material default with respect to the Company's indebtedness[111](index=111&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - The disclosure requirement for Mine Safety is not applicable to Modular Medical, Inc.[112](index=112&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is provided under this item[113](index=113&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from executive officers (Sarbanes-Oxley Act Sections 302 and 906) and financial information formatted in Inline XBRL - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[114](index=114&type=chunk) - Financial information from the quarterly report, including statements of operations, balance sheets, stockholders' equity, cash flows, and notes, is filed in Inline Extensible Business Reporting Language (Inline XBRL)[114](index=114&type=chunk) [Signatures](index=26&type=section&id=Signatures) The report is duly signed on behalf of Modular Medical, Inc. by its Chief Executive Officer, James E. Besser, and its Chairman, President, Chief Financial Officer, and Treasurer, Paul DiPerna, as of November 13, 2023 - The report is signed by James E. Besser, Chief Executive Officer, and Paul DiPerna, Chairman, President, Chief Financial Officer, and Treasurer, on November 13, 2023[117](index=117&type=chunk)

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Modular Medical, Inc., including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in total assets and stockholders' equity from March 31, 2023, to June 30, 2023, primarily driven by an increase in cash and cash equivalents and additional paid-in capital from an equity offering | Metric | March 31, 2023 (Unaudited, in thousands) | June 30, 2023 (Unaudited, in thousands) | | :-------------------------- | :--------------------------------------- | :-------------------------------------- | | Cash and cash equivalents | $3,799 | $9,952 | | Total Current Assets | $4,046 | $10,235 | | Total Assets | $7,245 | $13,666 | | Total Current Liabilities | $979 | $1,010 | | Total Liabilities | $2,169 | $2,110 | | Common Stock (shares) | 10,949 | 21,095 | | Additional paid-in capital | $53,524 | $63,731 | | Accumulated deficit | $(48,459) | $(52,196) | | Total Stockholders' Equity | $5,076 | $11,556 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $3,737 thousand for the three months ended June 30, 2023, slightly higher than the $3,499 thousand loss for the same period in 2022, with increased operating expenses mainly due to higher R&D costs | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Research and development | $2,604 | $2,222 | | General and administrative | $1,147 | $1,277 | | Total operating expenses | $3,751 | $3,499 | | Loss from operations | $(3,751) | $(3,499) | | Net loss | $(3,737) | $(3,499) | | Net loss per share (Basic/Diluted)| $(0.22) | $(0.30) | | Shares used in computing net loss | 17,099 | 11,588 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly increased from $5,076 thousand at March 31, 2023, to $11,556 thousand at June 30, 2023, primarily due to the issuance of common stock and warrants in an equity offering, adding $9,733 thousand to additional paid-in capital | Metric | March 31, 2023 (in thousands) | Issuance of common stock and warrants, net (in thousands) | Stock-based compensation (in thousands) | Net loss (in thousands) | June 30, 2023 (in thousands) | | :-------------------------- | :---------------------------- | :---------------------------------------- | :-------------------------------------- | :---------------------- | :--------------------------- | | Total Stockholders' Equity | $5,076 | $9,733 | $478 | $(3,737) | $11,556 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net increase in cash and cash equivalents of $6,153 thousand for the three months ended June 30, 2023, primarily driven by $9,733 thousand in financing activities, partially offset by cash used in operating and investing activities | Cash Flow Activity | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(3,207) | $(2,675) | | Net cash used in investing activities | $(373) | $(76) | | Net cash provided by financing activities | $9,733 | $7,372 | | Net increase in cash and cash equivalents | $6,153 | $4,621 | | Cash and cash equivalents at end of period | $9,952 | $13,697 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's business, significant accounting policies, balance sheet details, lease obligations, changes in stockholders' equity, stock-based compensation, income tax positions, and commitments and contingencies [NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Modular Medical, Inc. is a development-stage medical device company focused on the design, development, and eventual commercialization of an innovative insulin pump (MODD1) for the diabetes marketplace, expecting continued operating losses and cash outflows, raising substantial doubt about its ability to continue as a going concern, necessitating additional capital raises - Company is a development-stage medical device company focused on an innovative two-part patch insulin pump (MODD1) to expand the wearable insulin delivery device market for type 1 and type 2 diabetes[23](index=23&type=chunk)[81](index=81&type=chunk) - Expects continued operating losses and cash outflows, raising substantial doubt about the company's ability to continue as a going concern, requiring additional capital through equity or debt securities[25](index=25&type=chunk)[26](index=26&type=chunk)[91](index=91&type=chunk) - The company adopted