UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Washington, D.C. 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 December 31, 2017Quarterly Period Ended September 30, 2023

o

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition periodTransition Period from ____________ to____________to

Commission File Number: 000-49671

Commission file number: 000-49671

MODULAR MEDICAL, INC.

(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)

17995 Bear Valley Lane

Escondido,10740 Thornmint Road, San Diego, CA 9202792127

(Address of Principal Executive Offices) (Zip Code)

949 370 9062(858) 800-3500

(Registrant’s Telephone Number, Including Area Code)telephone number, including area code)

N/ASecurities registered pursuant to Section 12(b) of the Act:

(former name or former address, if changed since last report)

Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx Noo

☒ Yes ☐ No

Indicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to submit and post such files).  Yesx Noo (The Registrant does not have a corporate Web site.)

☐ Yes ☒ No

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-acceleratednon- accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrantregistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox

APPLICABLE ONLY TO CORPORATE ISSUERS☐ Yes ☒ No

Indicate theThe number of shares outstanding of eachshares of the Registrant’s classes ofregistrant’s common stock, par value $0.001 per share, was 21,123,726 as of the latest practicable date.November 3, 2023.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the Financial Statements and Notes to Financial Statements contained herein may contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.

MODULAR MEDICAL, INC.

FORM 10-Q

SEPTEMBER 30, 2023

TABLE OF CONTENTS

Part I -– FINANCIAL STATEMENTSINFORMATION

Item 1. Financial Statements.Statements

Modular Medical, Inc.

Condensed Consolidated Balance Sheets
(In thousands, except par value)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Operations
(Unaudited)

(In thousands, except per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)

(In thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Modular Medical, Inc.

Condensed Consolidated Statements of Cash Flows
(Unaudited)

(In thousands)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MODULAR MEDICAL, INC.

FKA -BEAR LAKE RECREATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

DECEMBER 31, 2017

(UNAUDITED)

NOTE 1 - ORGANIZATION– THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical, Inc. (the Company) was organizedincorporated in Nevada in October 1998 under the laws of the State of Nevada on October 22, 1998, to engage in any lawful purpose.name Bear Lake Recreation, Inc. The Company has at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

Through the year ended June 30, 2001 the Company was seeking to rent out snowmobiles and all-terrain vehicles (ATV’s).  In June of 2000, the Company also purchased the rights to manufacture, use, market, and sell the Net Caddy, a backpack style bag used to transport fishing gear. The Company abandoned both the snowmobile and ATV’s plans, and the Net Caddy plans.

Quasuras, Inc. (Quauras) was incorporated in Delaware on April 20, 2015.

Quasuras has developed a hardware technology allowing people with diabetes to receive their daily insulin in two ways, through a continuous “basal” delivery allowing a small amount of insulin to be in the blood athad no material business operations from 2002 until approximately 2017 when it acquired all times and a “bolus” delivery to address meal time glucose input and to address when the blood glucose level becomes too high. By addressing the time and effort required to effectively treat their condition, Quasuras believes it can address the less technically savvy, less motivated part of the market.

Reorganization

On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, the Company and Quasuras, the Company acquired 100% of the issued and outstanding shares of Quasuras, for 7,582,000 shares of the Company, resulting in Quasuras becomingInc., a wholly-owned subsidiary of the Company. SinceDelaware corporation (Quasuras). As the major shareholder of Quasuras retained control of both the Company and Quasuras, the share exchange was accounted for as a reverse merger. As such, the Company recognized the assets and liabilities of Quasuras, acquired in the Reorganization,merger, at their historical carrying amounts.

Pursuant Prior to the reorganization,acquisition of Quasuras and, since at least 2002, the Company was a shell company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act). In June 2017, the Company changed the fiscal year endits name from June 30Bear Lake Recreation, Inc. to March 31, to coincide with the year end for Quasuras,Modular Medical, Inc.

The Company is a development stage medical device company focused on the design, development and eventual commercialization of an innovative insulin pump using modernized technology to increase pump adoption in the diabetes marketplace. Through the creation of a novel two-part patch pump, our MODD1 product, or MODD1, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access to the higher standards of care that presently available insulin pumps provide. By simplifying and streamlining the user experience from introduction, prescription, reimbursement, training and day-to- day use, we seek to expand the wearable insulin delivery device market beyond the highly motivated “super users” and expand the category into the mass market. The product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets.

