UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2022 o 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 (State or other jurisdiction of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: March 31, 2022 or o 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 (State or Other Jurisdiction of I ...

| --- | --- | --- | --- | --- | --- | |------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | O MODULAR | | | | | | | MEDICAL | | | | | | | Investor Presentation. | | | | | | | | | | | | | | NASDAQ:MODD | | | | | | 2 | Forward Looking Statements, Other Disclaimers. THIS SUMMARY IS PROVIDED ON A CONFIDENTIAL AND LIMITED BASIS, SOLELY FOR YOUR USE AS A PART OF YOUR DETERMINATION OF WHETHER TO INVEST IN THE OPPORTUNITY. THIS SUMMARY IS BEING ...

PART I: FINANCIAL INFORMATION [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, including the balance sheets, statements of operations, stockholders' equity (deficit), and cash flows, along with detailed notes explaining significant accounting policies, debt instruments, equity changes, and subsequent events [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | December 31, 2021 (Unaudited) (USD) | March 31, 2021 (USD) | | :-------------------------- | :------------------------------ | :--------------- | | Cash and cash equivalents | $204,098 | $1,468,465 | | Total Current Assets | $268,651 | $1,649,089 | | Total Assets | $751,839 | $2,248,171 | | Total Current Liabilities | $8,921,262 | $3,296,965 | | Total Liabilities | $8,998,474 | $3,523,320 | | Total Stockholders' Deficit | $(8,246,635) | $(1,275,149) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights | Metric | Three Months Ended Dec 31, 2021 (USD) | Three Months Ended Dec 31, 2020 (USD) | Nine Months Ended Dec 31, 2021 (USD) | Nine Months Ended Dec 31, 2020 (USD) | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $1,849,399 | $1,086,669 | $5,742,911 | $3,150,149 | | General and administrative | $1,981,665 | $783,898 | $5,156,152 | $2,453,808 | | Total operating expenses | $3,831,064 | $1,870,567 | $10,899,063 | $5,603,957 | | Loss from operations | $(3,831,064) | $(1,870,567) | $(10,899,063) | $(5,603,957) | | Interest expense | $(1,010,247) | $0 | $(2,204,917) | $0 | | Net loss | $(4,841,307) | $(1,870,545) | $(14,058,155) | $(5,605,431) | | Net loss per share (Basic and diluted) | $(0.76) | $(0.30) | $(2.22) | $(0.91) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Deficit)) Stockholders' Deficit Changes (Nine Months Ended Dec 31, 2021) | Item | Amount (USD) | | :------------------------------------ | :----------- | | Balance as of March 31, 2021 | $(1,275,149) | | Shares issued for services | $172,200 | | Warrants issued with convertible notes| $3,700,632 | | Stock-based compensation | $2,740,073 | | Net loss | $(14,058,155)| | Balance as of December 31, 2021 | $(8,246,635) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended) | Cash Flow Activity | December 31, 2021 (USD) | December 31, 2020 (USD) | | :----------------- | :---------------- | :---------------- | | Operating | $(7,128,787) | $(4,570,713) | | Investing | $(22,779) | $(109,541) | | Financing | $5,887,199 | $2,154,662 | | Net decrease | $(1,264,367) | $(2,525,592) | | Cash at end of period | $204,098 | $596,542 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's business, significant accounting policies, lease obligations, PPP loan forgiveness, convertible and promissory notes, stockholders' equity, income taxes, related party transactions, commitments, contingencies, and subsequent events [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 designing, developing, and commercializing an innovative two-part insulin patch pump for both type 1 and type 2 diabetes markets[23](index=23&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, necessitating additional capital raises[25](index=25&type=chunk) - A **1-for-3 reverse stock split** was effective November 29, 2021, combining every three shares of common stock into one, with proportionate adjustments to voting rights, options, and warrants[29](index=29&type=chunk) [NOTE 2 – LEASES](index=11&type=section&id=NOTE%202%20%E2%80%93%20LEASES) Future Minimum Lease Payments (as of December 31, 2021) | Annual Fiscal Years | Operating Lease (USD) | | :------------------ | :-------------- | | 2022 | $38,358 | | 2023 | $158,028 | | 2024 | $40,692 | | Less: Imputed interest | $(20,049) | | Present value of lease liabilities | $217,029 | - Cash paid for lease liabilities was **$115,073** for the nine months ended December 31, 2021[47](index=47&type=chunk) [NOTE 3 – PPP NOTE](index=12&type=section&id=NOTE%203%20%E2%80%93%20PPP%20NOTE) - The Company received a **$368,780 PPP Note** in April 2020, which was fully forgiven in May 2021, and recorded as a gain on extinguishment in other income[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 4 – CONVERTIBLE PROMISSORY NOTES](index=12&type=section&id=NOTE%204%20%E2%80%93%20CONVERTIBLE%20PROMISSORY%20NOTES) - In April and May 2021, the Company sold **$4,250,000 in convertible promissory notes** and warrants, bearing **12% annual interest** (16% upon default) and convertible at **$8.61 per share** after 270 days[51](index=51&type=chunk)[52](index=52&type=chunk) - The fair value of warrants issued with convertible notes was **$3,700,632**, with **$2,379,182** recorded as a debt discount and **$1,321,450** as a loss on debt extinguishment[57](index=57&type=chunk) - Interest expense attributable to debt discount (issuance costs and warrants) was **$630,323** for the three months and **$1,454,762** for the nine months ended December 31, 2021[58](index=58&type=chunk) [NOTE 5 – PROMISSORY NOTE](index=13&type=section&id=NOTE%205%20%E2%80%93%20PROMISSORY%20NOTE) - On October 28, 2021, the Company issued a secured promissory note (Bridge Note) to Manchester Explorer, L.P., providing a **$3,000,000 revolving credit facility** due March 15, 2022, with a **12% interest rate**[60](index=60&type=chunk) - During the quarter ended December 31, 2021, the Company drew **$1,500,000** on the Bridge Note and incurred **$180,000** in interest charges[64](index=64&type=chunk) [NOTE 6 – STOCKHOLDERS' DEFICIT AND STOCK-BASED COMPENSATION](index=14&type=section&id=NOTE%206%20%E2%80%93%20STOCKHOLDERS%27%20DEFICIT%20AND%20STOCK-BASED%20COMPENSATION) - During the three months ended December 31, 2021, the Company sold **30,865 common shares** to officers, issued **8,334 shares** to a service provider, and **5,775 shares** to non-employee directors[65](index=65&type=chunk) - Stock-based compensation expense for the nine months ended December 31, 2021, was **$1,769,805**, with an unamortized cost of **$7,419,022** expected to be recognized over approximately two years[67](index=67&type=chunk)[68](index=68&type=chunk) Stock Option Activity (Nine Months Ended Dec 31, 2021) | Metric | Number of Shares | | :-------------------------------- | :--------------- | | Balance at March 31, 2021 | 1,197,252 | | Options granted | 723,269 | | Options cancelled and returned | (67,990) | | Balance at December 31, 2021 | 1,845,953 | | Options Exercisable (Dec 31, 2021)| 1,011,586 | | Weighted Average Exercise Price (Outstanding) | $7.57 | | Weighted Average Exercise Price (Exercisable) | $5.10 | [NOTE 7 – INCOME TAXES](index=16&type=section&id=NOTE%207%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 they will not be fully realized[75](index=75&type=chunk) [NOTE 8 – RELATED PARTY TRANSACTIONS](index=16&type=section&id=NOTE%208%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) - Related parties, including the chairman/president and an investor, held convertible notes totaling **$1,129,293** in principal and accrued interest as of December 31, 2021[77](index=77&type=chunk)[78](index=78&type=chunk) - The CEO and Chairman/CFO purchased **30,864 shares** of common stock for **$250,000** in October 2021[79](index=79&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company is involved in legal proceedings, claims, and assessments in the normal course of business but has not made any payments or received claims under indemnification agreements with officers and directors[81](index=81&type=chunk)[82](index=82&type=chunk) [NOTE 10 – SUBSEQUENT EVENTS](index=17&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) - Subsequent to December 31, 2021, the Company made additional draws totaling **$600,000** under the Bridge Note[83](index=83&type=chunk) - On February 9, 2022, the Company completed a public offering of **2,500,000 common shares** and **2,500,000 warrants** at **$6.00 per unit**, generating **$15 million in gross proceeds**, and listed on Nasdaq Capital Market under 'MODD'[84](index=84&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 for the reported periods. It highlights the company's development-stage status, the impact of COVID-19, critical accounting policies, and detailed analysis of operating expenses and capital resources, emphasizing the going concern risk and need for future financing - The Company is a development-stage medical device company focused on an innovative insulin pump, targeting both type 1 and type 2 diabetes markets[90](index=90&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[91](index=91&type=chunk)[102](index=102&type=chunk) [Company Overview](index=18&type=section&id=Company%20Overview) - 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 expand the wearable insulin delivery device market[90](index=90&type=chunk) [Impacts of COVID-19](index=19&type=section&id=Impacts%20of%20COVID-19) - COVID-19 has negatively affected the economy, supply chains, and financial markets, leading to longer lead times for components and potential delays for FDA submission[92](index=92&type=chunk)[93](index=93&type=chunk) - The Company's ability to raise additional capital to support future operations may be impacted by continued disruption and volatility in global capital markets[94](index=94&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - As of December 31, 2021, there have been no material changes to the Company's significant accounting policies and estimates[96](index=96&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) [Research and Development](index=19&type=section&id=Research%20and%20Development) Research and Development Expenses (YoY Change) | Period | 2021 (USD) | 2020 (USD) | Change (USD) | Change (%) | | :------------------------- | :---------- | :---------- | :----------- | :--------- | | Three months ended Dec 