ASU No. 2016-13 (CECL model) effective April 1, 2023, with no impact on its results of operations and financial position[53](index=53&type=chunk) [NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL](index=13&type=section&id=NOTE%202%20%E2%80%93%20CONSOLIDATED%20BALANCE%20SHEET%20DETAIL) Details of property and equipment, net, show an increase from $1,721 thousand to $2,036 thousand, primarily in machinery and equipment and construction-in-process, while accrued expenses decreased from $339 thousand to $198 thousand, mainly due to a decrease in accrued wages and employee benefits | Property and Equipment, net | March 31, 2023 (in thousands) | June 30, 2023 (in thousands) | | :-------------------------- | :---------------------------- | :--------------------------- | | Machinery and equipment | $820 | $1,171 | | Construction-in-process | $1,003 | $1,018 | | Total property and equipment, net | $1,721 | $2,036 | | Accrued expenses | $339 | $198 | [NOTE 3 – LEASES](index=13&type=section&id=NOTE%203%20%E2%80%93%20LEASES) The company's 39-month lease at W. Bernardo Drive expired on June 30, 2023, and a new 48-month lease for Thornmint Road commenced February 1, 2023, with an initial monthly rent of $36,000 and annual increases, resulting in a right-of-use asset of approximately $1,560,000 - The 39-month lease at W. Bernardo Drive expired on June 30, 2023, with a **$100,000 security deposit receivable**[55](index=55&type=chunk) - A new 48-month lease for Thornmint Road commenced February 1, 2023, with an initial base monthly rent of **$36,000** and annual increases, resulting in a right-of-use asset of approximately **$1,560,000**[56](index=56&type=chunk) | Annual Fiscal Years | Operating Lease Payments (in thousands) | | :------------------ | :-------------------------------------- | | 2024 | $327 | | 2025 | $452 | | 2026 | $470 | | 2027 | $405 | | Total future lease payments | $1,654 | | Present value of lease liability | $1,439 | [NOTE 4 – STOCKHOLDERS' EQUITY](index=14&type=section&id=NOTE%204%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) In May 2023, the company completed a public offering, issuing 8,816,900 shares of common stock and warrants to purchase 4,408,450 shares, generating approximately $9,390,000 in gross proceeds, with the underwriter exercising an over-allotment option for additional securities, bringing total gross proceeds to approximately $10,798,000 - In May 2023, the company completed a public offering, selling **8,816,900 shares of common stock** and warrants to purchase **4,408,450 shares**, for aggregate gross proceeds of approximately **$9,390,000**[59](index=59&type=chunk) - The underwriter exercised its over-allotment option in full on May 25, 2023, purchasing additional securities for approximately **$1,408,000** in gross proceeds[60](index=60&type=chunk) | Warrant Type | Number of Shares (in thousands) | Exercise Price | Expiration | | :----------- | :------------------------------ | :------------- | :--------- | | Common stock | 1,348 | $0.01 | — | | Common stock | 768 | $6.00 | Jan-Feb 2027 | | Common stock | 4,011 | $6.60 | Feb 2027 | | Common stock | 1,438 | $6.60 | Nov 2027 | | Common stock | 710 | $1.32 | May 2027 | | Common stock | 5,070 | $1.22 | May 2028 | | Total | 13,345 | | | [NOTE 5 – STOCK-BASED COMPENSATION](index=16&type=section&id=NOTE%205%20%E2%80%93%20STOCK-BASED%20COMPENSATION) The company's 2017 Equity Incentive Plan was amended in January 2023 to increase reserved shares by 2,000,000, with stock-based compensation expense for Q2 2023 at approximately $484,000 and unamortized compensation cost for stock options of $3,084,000 expected to be recognized over approximately 1.90 years - Stockholders approved an increase of **2,000,000 shares** reserved for issuance under the 2017 Equity Incentive Plan in January 2023[66](index=66&type=chunk) - Unamortized compensation cost for stock options was approximately **$3,084,000** as of June 30, 2023, to be recognized over a weighted-average period of approximately **1.90 years**[67](index=67&type=chunk) | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Stock-based compensation expense | $484 | $739 | | Weighted-average grant date fair value of options | $1.00 | $4.26 | [NOTE 6 – INCOME TAXES](index=17&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) The company has recorded a full valuation allowance against its federal and state net deferred tax assets, as management believes it is more likely than not that these assets will not be fully realized, and no liability for unrecognized tax benefits has been recorded - A full valuation allowance has been established for federal and state net deferred tax assets, as realization is not considered more likely than not[74](index=74&type=chunk) - No liability for unrecognized tax benefits related to uncertain tax positions has been recorded as of June 30, 2023[75](index=75&type=chunk) [NOTE 7 – COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%207%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company is not currently involved in any litigation expected to have a material adverse effect, has contractual indemnification arrangements with counterparties and its officers/directors with unestimable maximum potential liability, and had outstanding purchase obligations for machinery and equipment totaling approximately $566,000 at June 30, 2023 - The company is not currently involved in any litigation that is believed to have a material adverse effect on its