In February 2022, the Company completed a public offering of its equity securities, and its common stock was approved to list on the Nasdaq Capital Market under the symbol “MODD” and began trading there on February 10, 2022.

Liquidity and Going Concern

The Company expects to continue to incur operating losses for the foreseeable future and incur cash outflows from operations as it continues to invest in the development and subsequent commercialization of its product. The Company expects that its research and development and general and administrative expenses will continue to increase, and, as a result, it will eventually need to generate significant revenue to achieve profitability. The Company’s expected operating losses and cash burn raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. These consolidated financial statements do not include any adjustments that might result from this uncertainty. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to raise additional capital, through the sale of additional equity or debt securities, to support its future operations. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to the Company. As discussed in Note 4, in May 2023, the Company completed an offering of its common stock and warrants.

The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its product, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product offering. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

Basis of Presentation

The Company’s fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these notes to the condensed consolidated financial statements refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ending March 31, 2024). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Quasuras. All significant intercompany transactions and balances have been preparedeliminated in accordance with accounting principles generally accepted in the United States of America.  The following summarizes the more significant of such policies:consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements wereare unaudited and have been prepared in conformityaccordance with generally accepted accounting principles in the United States (“US GAAP”)(GAAP) and with the instructions to Form 10-Q.

rules and regulations of the United States Security and Exchange Commission (SEC) regarding interim financial reporting. The condensed consolidated balance sheet as of March 31, 2023 has been derived from the audited consolidated financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAPin accordance with these rules and regulations for presentation of interim financial information. Therefore, the unaudited condensed interim consolidated financial statementsSEC. The information in this report should be read in conjunction with the Company’s consolidated financial statements and the notes thereto included in the Company’s Annual Report on the Form 10-K for the fiscal year ended June 30, 2017 and the Form 8-K filed on July 28, 2017. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended June 30, 2017 included in the Company’s Annual Reportits most recent annual report on Form 10-K filed with the Securities and Exchange Commission. SEC.

In the opinion of Management,management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation, consisting solely(consisting only of normal recurring adjustments, have been made. Operatingadjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The operating results for the ninesix months ended December 31, 2017September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2018.

Principles of Consolidation2024 or for any other future period.

The consolidated financial statements include the accounts of Modular Medical, Inc. and its wholly owned subsidiary Quasuras, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amountsamount of revenues and expenses during the reporting period. Estimates may include those pertaining to accruals, stock-based compensation, and income taxes. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.

Reportable Segment

The Company hasoperates in one reportable segment. The Company’s activities are interrelatedbusiness segment and each activity is dependent upon and supportiveuses one measurement of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single globalprofitability for its business.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Cost of Sales 

Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping, importation duties and charges, third party royalties, and product sampling.

Research and Development

The Company expenses the cost of research and development expenditures as incurred. Research and development costs charged to operations were approximately $259,000 and $0 for the nine months ended December 31, 2017 and 2016, respectively, and approximately $171,045 and $0 for the three months ended December 31, 2017 and 2016, respectively.

General and Administration

General and administration expense consistsAdministrative

General and administrative expenses consist primarily of payroll and benefit related costs, rent, stock-based compensation, legal and accounting fees, and office expenses, and meetings and travel.other administrative expenses.

Income Taxes

The Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.

At December 31, 2017 and 2016, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended March 31, 2017 and prior years or in computing its tax provision for 2017. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities for the period ended March 31, 2017 to the present, generally for three years after they are filed.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrationsconcentration of credit risk are cash, accounts receivable and other receivables arising from its normal business activities.consist primarily of cash. The Company placesmaintains its cash at a high-credit quality financial institution within the United States, which is insured by the Federal Deposit Insurance Corporation (FDIC) up to limits of approximately $250,000. No reserve has been made in what it believesthe financial statements for any possible loss due to be credit-worthy financial institutions.  institution failure.