31 | $1,849,399 | $1,086,669 | $762,730 | 70.2% | | Nine months ended Dec 31 | $5,742,911 | $3,150,149 | $2,592,762 | 82.3% | - The increase in R&D expenses was primarily due to increased engineering and manufacturing consulting costs, personnel, prototype and production component costs, and stock-based compensation expenses[98](index=98&type=chunk) [General and Administrative](index=20&type=section&id=General%20and%20Administrative) General and Administrative Expenses (YoY Change) | Period | 2021 (USD) | 2020 (USD) | Change (USD) | Change (%) | | :------------------------- | :---------- | :---------- | :----------- | :--------- | | Three months ended Dec 31 | $1,981,665 | $783,898 | $1,197,767 | 152.8% | | Nine months ended Dec 31 | $5,156,152 | $2,453,808 | $2,702,344 | 110.1% | - The increase in G&A expenses was mainly driven by higher stock-based compensation expense and increased consulting and legal fees[100](index=100&type=chunk) [Interest Expense](index=20&type=section&id=Interest%20Expense) Interest Expense (YoY Change) | Period | 2021 (USD) | 2020 (USD) | Change (USD) | | :------------------------- | :---------- | :--------- | :----------- | | Three months ended Dec 31 | $1,010,247 | $0 | $(1,010,225) | | Nine months ended Dec 31 | $2,204,917 | $0 | $(2,204,791) | - Interest expense significantly increased due to interest incurred from convertible promissory notes and the promissory (bridge) note[101](index=101&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company incurred a net loss of approximately **$14.1 million** for the nine months ended December 31, 2021, and had an accumulated deficit of approximately **$29.9 million**[102](index=102&type=chunk) - Cash used in operating activities was **$7,128,787** for the nine months ended December 31, 2021, compared to **$4,570,713** for the same period in 2020[104](index=104&type=chunk) - Cash provided by financing activities was **$5,887,199** for the nine months ended December 31, 2021, primarily from convertible notes (**$4,137,199 net**) and a promissory note (**$1,500,000**), and private placement of common stock (**$250,000**)[19](index=19&type=chunk)[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=21&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for the Company - This item is not required[107](index=107&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 December 31, 2021, and reported no material changes in internal control over financial reporting during the nine months ended December 31, 2021 - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2021[109](index=109&type=chunk) - There were **no material changes** in internal control over financial reporting during the nine months ended December 31, 2021[110](index=110&type=chunk) PART II: OTHER INFORMATION [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The Company reported no legal proceedings - There are no legal proceedings[113](index=113&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) This section reiterates significant business risks, including the ongoing and uncertain adverse effects of the COVID-19 pandemic on operations, supply chains, and the ability to raise capital, which could materially impact the Company's financial condition and results - The full effects of COVID-19 are uncertain and could materially and adversely affect the Company's business, financial condition, operating results, and cash flows, particularly impacting supply chains and workforce effectiveness[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - The Company may be unable to access capital markets or secure additional capital on favorable terms, which is crucial for future operations, given the ongoing disruption and volatility caused by COVID-19[118](index=118&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details recent unregistered sales of common stock, including issuances to non-employee directors, service providers, and executive officers, totaling 30,864 shares to officers for $250,000 - On December 31, 2021, **5,775 shares** of common stock were issued to non-employee directors[119](index=119&type=chunk) - On October 22, 2021, **8,834 shares** of common stock were issued to service providers[119](index=119&type=chunk) - On October 28, 2021, **30,864 shares** of common stock were sold to two executive officers for gross proceeds of **$250,000**[121](index=121&type=chunk) [Item 3. Defaults Upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - There are no defaults upon senior securities[122](index=122&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable[123](index=123&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205.%20Other%20Information) The Company reported no other information - There is no other information to report[124](index=124&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 corporate governance documents, debt agreements, stock purchase agreements, and certifications Key Exhibits Filed | Exhibit No. | Description of Document | | :---------- | :---------------------- | | 3.1 | Certificate of Amendment and Second Amended and Restated Articles of Incorporation | | 3.2 | Certificate of Amendment to the Amended and Restated Articles of Incorporation | | 10.27 | Promissory Note dated October 28, 2021 | | 10.28 | Security Agreement dated October 28, 2021 | | 10.29 | Form of Common Stock Purchase Agreement dated October 28, 2021 | | 31.1 | Certification of Ellen O'Connor Vos pursuant to Section 302 of SOX | | 31.2 | Certification of Paul M. DiPerna pursuant to Section 302 of SOX | | 32.1 | Certification of Ellen O'Connor Vos and Paul M. DiPerna pursuant to 18 U.S.C. Section 1350 | | 101.INS | XBRL Instance Document | [Signatures](index=24&type=section&id=Signatures) This section contains the official signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the accuracy and completeness of the quarterly report - The report is signed by Ellen O'Connor Vos, Chief Executive Officer, and Paul M. DiPerna, Chief Financial Officer, on February 14, 2022[130](index=130&type=chunk)

```markdown [FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) This quarterly report (Form 10-Q) for September 30, 2021, details MODULAR MEDICAL, INC.'s filing status and outstanding shares - The report is a Quarterly Report (Form 10-Q) for the period ended September 30, 2021, filed by **MODULAR MEDICAL, INC.** (Commission file number: **000-49671**)[1](index=1&type=chunk)[2](index=2&type=chunk) - The registrant is classified as a **Non-accelerated filer**, a **Smaller reporting company**, and an **Emerging growth company**[4](index=4&type=chunk) - As of November 10, 2021, the number of outstanding shares of **common stock** was **19,100,154**[6](index=6&type=chunk) Part I – Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, showing a decrease in cash and a significant increase in total liabilities | ASSETS/LIABILITIES/EQUITY | September 30, 2021 (Unaudited) | March 31, 2021 | | :-------------------------- | :----------------------------- | :------------- | | Cash and cash equivalents | $798,161 | $1,468,465 | | TOTAL CURRENT ASSETS | $844,661 | $1,649,089 | | TOTAL ASSETS | $1,374,838 | $2,248,171 | | TOTAL CURRENT LIABILITIES | $6,361,743 | $3,296,965 | | TOTAL LIABILITIES | $6,475,652 | $3,523,320 | | TOTAL STOCKHOLDERS' DEFICIT | $(5,100,814) | $(1,275,149) | - The company's cash and cash equivalents decreased by approximately **45.7%** from **$1,468,465** at March 31, 2021, to **$798,161** at September 30, 2021[9](index=9&type=chunk) - Total liabilities increased significantly by approximately **83.8%** from **$3,523,320** at March 31, 2021, to **$6,475,652** at September 30, 2021, primarily due to an increase in **convertible notes** payable[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, reporting a significant increase in net loss driven by higher operating and interest expenses | Operating Expenses / Loss | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Research and development | $2,105,380 | $1,092,665 | $3,893,511 | $2,063,480 | | General and administrative| $1,589,032 | $766,513 | $3,174,489 | $1,669,910 | | Total operating expenses | $3,694,412 | $1,859,178 | $7,068,000 | $3,733,390 | | Loss from operations | $(3,694,412) | $(1,859,178) | $(7,068,000) | $(3,733,390) | | Interest expense | $(685,793) | $— | $(1,194,670) | $— | | Loss on debt extinguishment | $— | $— | $(1,321,450) | $— | | Net Loss | $(4,381,757) | $(1,860,729) | $(9,216,848) | $(3,734,886) | | Net loss per share (Basic and diluted) | $(0.23) | $(0.10) | $(0.49) | $(0.20) | - Net loss for the six months ended September 30, 2021, significantly increased to **$(9,216,848)** from **$(3,734,886)** in the prior year, primarily due to increased operating expenses, interest expense, and a loss on debt extinguishment[11](index=11&type=chunk) - Research and development expenses increased by **88.7%** for the six months ended September 30, 2021, compared to the same period in 2020, reflecting increased development and manufacturing activities[11](index=11&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section outlines changes in stockholders' equity, primarily reflecting an increased deficit due to net loss, partially offset by capital contributions | Equity Item | Balance as of March 31, 2021 | Shares issued for services | Warrants issued with convertible notes | Stock-based compensation | Net loss | Balance as of September 30, 2021 | | :---------- | :--------------------------- | :------------------------- | :----------------------------------- | :----------------------- | :------- | :------------------------------- | | Common Stock Shares | 18,906,148 | 60,000 | — | 16,414 | — | 18,982,562 | | Common Stock Amount | $18,906 | $60 | — | $17 | — | $18,983 | | Additional Paid-In Capital | $14,652,955 | $172,140 | $3,700,632 | $1,518,334 | — | $20,044,061 | | Accumulated Deficit | $(15,947,010) | — | — | — | $(9,216,848) | $(25,163,858) | | Stockholders' Deficit | $(1,275,149) | $172,200 | $3,700,632 | $1,518,334 | $(9,216,848) | $(5,100,814) | - The total stockholders' deficit increased from **$(1,275,149)** at March 31, 2021, to **$(5,100,814)** at September 30, 2021, primarily due to a net loss of **$(9,216,848)** partially offset by capital contributions from **warrants** issued with **convertible notes** and **stock-based compensation**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents cash flow activities, showing increased cash usage in operations offset by significant cash provided by financing activities | Cash Flow Activity | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :----------------- | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(4,784,725) | $(3,029,671) | | Net cash used in investing activities | $(22,779) | $(93,303) | | Net cash provided by financing activities | $4,137,200 | $1,487,414 | | Net decrease in cash and cash equivalents | $(670,304) | $(1,635,560) | | Cash and cash equivalents at end of period | $798,161 | $1,486,574 | - Net cash used in operating activities increased to **$(4,784,725)** for the six months ended September 30, 2021, from **$(3,029,671)** in the prior year, driven by a higher net loss[17](index=17&type=chunk)[94](index=94&type=chunk) - Cash provided by financing activities significantly increased to **$4,137,200** for the six months ended September 30, 2021, primarily from the issuance of **convertible notes**[17](index=17&type=chunk)[96](index=96&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, financial instruments, equity, and other significant financial disclosures [NOTE 1 – The Company and Summary of Significant Accounting Policies](index=7&type=section&id=NOTE%201%20%E2%80%93%20THE%20COMPANY%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes Modular Medical, Inc. as a development-stage company, highlighting going concern doubts and COVID-19 impacts - **Modular Medical, Inc.