Modular Medical(MODD) - 2021 Q2 - Quarterly Report

Part I – FINANCIAL INFORMATION Item 1. Financial Statements The development-stage company reported a widened net loss of $3.7 million and a significant decline in stockholders' equity Condensed Consolidated Balance Sheets 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 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 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] - 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][16] Condensed Consolidated Statements of Cash Flows 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 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] - Management has concluded that substantial doubt exists about the Company's ability to continue as a going concern[22] - In April 2020, the company received a $368,780 unsecured loan under the Paycheck Protection Program (PPP) and has since applied for forgiveness[44][46] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its going concern risk, COVID-19 impacts, rising operating expenses, and reliance on external financing Company Overview 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] - The company has not yet obtained FDA clearance for its insulin pump and has not generated any revenue from product sales[65] - As of September 30, 2020, the company had an accumulated deficit of approximately $12.3 million, and there is substantial doubt about its ability to continue as a going concern[65][66] Impacts of COVID-19 The COVID-19 pandemic has caused operational disruptions, delaying the expected FDA submission to H1 2021 - The company has experienced longer lead times for certain components used to manufacture products for its FDA submission due to COVID-19 disruptions[68] - The product-approval submission to the FDA is now expected to occur in the first half of calendar year 2021[68] - The pandemic has led to disruption and volatility in global capital markets, which may impact the company's ability to raise additional capital[70] Results of Operations Operating expenses rose significantly, driven by increased personnel and consulting costs in both R&D and G&A Research and Development Expenses (Six Months Ended Sep 30) | Period | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Six Months Ended | $2,063,480 | $1,337,025 | $726,455 | 54.3% | - The increase in R&D expenses was primarily due to increased engineering and manufacturing personnel and consulting costs, as the R&D employee headcount grew from four to 15 year-over-year[74] General and Administrative Expenses (Six Months Ended Sep 30) | Period | 2020 | 2019 | Change ($) | 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] Liquidity and Capital Resources 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] - 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] - 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not required for smaller reporting companies - Disclosure is not required[83] Item 4. Controls and Procedures 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] - 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] Part II - OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - None[89] Item 1A. Risk Factors 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][92] - An extended period of supply chain disruption could impact the ability to produce initial product quantities for regulatory approval[94] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[97] Item 6. Exhibits This section lists exhibits filed with the report, including incentive plans and Sarbanes-Oxley certifications