Risks and Uncertainties

The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

Contingencies

Certain conditions may exist asEconomic Disruptions

The global outbreak of the datecoronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020. This negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel, and transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the financial statementsmarkets. While the U.S. national emergency expired in May 2023 and substantially all closures and “shelter-in-place” orders have ended, there can be no assurance that the COVID-19 pandemic will not impact the Company’s operational and financial performance in the future, as the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease spread are issued, whichuncertain, out of our control, and cannot be predicted.

Wars and acts of terrorism have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. Since mid-2022, the U.S. Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation remains elevated. While the Company was recently able to access the capital markets, in the future, the Company may result in a lossbe unable to access the capital markets, and additional capital may only be available to the Company but which will onlyon terms that could be resolved when one or more future events occur or failsignificantly detrimental to occur. The Company’s managementits existing stockholders and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.its business.

If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Cash and Cash Equivalents

Cash and cash equivalents include cash inon hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2017

Property and March 31, 2017, the Company had $4,510,052 and $392,007, respectively, in cash. Deposits at the bank are insured up to $250,000 by the Federal Deposit Insurance Corporation. The Company’s uninsured portion of the balances held at the bank aggregated to approximately $4,010,052 and $142,007, respectively. No reserve has been made in the financial statements for any possible loss due to any financial institution failure.  The Company has not experienced any losses in such accounts and believes we are not exposed to any significant risk on cash and cash equivalents.Equipment

Inventory

Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of December 31, 2017 and March 31, 2017, the Company had no inventory.

Property, Plant & Equipment

Property and equipment are recorded at historical cost. Depreciation is stated at cost and depreciatedcomputed using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our propertythe assets, generally three to five years. Depreciation is recorded in operating expenses in the consolidated statements of operations. Leasehold improvements and assets acquired through capital leases are amortized over the shorter of their estimated useful life or the lease term, and amortization is recorded in operating expenses in the consolidated statements of operations. Construction-in-process includes machinery and equipment and is stated at cost and not depreciated. Depreciation on construction-in-process commences when the assets are generally as follows: computer software developed or acquiredready for internaltheir intended use three to 10 years; computer equipment, two to three years; buildings and improvements, five to 15 years; leasehold improvements, two to 10 years; and furniture and equipment, one to five years.placed into service.

As of December 31, 2017 and March 31, 2017, property, plant and equipment amounted to:

Depreciation expenses for the nine months ended December 31, 2017 and 2016 was $758 and $0, respectively.

Fair Value of Financial InstrumentInstruments

For certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of

The Company measures the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” definesusing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Due to their short-term nature, the carrying values of cash equivalents, accounts payable and establishesaccrued expenses, approximate fair value.

Leases

The Company’s right-of-use assets consist of leased assets recognized in accordance with FASB ASC No. 842, Leases, which requires lessees to recognize a three-level valuation hierarchylease liability and a corresponding lease asset for disclosuresvirtually all lease contracts. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and the lease liability represents the Company’s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheets and are expensed on a straight-line basis over the lease term in the consolidated statement of operations and comprehensive loss. The Company determines the lease term by agreement with the lessor. In cases where the lease does not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

Stock-Based Compensation

The Company recognizes stock-based compensation for equity awards granted to employees and non-employees on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The Company estimates the value of stock options on the date of grant using the Black-Scholes pricing model. The determination of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported inof share-based payment awards on the balance sheets for receivablesdate of grant using an option-pricing model is affected by the option price, as well as assumptions regarding a number of highly complex and current liabilities each qualify as financial instruments andsubjective variables. These variables include, but are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputsnot limited to, the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs toexpected stock price volatility over the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.awards, and projected stock option exercise behaviors.

Per-Share Amounts

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

As of December 31, 2017 and March 31, 2017, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Earnings Per Share (EPS)

Basic EPSnet loss per share is computed by dividing income available to common shareholdersloss for the period by the weighted averageweighted-average number of shares of common stock outstanding (WASO) during the period. In addition, the Company includes the number of shares of common stock issuable under pre-funded warrants as outstanding. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted intoPotentially dilutive common shares consist of incremental shares of common stock atissuable upon the beginningexercise of stock options and exercise of warrants.

Prior to April 1, 2023, the period (or at the time of issuance, if later).