** is a development-stage medical device company focused on designing, developing, and commercializing an innovative insulin pump for both **type 1 and type 2 diabetes** markets[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, necessitating additional capital raises[22](index=22&type=chunk)[23](index=23&type=chunk) - The **COVID-19 pandemic** has negatively impacted the economy, supply chains, and financial markets, leading to longer lead times for components and potential delays in **FDA submission**[33](index=33&type=chunk)[82](index=82&type=chunk) [NOTE 2 – Leases](index=10&type=section&id=NOTE%202%20%E2%80%93%20LEASES) This note details the company's lease obligations, including the adoption of ASC 842 and future operating lease payments - The company adopted ASU No. **2016-02**, Leases (**ASC 842**), effective April 1, 2019, and executed a **39-month** lease for a new corporate facility in **San Diego, California**, commencing April 1, 2020[41](index=41&type=chunk) | Annual Fiscal Years | Operating Lease Payments | | :------------------ | :----------------------- | | 2022 | $76,716 | | 2023 | $158,028 | | 2024 | $40,692 | | Less: Imputed interest | $(26,613) | | Present value of lease liabilities | $248,823 | [NOTE 3 – PPP Note](index=10&type=section&id=NOTE%203%20%E2%80%93%20PPP%20NOTE) This note describes the Paycheck Protection Program (PPP) loan received and its subsequent forgiveness, recorded as a gain on extinguishment - The company received a **$368,780** unsecured loan under the **Paycheck Protection Program (PPP)** on April 24, 2020[44](index=44&type=chunk) - The full amount of the **PPP Note**, including accrued interest, was forgiven in May 2021 and recorded as a gain on extinguishment in other income[45](index=45&type=chunk) [NOTE 4 – Convertible Promissory Notes](index=10&type=section&id=NOTE%204%20%E2%80%93%20CONVERTIBLE%20PROMISSORY%20NOTES) This note details the issuance of convertible promissory notes and warrants, including their terms, interest, and conversion features - In April and May 2021, the company sold **$4,250,000** aggregate principal amount of **convertible promissory notes** and **warrants** to purchase **2,303,348** shares of **common stock**[47](index=47&type=chunk)[54](index=54&type=chunk) - The notes bear **12%** interest, mature in **12 months**, and are convertible into **common stock** at an initial price of **$2.87** per share after a **270-day** trigger date[47](index=47&type=chunk)[49](index=49&type=chunk)[56](index=56&type=chunk) - The fair value of the **warrants** was **$3,700,632**, contributing to a debt discount and a **$1,321,450** loss on debt extinguishment[54](index=54&type=chunk) [NOTE 5 – Stockholders' Equity (Deficit) & Stock-Based Compensation](index=12&type=section&id=NOTE%205%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)%20%26%20STOCK-BASED%20COMPENSATION) This note covers changes in stockholders' equity, including common stock issuances and stock-based compensation expenses - During the six months ended September 30, 2021, the company issued **60,000** shares of **common stock** to a service provider and **16,414** shares to non-employee directors[57](index=57&type=chunk) - The **2017 Equity Incentive Plan** was amended in August 2021, increasing the shares reserved for issuance by **4,000,000**[58](index=58&type=chunk)[62](index=62&type=chunk) - **Stock-based compensation** expense for the six months ended September 30, 2021, was **$845,979**, with **1,371,471** options granted[60](index=60&type=chunk) [NOTE 6 – Income Taxes](index=14&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note addresses the company's income tax position, including deferred tax assets and the valuation allowance recorded - The company has recorded a full valuation allowance for its federal and state net deferred tax assets, as management believes it is more likely than not that they will not be fully realized[65](index=65&type=chunk) [NOTE 7 – Related Party Transactions](index=14&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, specifically the purchase of convertible notes by company officers and directors - The company's chairman, president, and a director purchased **convertible notes**, with interest expense incurred on these related party notes totaling approximately **$56,760** for the six months ended September 30, 2021[67](index=67&type=chunk)[68](index=68&type=chunk) [NOTE 8 – Commitments and Contingencies](index=14&type=section&id=NOTE%208%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's commitments and contingencies, including legal proceedings and indemnification agreements - The company is involved in legal proceedings, claims, and assessments in the normal course of business and has entered into indemnification agreements with its officers and directors[69](index=69&type=chunk)[70](index=70&type=chunk) [NOTE 9 – Subsequent Events](index=16&type=section&id=NOTE%209%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note reports significant events occurring after the balance sheet date, such as stock sales to officers and a new credit facility - On October 28, 2021, the company sold **92,592** shares of **common stock** to two executive officers for approximately **$250,000**[72](index=72&type=chunk) - The company issued a secured promissory note (**Bridge Note**) to Manchester Explorer, L.P., providing a **$3,000,000** revolving credit facility, with an initial draw of **$500,000** made on November 9, 2021[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&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, the impact of COVID-19, critical accounting policies, and detailed analysis of operating expenses, interest expense, and liquidity challenges [Company Overview](index=17&type=section&id=Company%20Overview) This section provides an overview of Modular Medical, Inc. as a development-stage medical device company and its financing needs - **Modular Medical, Inc.** 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[79](index=79&type=chunk) - The company has historically financed operations through private placements of **common stock** and **convertible promissory notes**, and its ability to continue as a **going concern** depends on raising additional capital[80](index=80&type=chunk) [Impacts of COVID-19](index=17&type=section&id=Impacts%20of%20COVID-19) This section discusses the adverse effects of the COVID-19 pandemic on the company's operations, supply chain, and capital access - The **COVID-19 pandemic** has negatively affected the U.S. and global economy, disrupted supply chains, and led to longer lead times for components needed for **FDA submission**[81](index=81&type=chunk)[82](index=82&type=chunk) - The company faces risks in accessing capital markets due to market volatility caused by **COVID-19**, potentially impacting its ability to secure additional funding for future operations[83](index=83&type=chunk) [Critical Accounting Policies and Estimates](index=17&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no material changes to the company's critical accounting policies and estimates during the reporting period - There have been no material changes to the company's significant accounting policies and estimates as of September 30, 2021[85](index=85&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) This section analyzes the company's operating performance, focusing on changes in research and development, general and administrative, and interest expenses [Research and Development](index=18&type=section&id=Research%20and%20Development) This section details the significant increase in research and development expenses driven by intensified development and manufacturing activities | Period | 2021 (USD) | 2020 (USD) | Change (USD) | Change (%) | | :----- | :--------- | :--------- | :----------- | :--------- | | Three months ended Sep 30 | $2,105,380 | $1,092,665 | $1,012,715 | 92.7% | | Six months ended Sep 30 | $3,893,511 | $2,063,480 | $1,830,031 | 88.7% | - The increase in R&D expenses was primarily due to increased engineering and manufacturing consulting costs, prototype and production component costs, and **stock-based compensation** expenses as development and manufacturing activities intensified[87](index=87&type=chunk) [General and Administrative](index=18&type=section&id=General%20and%20Administrative) This section explains the rise in general and administrative expenses due to increased stock-based compensation and consulting fees | Period | 2021 (USD) | 2020 (USD) | Change (USD) | Change (%) | | :----- | :--------- | :--------- | :----------- | :--------- | | Three months ended Sep 30 | $1,589,032 | $766,513 | $822,519 | 107.3% | | Six months ended Sep 30 | $3,174,488 | $1,669,910 | $1,504,578 | 90.1% | - The increase in G&A expenses was mainly driven by higher **stock-based compensation** expense and increased consulting and legal fees[89](index=89&type=chunk) [Interest Expense](index=18&type=section&id=Interest%20Expense) This section highlights the substantial increase in interest expense primarily from