financial condition or results of operations[103](index=103&type=chunk) - The company has entered into indemnification agreements with its officers and directors; no amounts were reflected in the financial statements, and the maximum potential amount of indemnification liability is not estimable[77](index=77&type=chunk) - Outstanding purchase orders for machinery and equipment and related expenditures totaled approximately **$566,000** at June 30, 2023[78](index=78&type=chunk)[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its development-stage status, reliance on capital raises, and the impact of economic disruptions, detailing changes in R&D and G&A expenses and reiterating going concern doubts [Company Overview](index=18&type=section&id=MD%26A%20-%20Company%20Overview) Modular Medical, Inc. is a development-stage medical device company focused on commercializing an innovative two-part patch insulin pump (MODD1) to expand the wearable insulin delivery market for both type 1 and type 2 diabetes, historically financing operations through equity and debt offerings, and while it believes it has adequate cash for the next 12 months, its long-term viability depends on raising additional capital - The company is a development-stage medical device company focused on designing, developing, and commercializing an innovative insulin pump (MODD1) to expand the wearable insulin delivery device market[81](index=81&type=chunk) - Historically, operations have been financed through private placements and public offerings of common stock and convertible promissory notes[82](index=82&type=chunk) - Long-term ability to continue as a going concern depends on raising additional capital through equity or debt securities[82](index=82&type=chunk) [Recent Economic Disruptions](index=19&type=section&id=MD%26A%20-%20Recent%20Economic%20Disruptions) The company acknowledges the past and potential future impacts of the COVID-19 pandemic, the Russian invasion of Ukraine, inflationary pressures, and rising interest rates on the global economy and capital markets, and while it recently accessed capital markets, future access on favorable terms is uncertain - The COVID-19 pandemic's U.S. national emergency expired in May 2023, but its future impact on operational and financial performance remains uncertain[83](index=83&type=chunk) - Global capital markets have experienced disruption and volatility due to the continued spread of COVID-19, the Russian invasion of Ukraine, mounting inflationary cost pressures, and rising interest rates[39](index=39&type=chunk)[84](index=84&type=chunk) - Future access to capital markets and the terms of additional capital are uncertain, potentially being significantly detrimental to existing stockholders[39](index=39&type=chunk)[84](index=84&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=MD%26A%20-%20Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments, and as of June 30, 2023, there have been no material changes to its significant accounting policies and estimates previously disclosed in its annual 10-K - Financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments[86](index=86&type=chunk) - As of June 30, 2023, there have been no material changes to the company's significant accounting policies and estimates disclosed in its most recent annual report on Form 10-K[86](index=86&type=chunk) [Results of Operations](index=19&type=section&id=MD%26A%20-%20Results%20of%20Operations) The company's operating expenses increased for the three months ended June 30, 2023, compared to the same period in 2022, primarily driven by higher research and development costs, partially offset by a decrease in general and administrative expenses [Research and Development](index=19&type=section&id=MD%26A%20-%20Research%20and%20Development) R&D expenses increased by 17.2% to $2,604 thousand for Q2 2023, primarily due to higher employee-related costs and materials, partially offset by reduced consulting costs as the company increased headcount and completed pump product development | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :---------------------- | :--------- | | Research and development | $2,604 | $2,222 | $382 | 17.2% | - Increase primarily due to increased employee-related costs (approx. **$410,000**) and materials costs (approx. **$177,000**)[88](index=88&type=chunk) - Partially offset by an approximately **$255,000 decrease** in consulting costs as employee headcount increased (**34** at June 30, 2023, from **23** at June 30, 2022) and pump product development was completed[88](index=88&type=chunk) [General and Administrative](index=20&type=section&id=MD%26A%20-%20General%20and%20Administrative) G&A expenses decreased by 10.2% to $1,147 thousand for Q2 2023, mainly due to a significant reduction in stock-based compensation expenses and consulting services, partially offset by increased facility-related and employee-related costs | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :---------------------- | :--------- | | General and administrative | $1,147 | $1,277 | $(130) | (10.2)% | - Decrease primarily due to a reduction in stock-based compensation expenses (approx. **$305,000**) and consulting and professional services expenses (approx. **$70,000**)[90](index=90&type=chunk) - Partially offset by increases in facility-related costs (approx. **$137,000**) and employee-related costs (approx. **$80,000**)[90](index=90&type=chunk) [Liquidity and Going Concern](index=20&type=section&id=MD%26A%20-%20Liquidity%20and%20Going%20Concern) As