The following table sets forCompany excluded pre-funded warrants from the computation of basicWASO. The pre- funded warrants are now included in the computation of WASO. Prior period amounts have been conformed to the current-period presentation. The impact of the change reduced the previously reported loss per share by $0.04 and diluted earnings per share$0.06, respectively, and increased WASO by approximately 1,348,000 and 1,098,000 shares, respectively, for the three and ninesix months ended December 31, 2017 and 2016:

Recently Issued Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics.September 30, 2022. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on our financial position or statement of operations.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a materialreclassification had no impact on the Company’s presentnet loss or future consolidated financial statements.cash flows for the three or six months ended September 30, 2022.

Reclassification

For the six months ended September 30, 2023 and 2022, the following table sets forth securities outstanding which were excluded from the computation of diluted net loss per share as their inclusion would be anti- dilutive (in thousands).

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.flows.

NOTE 2- REORGANIZATION AND PRIVATE PLACEMENT

OnComprehensive Loss

Comprehensive loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive loss may include certain changes in equity that are excluded from net loss. For the three and six months ended September 30, 2023 and 2022, the Company’s comprehensive loss was the same as its net loss.

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses. This ASU added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies. The Company adopted ASU No. 2016-13 effective April 26, 2017, Modular, issued 2,900,000 shares (the “Control Block”), of newly issued, restricted common stock, par value, $0.001, per share, for a purchase price of $375,000, resulting in a change in control of Modular.

On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, Modular, and3 Quasuras Shareholdersand Quasuras (the “Acquisition Agreement”), the Company acquired all 4,400,000 shares of Quasuras’ common stock which represented 100% of the issued and outstanding shares of Quasuras for 7,582,060 shares of our common stock, resulting in Quasuras becoming our wholly-owned subsidiary (the “Acquisition”).

Simultaneously with the closing of the Acquisition and as a condition thereto, we sold (the “Private Placement”), in a private placement an aggregate of 7,801,212 shares of our common stock pursuant to one or more exemptions from the registration requirements of the Securities Act, at a purchase price of $0.66 per share resulting in gross proceeds to us of approximately $5,100,000. Simultaneously with the Acquisition and Private Placement, the Company cancelled all 2,900,000 Control Block shares it had issued in the Control Block Acquisition (the “Share Cancellation”). In connection with the Private Placement, we paid $41,928 as compensation in connection with sales of our shares therein.

Following the Acquisition, the Private Placement1, 2023, and the Share Cancellation, weadoption had issued and outstanding 15,983,272 shares of our common stock.

The cash received in the private placement was recorded as the cash received in reorganization in the accompanying financial statements.

Simultaneously with and as a condition to the closing of the Acquisition and the Private Placement, pursuant to an intellectual property transfer agreement dated as of July 24, 2017, by and among, us, Quasuras and Mr. DiPerna (the “IP Transfer Agreement”), Mr. DiPerna transferred to us all intellectual property rights owned directly and/or indirectly by him related to our proposed business. Separately, we agreed to pay Mr. DiPerna as part of his compensation for services to be performed for us pursuant to a royalty agreement (the “Royalty Agreement”) certain fees based upon future sales, if any, of our proposed product subject to a maximum $10,000,000 capno impact on the aggregate amountCompany’s results of fees that Mr. DiPerna could earn from such arrangement.operations and financial position.

NOTE 2 – CONSOLIDATED BALANCE SHEET DETAIL

NOTE 3 – ACCRUED EXPENSESLEASES

As

W. Bernardo Drive, San Diego, CA

The 39-month lease term expired on June 30, 2023, and, upon expiration, the Company had a $100,000 security deposit receivable from the landlord, which was refunded to the Company during the three months ended September 30, 2023.

Thornmint Road, San Diego, CA

The 48-month lease term commenced February 1, 2023, and the lease provides for an initial base monthly rent of December 31, 2017$36,000 with annual rent increases of approximately 4%. In addition to the minimum lease payments, the Company is responsible for property taxes, insurance, and March 31, 2017, accrued expenses amountedother certain operating costs. A discount rate of 8%, which approximated the Company’s incremental borrowing rate, was used to $32,601measure the lease asset and $8,425, respectively. Accrued expenses comprisedliability. The Company obtained a right-of-use asset of accrued legal and professional chargesapproximately $1,560,000 in exchange for its obligations under the operating lease.