convertible promissory notes and debt issuance cost amortization | Period | 2021 (USD) | 2020 (USD) | Change (USD) | | :----- | :--------- | :--------- | :----------- | | Three months ended Sep 30 | $685,793 | $— | $(685,793) |\ | Six months ended Sep 30 | $1,194,670 | $— | $(1,194,670) | - Interest expense significantly increased due to the **convertible promissory notes**, including amortization of debt issuance costs, with all interest accrued on the notes[90](index=90&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, significant net loss, accumulated deficit, and ongoing need for additional capital - The company incurred a net loss of approximately **$9.2 million** for the six months ended September 30, 2021, and had an accumulated deficit of approximately **$25.2 million**, raising substantial doubt about its ability to continue as a **going concern**[92](index=92&type=chunk) - Cash balance at September 30, 2021, was approximately **$0.8 million**. The company used **$4,784,725** in operating activities for the six months ended September 30, 2021[92](index=92&type=chunk)[94](index=94&type=chunk) - Recent financing activities include a private placement of **$6,610,500** in **convertible promissory notes**, **$250,000** from officer stock purchases, and a **$3,000,000** revolving credit facility (**Bridge Note**) with an initial draw of **$500,000**[92](index=92&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for the company - The company is not required to provide quantitative and qualitative disclosures about market risk[97](index=97&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, and reported no material changes in internal control over financial reporting during the period - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[99](index=99&type=chunk) - There were no material changes in the company's internal control over financial reporting during the six months ended September 30, 2021[100](index=100&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[103](index=103&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section reiterates significant risks, emphasizing the uncertain and potentially adverse effects of the COVID-19 pandemic on business - The company faces significant risks, including those related to the full effects of **COVID-19**, which could materially and adversely impact its business, financial condition, operating results, and cash flows[104](index=104&type=chunk)[105](index=105&type=chunk) - **COVID-19** has caused supply chain disruptions, potential delays in prototype production and **FDA submission**, and challenges in accessing capital markets for future funding[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details recent unregistered sales of equity securities, including common stock issued to executive officers and non-employee directors, and convertible promissory notes with warrants to accredited investors - On October 28, 2021, the company sold **92,592** shares of **common stock** to two executive officers for **$250,000**[109](index=109&type=chunk) - The company issued **10,906** shares and **5,508** shares of **common stock** to non-employee directors on September 30, 2021, and June 30, 2021, respectively, under its compensation plan[109](index=109&type=chunk)[110](index=110&type=chunk) - From April 1, 2021, through June 30, 2021, the company sold **$6,610,550** in **12%** unsecured **convertible promissory notes** and **warrants** to purchase **2,303,348** shares of **common stock** in a private placement to accredited investors[111](index=111&type=chunk)[112](index=112&type=chunk) [Item 3. Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[113](index=113&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 - Mine Safety Disclosures are not applicable to the company[114](index=114&type=chunk) [Item 5. Other Information](index=22&type=section&id=Item%205.%20Other%20Information) The company reported no other information - There is no other information to report under this item[115](index=115&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including the 2017 Equity Incentive Plan, employment agreements, certifications, and XBRL taxonomy documents | Exhibit No. | Description of Document | | :---------- | :---------------------- | | 4.1 | 2017 Equity Incentive Plan, as amended | | 10.27 | Employment Agreement between the Registrant and Ellen O'Connor Vos dated August 11, 2021 | | 31.1 | Certification of Ellen O'Connor Vos pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Paul M. DiPerna pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1 | Certification of Ellen O'Connor Vos and Paul M. DiPerna pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | XBRL Instance Document | | 101.SCH | XBRL Taxonomy Extension Schema | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | | 101.DEF | XBRL Taxonomy Extension Definition Linkbase | | 101.LAB | XBRL Taxonomy Extension Label Linkbase | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | ```

[Part I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Modular Medical, Inc., including balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (June 30, 2021 vs. March 31, 2021) | Metric | June 30, 2021 | March 31, 2021 | Change | | :-------------------------- | :------------ | :------------- | :----- | | Cash and cash equivalents | $3,380,968 | $1,468,465 | +130% | | Total Current Assets | $3,466,430 | $1,649,089 | +110% | | Total Assets | $4,042,313 | $2,248,171 | +80% | | Convertible notes payable | $4,369,440 | $2,133,453 | +105% | | Total Current Liabilities | $5,474,187 | $3,296,965 | +66% | | Total Liabilities | $5,623,801 | $3,523,320 | +60% | | Total Stockholders' Deficit | $(1,581,488) | $(1,275,149) | -24% | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2021 | 2020 | Change (YoY) | | :---------------------- | :------------ | :------------ | :----------- | | Research and development| $1,788,131 | $970,815 | +84.2% | | General and administrative| $1,585,456 | $903,397 | +75.5% | | Total operating expenses| $3,373,587 | $1,874,212 | +80% | | Loss from operations | $(3,373,587) | $(1,874,212) | -80% | | Other income | $368,823 | $55 | >+1000% | | Interest expense | $(508,877) | $— | N/A | | Loss on debt extinguishment| $(1,321,450) | $— | N/A | | Net loss | $(4,835,091) | $(1,874,157) | -158% | | Net loss per share (Basic and diluted)| $(0.26) | $(0.10) | -160% | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Condensed Consolidated Statements of Stockholders' Equity (Deficit) Highlights | Metric | March 31, 2021 | June 30, 2021 | Change | | :-------------------------- | :------------- | :------------ | :----- | | Common Stock (Amount) | $18,906 | $18,972 | +$66 |\n| Additional Paid-In Capital | $14,652,955 | $19,181,641 | +$4,528,686 |\n| Accumulated Deficit | $(15,947,010) | $(20,782,101) | -$4,835,091 |\n| Total Stockholders' Deficit | $(1,275,149) | $(1,581,488) | -$306,339 | - Key activities impacting stockholders' deficit for the three months ended June 30, 2021, included the issuance of warrants with convertible notes (**$3,700,632**), stock-based compensation (**$655,920**), and a net loss of (**$4,835,091**) [14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended June 30) | Cash Flow Activity | 2021 | 2020 | Change (YoY) | | :----------------- | :------------ | :------------ | :----------- | | Operating Activities | $(2,204,621) | $(1,507,548) | -46.2% | | Investing Activities | $(20,076) | $(12,934) | -55.2% | | Financing Activities | $4,137,200 | $1,539,588 | +168.7% | | Net increase in cash | $1,912,503 | $19,106 | +9990% | | Cash at end of period| $3,380,968 | $3,141,240 | +7.6% | - The significant increase in cash from financing activities in 2021 was primarily due to proceeds from the issuance of convertible notes, net of placement fees (**$4,137,200**) [17](index=17&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [NOTE 1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&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 designing and commercializing an innovative insulin pump for insulin-dependent individuals with diabetes [21](index=21&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**, necessitating additional capital [23](index=23&type=chunk)[24](index=24&type=chunk) - The global COVID-19 pandemic has negatively affected the economy, supply chains, and financial markets, with the full impact on the Company's operational and financial performance remaining uncertain [34](index=34&type=chunk) - The Company early adopted ASU 2020-06, simplifying accounting for convertible instruments, effective April 1, 2021, with no material impact on its financial statements [41](index=41&type=chunk) [NOTE 2 – LEASES](index=10&type=section&id=NOTE%202%20%E2%80%93%20LEASES) - The Company adopted ASC 842 for leases effective April 1, 2019, and executed a **39-month** lease for a new corporate facility in San Diego in January 2020 [42](index=42&type=chunk) Future Minimum Operating Lease Payments (as of June 30, 2021) | Annual Fiscal Years | Operating Lease | | :------------------ | :-------------- | | 2022 | $115,074 | | 2023 | $158,028 | | 2024 | $40,692 | | Less: Imputed interest| $(34,038) | | Present value of lease liabilities| $279,756 | [NOTE 3 – PPP NOTE](index=10&type=section&id=NOTE%203%20%E2%80%93%20PPP%20NOTE) - The Company received a **$368,780** PPP Note in April 2020, which was fully forgiven in May 2021, resulting in a gain on extinguishment recognized in other income [45](index=45&type=chunk)[46](index=46&type=chunk) [NOTE 4 – CONVERTIBLE PROMISSORY NOTES](index=10&type=section&id=NOTE%204%20%E2%80%93%20CONVERTIBLE%20PROMISSORY%20NOTES) - In April and May 2021, the Company sold **$4,250,000** in convertible promissory notes (Notes) and warrants in a private placement, incurring **$116,000** in debt issuance costs [48](index=48&type=chunk)[55](index=55&type=chunk) - The Notes bear **12%** annual interest, mature in **12 months**, and are convertible into common stock at **$2.87** per share, subject to certain conditions and adjustments [48](index=48&type=chunk)[49](index=49&type=chunk)[56](index=56&type=chunk) - Warrants to purchase **2,303,348 shares** at an **$8.00** exercise price were issued, with a fair value of **$3,700,632**, recorded as debt discount and loss on debt extinguishment [54](index=54&type=chunk) [NOTE 5 – STOCKHOLDERS' EQUITY (DEFICIT) & STOCK-BASED COMPENSATION](index=12&type=section&id=NOTE%205%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)%20%26%20STOCK-BASED%20COMPENSATION) - During