Modular Medical(MODD) - 2026 Q1 - Quarterly Report

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