a development-stage company with no current revenues, Modular Medical continues to incur operating losses and negative cash flows, resulting in an accumulated deficit of $52.2 million at June 30, 2023, and despite a recent $9.7 million equity offering, these conditions raise substantial doubt about its ability to continue as a going concern, necessitating further capital raises or cost reductions - Incurred net losses of **$3.7 million** for the three months ended June 30, 2023, and **$13.9 million** for the year ended March 31, 2023[91](index=91&type=chunk) - Cash balance of approximately **$10.0 million** and an accumulated deficit of **$52.2 million** at June 30, 2023[91](index=91&type=chunk) - Conditions raise substantial doubt about the company's ability to continue as a going concern, requiring additional capital or curtailment of R&D initiatives and cost reductions[91](index=91&type=chunk) | Cash Flow Activity | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(3,207) | $(2,675) | | Net cash used in investing activities | $(373) | $(76) | | Net cash provided by financing activities | $9,733 | $7,372 | [Purchase Obligations](index=21&type=section&id=MD%26A%20-%20Purchase%20Obligations) The company's primary purchase obligations consist of purchase orders for machinery and equipment, totaling approximately $566,000 as of June 30, 2023 - Outstanding purchase orders for machinery and equipment and related expenditures totaled approximately **$566,000** at June 30, 2023[78](index=78&type=chunk)[96](index=96&type=chunk) [Recently Issued Accounting Pronouncements](index=21&type=section&id=MD%26A%20-%20Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 1 of the financial statements for details on recently issued accounting pronouncements - Details on recently issued accounting pronouncements are provided in Note 1 of the Notes to the Condensed Consolidated Financial Statements[97](index=97&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, and there were no material changes in internal control over financial reporting during the three months ended June 30, 2023 [Disclosure Controls and Procedures](index=21&type=section&id=Disclosure%20Controls%20and%20Procedures) Management, including the Chief Executive Officer, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2023 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[100](index=100&type=chunk) [Changes in Internal Control over Financial Reporting](index=21&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the three months ended June 30, 2023 - There was no change in internal control over financial reporting that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended June 30, 2023[101](index=101&type=chunk) [PART II — OTHER INFORMATION](index=22&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any litigation that is believed to have a material adverse effect on its financial condition or results of operations - The company is not currently involved in any litigation that is believed to have a material adverse effect on its financial condition or results of operations[103](index=103&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) There are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended March 31, 2023 - There are no material changes to the risk factors set forth under Item 1A of the Annual Report on Form 10-K for the year ended March 31, 2023[104](index=104&type=chunk) [Item 2. Unregistered Sales of Equity Securities](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities) On June 30, 2023, the company issued 6,375 shares of restricted common stock to four non-employee directors under its Outside Director Compensation Plan, pursuant to exemptions from registration - On June 30, 2023, the company issued a total of **6,375 shares of restricted common stock** to four non-employee directors in accordance with its Outside Director Compensation Plan[105](index=105&type=chunk) - These issuances were made pursuant to exemptions from registration under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act[105](index=105&type=chunk) [Item 3. Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There have been no defaults in payment of principal, interest, or any other material default with respect to any of the company's indebtedness - There has been no default in the payment of principal, interest, or any other material default with respect to any indebtedness of the company[106](index=106&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[107](index=107&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - None[108](index=108&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Underwriting Agreement, forms of warrants, certifications (302 and 906), and XBRL financial data - Exhibits include the Form of Underwriting Agreement, forms of warrants from the May 2023 Public Offering, certifications of Principal Executive Officer and Principal Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline Extensible Business Reporting Language (Inline XBRL) financial information[110](index=110&type=chunk) [Signatures](index=24&type=section&id=Signatures) The report is signed by James E. Besser, Chief Executive Officer, and Paul DiPerna, Chairman, President, Chief Financial Officer, and Treasurer, on August 14, 2023 - The report was signed on August 14, 2023, by James E. Besser, Chief Executive Officer, and Paul DiPerna, Chairman, President, Chief Financial Officer, and Treasurer[114](index=114&type=chunk)