Q1 2022, the Company issued **60,000 common shares** for services and granted **5,508 shares** to directors, along with options to purchase **182,321 shares** [57](index=57&type=chunk)[60](index=60&type=chunk) Stock-Based Compensation Expense (Three Months Ended June 30) | Metric | 2021 | 2020 | | :----- | :---------- | :---------- | | Expense| $655,920 | $344,716 | - As of June 30, 2021, unamortized stock option compensation cost was **$2,288,683**, expected to be recognized over approximately **1.94 years** [59](index=59&type=chunk) [NOTE 6 – INCOME TAXES](index=13&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 they will not be fully realized [65](index=65&type=chunk) [NOTE 7 – RELATED PARTY TRANSACTIONS](index=13&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) - The CEO and a Board-represented investor purchased **$100,000** and **$1,000,000**, respectively, of original convertible notes, which were replaced with new Notes in April 2021 [67](index=67&type=chunk) - As of June 30, 2021, the investor and CEO held Notes with aggregate principal amounts of **$1,026,630** and **$102,663**, respectively, plus accrued interest [67](index=67&type=chunk) [NOTE 8 – COMMITMENTS & CONTINGENCIES](index=13&type=section&id=NOTE%208%20%E2%80%93%20COMMITMENTS%20%26%20CONTINGENCIES) - The Company is involved in legal proceedings in the normal course of business and enters into contractual indemnification arrangements with counterparties, officers, and directors [69](index=69&type=chunk)[70](index=70&type=chunk) [NOTE 9 – SUBSEQUENT EVENT](index=13&type=section&id=NOTE%209%20%E2%80%93%20SUBSEQUENT%20EVENT) - On August 11, 2021, the Board approved an increase of **4,000,000 shares** reserved for issuance under the 2017 Equity Incentive Plan, bringing the total to **8,000,000 shares** [72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition and results, covering business overview, COVID-19 impacts, accounting policies, operating expenses, liquidity, and capital resources [Company Overview](index=15&type=section&id=Company%20Overview) - Modular Medical, Inc. is a development-stage medical device company focused on an innovative insulin pump, currently without product sales revenue [75](index=75&type=chunk)[76](index=76&type=chunk) Key Financial Figures (as of June 30, 2021) | Metric | Amount | | :----- | :----- | | Net Loss (Q1 2022) | $4.8 million | | Negative Working Capital | ~$2.0 million | | Accumulated Deficit | $20.8 million | - Substantial doubt exists about the Company's ability to continue as a going concern, requiring additional capital through equity or debt sales [77](index=77&type=chunk) [Impacts of COVID-19](index=16&type=section&id=Impacts%20of%20COVID-19) - COVID-19 has negatively impacted the economy, supply chains, and financial markets, with the full extent of its impact on the Company remaining uncertain [78](index=78&type=chunk) - The Company experienced longer lead times for components, potentially delaying FDA submission, and faces challenges in accessing capital markets [79](index=79&type=chunk)[80](index=80&type=chunk) [Critical Accounting Policies and Estimates](index=16&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the Company's significant accounting policies and estimates as of June 30, 2021 [82](index=82&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) [Research and Development](index=17&type=section&id=Research%20and%20Development) Research and Development Expenses (Three Months Ended June 30) | Metric | 2021 | 2020 | Change (YoY) | | :----- | :------------ | :------------ | :----------- | | R&D Expenses | $1,788,131 | $970,815 | +84.2% | | Stock-based compensation | $138,286 | $103,725 | +33.3% | - The increase in R&D expenses was primarily due to a rise in engineering and operations personnel and consulting costs, with full-time R&D headcount increasing **from 10 to 22** [84](index=84&type=chunk) [General and Administrative](index=17&type=section&id=General%20and%20Administrative) General and Administrative Expenses (Three Months Ended June 30) | Metric | 2021 | 2020 | Change (YoY) | | :----- | :------------ | :------------ | :----------- | | G&A Expenses | $1,585,456 | $903,397 | +75.5% | | Stock-based compensation | $517,635 | $240,991 | +114.8% | - The increase in G&A expenses was mainly driven by higher personnel and consulting costs, stock-based compensation, and professional services fees, with G&A headcount increasing **from 3 to 4** [86](index=86&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company incurred a net loss of approximately **$4.4 million** for the three months ended June 30, 2021, and had a cash balance of **$3.4 million** and an accumulated deficit of **$20.8 million** [87](index=87&type=chunk) - Substantial doubt about the Company's ability to continue as a going concern exists due to operating losses and the need to repay convertible notes by May 2022, necessitating additional capital [87](index=87&type=chunk)[88](index=88&type=chunk) Cash Flow Summary (Three Months Ended June 30) | Cash Flow Activity | 2021 | 2020 | | :------------- | :------------ | :------------ | | Operating Activities | $(2,204,621) | $(1,507,548) | | Investing Activities | $(20,076) | $(12,934) | | Financing Activities | $4,137,200 | $1,539,588 | - Cash provided by financing activities in 2021 was primarily from the issuance of **$6,610,500** in convertible promissory notes [87](index=87&type=chunk)[91](index=91&type=chunk) [Recently Adopted Accounting Pronouncements](index=18&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) - Details on recently adopted accounting pronouncements are provided in Note 1 to the Condensed Consolidated Financial Statements [92](index=92&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=18&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company is not required to provide quantitative and qualitative disclosures about market risk - The Company is not required to provide quantitative and qualitative disclosures about market risk [93](index=93&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the Company's effective disclosure controls and procedures, confirming no material changes in internal control over financial reporting during the quarter [Disclosure Controls and Procedures.](index=18&type=section&id=Disclosure%20Controls%20and%20Procedures.) - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2021 [95](index=95&type=chunk) [Changes in Internal Control over Financial Reporting.](index=18&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting.) - There were no material changes in the Company's internal control over financial reporting during the three months ended June 30, 2021 [96](index=96&type=chunk) [Part II - OTHER INFORMATION](index=19&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) The Company has no legal proceedings to report - The Company has no legal proceedings to report [98](index=98&type=chunk) [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) Highlights material risks from the Annual Report on Form 10-K, emphasizing the uncertain and adverse effects of COVID-19 on business and financial condition [COVID-19 and Public Health Crises Risk Factors](index=19&type=section&id=The%20full%20ef%20ects%20of%20COVID-19%20and%20other%20potential%20future%20public%20health%20crises,%20epidemics,%20pandemics%20or%20similar%20events%20are%20uncertain%20and%20could%20have%20a%20material%20and%20adverse%20ef%20ect%20on%20our%20business,%20financial%20condition,%20operating%20results%20and%20cash%20flows.) - The COVID-19 pandemic's full effects are uncertain but could materially and adversely impact the Company's business, financial condition, operating results, and cash flows [100](index=100&type=chunk) - Operational disruptions, supply chain issues, and difficulties in accessing capital markets due to COVID-19 could delay product development and negatively affect financial performance [101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=19&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the Company's recent unregistered sales of equity securities, specifically private placement of convertible promissory notes and warrants [Recent Sales of Unregistered Securities](index=19&type=section&id=Recent%20Sales%20of%20Unregistered%20Securities) - From April 1 to June 30, 2021, the Company sold **$6,610,550** aggregate principal amount of **12%** unsecured convertible promissory notes and warrants to purchase **2,303,348 common shares** at an **$8.00** per share in a private placement [104](index=104&type=chunk) - These sales were made to accredited investors under exemptions from registration pursuant to 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=20&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There are no defaults upon senior securities to report - There are no defaults upon senior securities to report [106](index=106&type=chunk) [Item 4. Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company [107](index=107&type=chunk) [Item 5. Other Information](index=20&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - There is no other information to report under this item [108](index=108&type=chunk) [Item 6. Exhibits](index=20&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including agreements for the 2021 private placement and Sarbanes-Oxley certifications - Key exhibits include Addendum No. 1 to Reorganization and Share Exchange Agreement, forms of Convertible Promissory Note, Common Stock Purchase Warrant, Securities Purchase Agreement, and Registration Rights Agreement for the 2021 Placement [109](index=109&type=chunk) - Certifications by Paul M. DiPerna under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included [109](index=109&type=chunk) [SIGNATURES](index=21&type=section&id=SIGNATURES) [Filing Signatures](index=21&type=section&id=SIGNATURES_details) Confirms the official signing of the report by Paul M. DiPerna, President, Chief Financial Officer, Secretary, and Treasurer of Modular Medical, Inc - The report was signed on August 16, 2021, by Paul M. DiPerna, President, Chief Financial Officer, Secretary, and Treasurer [115](index=115&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2021 or o 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: 000-49671 MODULAR MEDICAL, INC. (Exact name of registrant as specified in its charter) Nevada 87-0620495 (State or Other Jurisdiction of I ...

Part I – FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, lease obligations, debt, equity transactions, stock-based compensation, income taxes, related party transactions, commitments, contingencies, and subsequent events [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time | Metric | December 31, 2020 ($) | March 31, 2020 ($) | | :-------------------------- | :---------------- | :--------------- | | Cash and cash equivalents | 596,542 | 3,122,134 | | Total Assets | 1,291,526 | 3,858,551 | | Total Liabilities | 1,292,279 | 980,129 | | Total Stockholders' Equity (Deficit) | (753) | 2,878,422 | | Accumulated Deficit | (14,174,465) | (8,569,034) | - The company's total assets decreased by approximately **$2,567,025**, and total stockholders' equity shifted from positive to negative, primarily driven by a significant reduction in cash and an increase in accumulated deficit[6](index=6&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net loss over specific periods, reflecting operational performance | Metric | 3 Months Ended Dec 31, 2020 ($) | 3 Months Ended Dec 31, 2019 ($) | 9 Months Ended Dec 31, 2020 ($) | 9 Months Ended Dec 31, 2019 ($) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Operating Expenses | 1,870,567 | 1,135,848 | 5,603,957 | 3,431,429 | | Net Loss | (1,870,545) | (1,133,517) | (5,605,431) | (3,403,281) | | Net Loss Per Share (Basic & Diluted) | (0.10) | (0.06) | (0.30) | (0.19) | - The company experienced a substantial increase in net loss for both the three months (from **$(1,133,517)** to **$(1,870,545)**) and nine months (from **$(3,403,281)** to **$(5,605,431)**) ended December 31, 2020, compared to the prior year, primarily due to higher operating expenses[8](index=8&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section details changes in the company's equity, including net losses, stock issuances, and stock-based compensation - Total Stockholders' Equity (Deficit) declined from **$2,878,422** as of March 31, 2020, to **$(753)** as of December 31, 2020, primarily due to recurring net losses[11](index=11&type=chunk) - Private placements of common stock generated **$1,118,634** (June 30, 2020) and **$667,248** (Dec 31, 2020), partially offsetting the accumulated deficit[11](index=11&type=chunk) - Stock-based compensation recognized during the period totaled **$940,374** (**$344,716** + **$300,604** + **$295,054**)[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by operating, investing, and financing activities over specific periods | Metric | 9 Months Ended Dec 31, 2020 ($) | 9 Months Ended Dec 31, 2019 ($) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | (4,570,713) | (2,776,998) | | Net cash used in investing activities | (109,541) | (58,278) | | Net cash provided by financing activities | 2,154,662 | 0 | | Net decrease in cash and cash equivalents | (2,525,592) | (2,835,276) | | Cash and cash equivalents at end of period | 596,542 | 3,718,492 | - Cash used in operating activities increased significantly in 2020, but financing activities provided substantial cash, primarily from private placements and a PPP loan, which helped mitigate the overall cash decrease[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – The Company and Summary of Significant Accounting Policies](index=7&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 going concern status, and the impact of the COVID-19 pandemic on its operations - Modular Medical, Inc. is a development-stage medical device company focused on designing and commercializing an innovative insulin pump[18](index=18&type=chunk) - The company expects to incur operating losses and cash outflows, raising substantial doubt about its ability to continue as a going concern, necessitating additional capital raises[20](index=20&type=chunk) - The global COVID-19 pandemic has negatively affected the economy, supply chains, and financial markets, with the full impact on the company's performance remaining uncertain[31](index=31&type=chunk) [NOTE 2 – Leases](index=9&type=section&id=NOTE%202%20%E2%80%93%20LEASES) This note details the company's lease accounting policies, new lease agreements, and future lease payment obligations - The company adopted ASC 842 for leases on April 1, 2019, and executed a new 39-month corporate facility lease in San Diego commencing April 1, 2020[38](index=38&type=chunk) - A right-of-use asset of **$270,950** was obtained, along with a **$139,000** lease incentive for improvements[39](index=39&type=chunk) | Annual Fiscal Years | Operating lease ($) | | :------------------ | :-------------- | | 2021 | 37,239 | | 2022 | 153,432 | | 2023 | 158,028 | | 2024 | 40,692 | | Present value of lease liabilities | 338,042 | - Rent expense for the nine months ended December 31, 2020, was **$80,654**, up from **$25,500** in the prior year[41](index=41&type=chunk) [NOTE 3 – Note Payable](index=10&type=section&id=NOTE%203%20%E2%80%93%20NOTE%20PAYABLE) This note describes the company's Paycheck Protection Program (PPP) loan, its terms, and the status of its forgiveness application - The company received a **$368,780** unsecured loan under the Paycheck Protection Program (PPP Note) on April 24, 2020[42](index=42&type=chunk) - The PPP Note is due in April 2022, accrues interest at **1.0%** per annum, with monthly payments starting September 2021[43](index=43&type=chunk) - An application for forgiveness of the PPP Note was submitted in October 2020, but forgiveness is not assured[44](index=44&type=chunk) [NOTE 4 – Stockholders' Equity (Deficit)](index=10&type=section&id=NOTE%204%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note details the company's private placement of common stock and the associated registration requirements - As of December 31, 2020, the company sold **962,387** shares of common stock in a private placement (2020 Placement) at **$2.87** per share, generating gross proceeds of **$2,762,054**[45](index=45&type=chunk) - The company is required to file a registration statement with the SEC within **90 days** of the 2020 Placement closing to register the shares for resale[45](index=45&type=chunk) [NOTE 5 – Stock-Based Compensation](index=10&type=section&id=NOTE%205%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note outlines changes to the equity incentive plan, unamortized compensation costs, and details of stock option grants - The 2017 Equity Incentive Plan was expanded in January 2020, increasing reserved shares by **1,000,000** to a total of **4,000,000**[46](index=46&type=chunk) - Unamortized stock-based compensation cost was **$2,354,079** at December 31, 2020, expected to be recognized over approximately **2.06 years**[47](index=47&type=chunk) - During the nine months ended December 31, 2020, options to purchase **355,476** shares were granted, with a fair value of **$825,838**, resulting in **$223,878** recorded as expense[48](index=48&type=chunk) | Metric | Value | | :-------------------------- | :------ | | Shares Available for Grant | 487,412 | | Number of Shares Outstanding | 3,512,588 | | Weighted Average Exercise Prices ($) | 1.71 | - As of December 31, 2020, **1,927,052** options were exercisable with a weighted average exercise price of **$1.16** and an aggregate intrinsic value of **$4,036,117**[52](index=52&type=chunk) [NOTE 6 – Income Taxes](index=13&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note explains the company's deferred tax assets, valuation allowance, and unrecognized tax benefits - The company has recorded a full valuation allowance against its federal and state net deferred tax assets, as management believes they are not likely to be fully realized[54](index=54&type=chunk) - No liability for unrecognized tax benefits related to uncertain tax positions was recorded as of December 31, 2020[55](index=55&type=chunk) [NOTE 7 – Related Party Transaction](index=13&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTION) This note discloses an outstanding payable to a board member from a terminated consulting agreement - As of December 31, 2020, the company had an outstanding payable of **$5,585** to a member of its board of directors, stemming from a terminated consulting agreement[56](index=56&type=chunk) [NOTE 8 – Commitments and Contingencies](index=13&type=section&id=NOTE%208%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the company's involvement in legal proceedings and contractual indemnification arrangements - The company is involved in legal proceedings and contractual indemnification arrangements in the normal course of business[57](index=57&type=chunk)[58](index=58&type=chunk) - No amounts have been reflected in the financial statements for indemnification liabilities due to the inability to estimate the maximum potential amount[58](index=58&type=chunk) [NOTE 9 – Subsequent Event](index=13&type=section&id=NOTE%209%20%E2%80%93%20SUBSEQUENT%20EVENT) This note details the private placement of convertible promissory notes in February 2021, including their terms and conversion features - On February 8, 2021, the company sold **$1,100,000** of convertible promissory notes in a private placement[59](index=59&type=chunk) - The notes bear **12%** annual interest, payable monthly, and mature on September 30, 2021[59](index=59&type=chunk) - Notes automatically convert upon a Qualified Financing (equity offering of at least **$5,000,000**) at an **80%** conversion price (**20%** discount)[60](index=60&type=chunk) - Holders can demand repayment or convert to common stock at **$2.87** per share (or **20%** discount to any financing) after maturity or upon a Change of Control[61](index=61&type=chunk)[63](index=63&type=chunk) - The company's chairman and CEO, along with an existing investor, purchased the notes[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&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 performance and condition, highlighting its status as a development-stage medical device company, the significant net losses incurred, and the ongoing challenges related to liquidity and capital resources. It also details the operational and financial impacts of the COVID-19 pandemic and discusses key operating expenses [Company Overview](index=15&type=section&id=Company%20Overview) This section provides an overview of the company's development-stage status, financial performance, and going concern challenges - Modular Medical, Inc. is a development-stage medical device company focused on an innovative insulin pump, with development substantially completed but awaiting FDA clearance[67](index=67&type=chunk)[68](index=68&type=chunk) - The company has not generated product sales revenue and incurred net losses of approximately **$5.6 million** for the nine months ended December 31, 2020[68](index=68&type=chunk) - As of December 31, 2020, the company had negative working capital of approximately **$0.2 million** and an accumulated deficit of approximately **$14.2 million**, raising substantial doubt about its ability to continue as a going concern[68](index=68&type=chunk)[69](index=69&type=chunk) [Impacts of COVID-19](index=16&type=section&id=Impacts%20of%20COVID-19) This section discusses the negative effects of the COVID-19 pandemic on the company's operations, supply chain, and capital raising efforts - The COVID-19 pandemic has negatively affected the U.S. and global economy, disrupted supply chains, and restricted travel, with the full impact on the company's performance uncertain[70](index=70&type=chunk) - The company has experienced longer lead times for components and implemented teleworking policies, potentially delaying FDA submission and approval[71](index=71&type=chunk)[72](index=72&type=chunk) - The pandemic has led to disruption and volatility in global capital markets, posing a risk to the company's ability to raise additional capital on favorable terms[73](index=73&type=chunk) [Critical Accounting Policies and Estimates](index=16&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms the company's adherence to U.S. GAAP and the absence of material changes to accounting policies - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments[75](index=75&type=chunk) - As of December 31, 2020, there have been no material changes to the company's significant accounting policies and estimates[75](index=75&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) This section analyzes the changes in key operating expenses and interest income over the reporting periods [Research and Development](index=17&type=section&id=Research%20and%20Development) This section details the increase in R&D expenses driven by personnel and consulting costs, with expected future decreases | Period | 2020 (R&D Expense, $) | 2019 (R&D Expense, $) | Change (2019 to 2020, $) | Percentage Change | | :-------------------- | :----------------- | :----------------- | :-------------------- | :------------------ | | Three months ended Dec 31 | 1,086,669 | 608,019 | 478,650 | 78.7% | | Nine months ended Dec 31 | 3,150,149 | 1,945,043 | 1,205,106 | 62.0% | - The increase in R&D expenses was primarily due to increased engineering and manufacturing personnel and consulting costs, with R&D employee headcount rising from **8** to **15**[77](index=77&type=chunk)[78](index=78&type=chunk) - R&D expenses are expected to decrease for the remainder of fiscal 2021 due to expense management[78](index=78&type=chunk) [General and Administrative](index=17&type=section&id=General%20and%20Administrative) This section explains the rise in G&A expenses due to personnel, stock-based compensation, and facilities costs, with expected future decreases | Period | 2020 (G&A Expense, $) | 2019 (G&A Expense, $) | Change (2019 to 2020, $) | Percentage Change | | :-------------------- | :----------------- | :----------------- | :-------------------- | :------------------ | | Three months ended Dec 31 | 783,898 | 527,829 | 256,069 | 48.5% | | Nine months ended Dec 31 | 2,453,808 | 1,486,386 | 967,422 | 65.1% | - The increase in G&A expenses was mainly due to higher personnel costs, stock-based compensation, and facilities costs, with G&A employee headcount increasing from **2** to **4**[80](index=80&type=chunk) - G&A expenses are expected to decrease for the remainder of fiscal 2021 due to expense management[80](index=80&type=chunk) [Interest Income](index=17&type=section&id=Interest%20Income) This section highlights the significant decrease in interest income due to lower rates and reduced cash balances | Period | 2020 (Interest Income, $) | 2019 (Interest Income, $) | Change (2019 to 2020, $) | Percentage Change | | :-------------------- | :--------------------- | :--------------------- | :-------------------- | :------------------ | | Three months ended Dec 31 | 22 | 2,331 | (2,309) | (99.1%) | | Nine months ended Dec 31 | 126 | 28,148 | (28,022) | (99.6%) | - Interest income decreased significantly due to a reduction in interest rates and lower average cash balances[81](index=81&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ongoing operating losses, negative cash flows, and reliance on external capital to maintain going concern status - The company has incurred continuous operating losses and negative cash flows, with a net loss of approximately **$5.6 million** for the nine months ended December 31, 2020[83](index=83&type=chunk) - As of December 31, 2020, the company had a cash balance of approximately **$0.6 million** and an accumulated deficit of approximately **$14.2 million**, raising substantial doubt about its going concern ability[83](index=83&type=chunk) - The company's ability to continue as a going concern depends on raising additional capital through equity or debt, having recently secured funds from a private placement, a PPP loan, and convertible promissory notes (subsequent event)[83](index=83&type=chunk) | Cash Flow Activity | 9 Months Ended Dec 31, 2020 ($) | | :-------------------------------- | :-------------------------- | | Net cash used in operating activities | (4,570,713) | | Net cash used in investing activities | (109,541) | | Net cash provided by financing activities | 2,154,662 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=18&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not required for the company - The company is not required to provide quantitative and qualitative disclosures about market risk[88](index=88&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020. There were no material changes in internal control over financial reporting during the nine months ended December 31, 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[90](index=90&type=chunk) - There were no material changes in internal control over financial reporting during the nine months ended December 31, 2020[91](index=91&type=chunk) Part II - OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, and other material information [Item 1. Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings under this item - No legal proceedings to report[93](index=93&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business risks, including those previously disclosed in its Form 10-K. The ongoing COVID-19 pandemic presents new and emphasized risks related to operations, supply chains, regulatory approvals, and access to capital markets - The company faces many significant business risks, including those previously disclosed in its Annual Report on Form 10-K[94](index=94&type=chunk) - The COVID-19 pandemic negatively affects the world economy, supply chains, and financial markets, potentially delaying product production, FDA submission, and regulatory approvals[95](index=95&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) - The continued spread of COVID-19 could limit access to capital markets or make additional capital available only on significantly detrimental terms[99](index=99&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=20&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported unregistered sales of equity securities, including 962,387 shares of common stock in a private placement for approximately $2.8 million gross proceeds, and $1.1 million in convertible promissory notes issued in February 2021 - The company sold **962,387** shares of common stock in a private placement (2020 Placement) for approximately **$2.8 million** gross proceeds since March 2020[100](index=100&type=chunk) - In February 2021, the company issued **$1.1 million** aggregate principal amount of convertible promissory notes[101](index=101&type=chunk) [Item 3. Defaults Upon Senior Securities](index=20&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities[102](index=102&type=chunk) [Item 4. Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[103](index=103&type=chunk) [Item 5. Other Information](index=21&type=section&id=Item%205.%20Other%20Information) This section provides further details on the $1.1 million convertible promissory notes sold on February 8, 2021, including their 12% interest rate, September 30, 2021 maturity, automatic conversion terms upon a Qualified Financing, and options for repayment or conversion at maturity or upon a Change of Control - The company sold **$1,100,000** of convertible promissory notes on February 8, 2021, bearing **12%** annual interest and maturing on September 30, 2021[104](index=104&type=chunk) - The notes automatically convert upon a Qualified Financing (equity offering of at least **$5,000,000**) at a **20%** discount to the lowest price paid by investors[105](index=105&type=chunk) - Holders have options for repayment or conversion into common stock at **$2.87** per share (or a **20%** discount to any financing) after maturity or upon a Change of Control[106](index=106&type=chunk)[107](index=107&type=chunk) - The notes were purchased by the company's chairman and CEO and an existing investor[108](index=108&type=chunk) [Item 6. Exhibits](index=21&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the form of convertible promissory note, certifications under the Sarbanes-Oxley Act, and XBRL taxonomy documents - Exhibits include the Form of Convertible Promissory Note dated February 8, 2021 (Exhibit **10.21**)[109](index=109&type=chunk) - Certifications of Paul M. DiPerna pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of 2002 are included (Exhibits **31.1**, **32.1**)[109](index=109&type=chunk) - XBRL Instance Document and Taxonomy Extension files are provided[109](index=109&type=chunk) SIGNATURES This section provides the official signatures certifying the accuracy and completeness of the report - The report was signed by Paul M. DiPerna, Chairman, Chief Executive Officer, Chief Financial Officer, Secretary, and Treasurer, on February 12, 2021[114](index=114&type=chunk)

[Part I – FINANCIAL INFORMATION](index=2&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) The development-stage company reported a widened net loss of $3.7 million and a significant decline in stockholders' equity [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $2.2 million while liabilities rose, causing a sharp decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2020 | Mar 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,486,574 | $3,122,134 | | Total Current Assets | $1,522,072 | $3,186,293 | | Total Assets | $2,199,398 | $3,858,551 | | Total Current Liabilities | $733,207 | $661,393 | | Total Liabilities | $1,291,908 | $980,129 | | Total Stockholders' Equity | $907,490 | $2,878,422 | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company generated no revenue and reported a widened net loss of $3.7 million due to increased operating expenses Statement of Operations Summary (Unaudited) | Metric | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Research and development | $2,063,480 | $1,337,025 | | General and administrative | $1,669,910 | $958,556 | | Total Operating Expenses | $3,733,390 | $2,295,581 | | Loss from operations | $(3,733,390) | $(2,295,581) | | Net Loss | $(3,734,886) | $(2,269,764) | | Net Loss Per Share (Basic and diluted) | $(0.20) | $(0.13) | [Condensed Consolidated Statements of Stockholders' Equity](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity fell sharply to $0.9 million, driven by a $3.7 million net loss despite new stock proceeds - Total stockholders' equity decreased from **$2,878,422** on March 31, 2020, to **$907,490** on September 30, 2020[13](index=13&type=chunk) - The decrease was driven by a net loss of over **$3.7 million**, partially offset by proceeds from a private stock placement ($1,118,634) and stock-based compensation ($645,320)[13](index=13&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $3.0 million, leading to a $1.6 million decrease in total cash Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,029,671) | $(1,747,462) | | Net cash used in investing activities | $(93,303) | $(30,600) | | Net cash provided by financing activities | $1,487,414 | $0 | | Net decrease in cash | $(1,635,560) | $(1,778,062) | | Cash at end of period | $1,486,574 | $4,775,706 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes highlight the company's development stage, a going concern warning, a PPP loan, and a recent private placement - The company is a development-stage medical device company focused on designing and commercializing an innovative insulin pump[20](index=20&type=chunk) - Management has concluded that **substantial doubt exists** about the Company's ability to continue as a going concern[22](index=22&type=chunk) - In April 2020, the company received a **$368,780 unsecured loan** under the Paycheck Protection Program (PPP) and has since applied for forgiveness[44](index=44&type=chunk)[46](index=46&type=chunk) - The company initiated a private placement in March 2020, selling 729,897 shares for aggregate proceeds of **$2,094,806** as of September 30, 2020[47](index=47&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=11&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its going concern risk, COVID-19 impacts, rising operating expenses, and reliance on external financing [Company Overview](index=13&type=section&id=Company%20Overview) The company is a pre-revenue medical device firm with a $12.3 million accumulated deficit and going concern doubts - The company is focused on the design, development, and commercialization of an innovative insulin pump for people with diabetes[64](index=64&type=chunk) - The company has **not yet obtained FDA clearance** for its insulin pump and has not generated any revenue from product sales[65](index=65&type=chunk) - As of September 30, 2020, the company had an accumulated deficit of approximately **$12.3 million**, and there is substantial doubt about its ability to continue as a going concern[65](index=65&type=chunk)[66](index=66&type=chunk) [Impacts of COVID-19](index=13&type=section&id=Impacts%20of%20COVID-19) The COVID-19 pandemic has caused operational disruptions, delaying the expected FDA submission to H1 2021 - The company has experienced **longer lead times** for certain components used to manufacture products for its FDA submission due to COVID-19 disruptions[68](index=68&type=chunk) - The product-approval submission to the FDA is now expected to occur in the **first half of calendar year 2021**[68](index=68&type=chunk) - The pandemic has led to disruption and volatility in global capital markets, which may impact the company's ability to raise additional capital[70](index=70&type=chunk) [Results of Operations](index=14&type=section&id=Results%20of%20Operations) Operating expenses rose significantly, driven by increased personnel and consulting costs in both R&D and G&A Research and Development Expenses (Six Months Ended Sep 30) | Period | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Six Months Ended | $2,063,480 | $1,337,025 | $726,455 | 54.3% | - The increase in R&D expenses was primarily due to increased engineering and manufacturing personnel and consulting costs, as the R&D employee headcount grew from four to 15 year-over-year[74](index=74&type=chunk) General and Administrative Expenses (Six Months Ended Sep 30) | Period | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Six Months Ended | $1,669,910 | $958,556 | $711,354 | 74.2% | - The increase in G&A expenses was primarily a result of increased personnel costs, stock-based compensation expenses, and facilities costs[76](index=76&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) With a cash balance of $1.5 million and recurring losses, the company's ability to continue as a going concern is in doubt - The company had a cash balance of approximately **$1.5 million** and an accumulated deficit of **$12.3 million** as of September 30, 2020[78](index=78&type=chunk) - Management states that these conditions raise **substantial doubt** about the company's ability to continue as a going concern for at least one year[78](index=78&type=chunk) - During the six months ended September 30, 2020, the company received net proceeds of **$1,118,634** from a private stock placement and **$368,780** from a PPP loan[82](index=82&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=15&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not required for smaller reporting companies - Disclosure is not required[83](index=83&type=chunk) [Item 4. Controls and Procedures](index=16&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes during the period - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were **effective**[85](index=85&type=chunk) - There were **no changes** in internal control over financial reporting during the six months ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[86](index=86&type=chunk) [Part II - OTHER INFORMATION](index=17&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=17&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - None[89](index=89&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic poses significant risks to supply chains, regulatory timelines, and future capital raising efforts - The COVID-19 pandemic has negatively affected the world economy, disrupted supply chains, and could **delay product production and FDA submission**[91](index=91&type=chunk)[92](index=92&type=chunk) - An extended period of supply chain disruption could impact the ability to produce initial product quantities for **regulatory approval**[94](index=94&type=chunk) - Disruption and volatility in global capital markets due to COVID-19 may make it difficult for the company to **raise needed additional capital** in the future[95](index=95&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=17&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company raised approximately $2.45 million in gross proceeds from a private placement of its common stock - Since March 2020, the company has sold 854,897 shares of common stock at $2.87 per share in a private placement, raising gross proceeds of approximately **$2.45 million**[96](index=96&type=chunk) [Item 3. Defaults Upon Senior Securities](index=17&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[97](index=97&type=chunk) [Item 6. Exhibits](index=19&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including incentive plans and Sarbanes-Oxley certifications

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-49671 MODULAR MEDICAL, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Employer Incorporat ...