Future minimum payments under the facility operating lease, as of December 31, 2017September 30, 2023, are listed in the table below (in thousands).

Cash paid for amounts included in the measurement of lease liabilities was approximately $257,000 and March 31, 2017.

NOTE 4 – PAYABLE TO RELATED PARTY

Payable to related party comprises of$79,000 for the amounts paid bysix months ended September 30, 2023 and 2022, respectively. Rent expense was approximately $225,000 and $54,000 for the major shareholder on behalf ofsix months ended September 30, 2023 and 2022, respectively and $113,000 and $27,000 for the Company. The payable is unsecured, non- interest bearingthree months ended September 30, 2023 and due on demand. As of December 31, 2017 and March 31, 2017, respectively, the payable to related party amounted to $0 and $21,256.2022, respectively.

NOTE 54 – STOCKHOLDERS’ EQUITY

Common stockMay 2023 Public Offering

On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among,May 15, 2023, the Company entered into an underwriting agreement (the Underwriting Agreement) with Newbridge Securities Corporation (the Underwriter), with respect to the issuance and Quasuras Inc.,sale in a firm commitment underwritten offering (the 2023 Offering) by the Company acquired 100% of the issuedunits of its securities for aggregate gross proceeds of approximately $9,390,000, before deducting underwriting discounts and outstandingcommissions and other offering expenses. The Company sold 8,816,900 shares of Quasuras for 7,582,000its common stock and warrants to purchase 4,408,450 shares of the Company, resulting in Quasuras becomingits common stock. The securities were sold as a wholly-owned subsidiaryunit, with each unit consisting of the Company. The historical equity for Quasuras was restated pursuant to the reorganization.

The Company has 50,000,000 shares of common stock authorized. The par value of the shares is $0.001. As of December 31, 2017, 15,983,000two shares of common stock of the Company and one warrant (the 2023 Warrant) to purchase one share of common stock, at a public offering price of $2.13 per unit. The 2023 Warrants were issuedimmediately separable and outstanding.exercisable, had a per share exercise price of $1.22 and expire five years from the date of issuance. The 2023 Offering closed on May 18, 2023.

Preferred StockPursuant to the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 1,322,534 shares of common stock and an additional 661,267 of the 2023 Warrants to cover over-allotments, if any. On May 25, 2023, the Underwriter exercised in full this option and purchased the additional securities for aggregate gross proceeds to the Company of approximately $1,408,000, before deducting underwriting discounts and commissions and other offering expenses.

The Underwriter was paid a cash fee of 7.0% of the aggregate gross proceeds of the 2023 Offering (including the over-allotment option) and reimbursed certain out-of-pocket expenses of approximately $125,000. In addition, pursuant to the Underwriting Agreement, the Company initially issued to the Underwriter common stock purchase warrants (the UW Warrants) for a total of 709,760 shares. Subsequently, the UW Warrants were reissued to the Underwriter and its agents for a total of 604,623 shares. The UW warrants are exercisable six months from the respective issuance dates and have a four-year term and a per share exercise price of $1.32.

The Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company, each director and executive officer of the Company, and certain stockholders have agreed with the Underwriter not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 90 days after May 17, 2023.

Warrants

As of September 30, 2023, the Company had the following warrants outstanding (share amounts in thousands):

As of March 31, 2023, the Company had the following warrants outstanding (share amounts in thousands):

Other

During the six months ended September 30, 2023 and 2022, the Company issued 1,429 and 348 shares of common stock with fair values of approximately $1,400 and $1,000, respectively, to a service provider.

NOTE 5 – STOCK-BASED COMPENSATION

Amended 2017 Equity Incentive Plan

In October 2017, the Company’s board of directors (the Board) approved the 2017 Equity Incentive Plan (the Plan), as amended, with 1,000,000 shares of common stock reserved for issuance. In January 2020 and August 2021, the Board approved an increase in the number of shares reserved for issuance by 333,334 and 1,333,334 shares, respectively. In January 2023, the Company’s stockholders approved an increase in the number of shares reserved for issuance under the plan by an additional 2,000,000 shares. Under the Plan, eligible employees, directors, and consultants may be granted a broad range of awards, including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units (RSUs). The Plan is administered by the Board or, in the alternative, a committee designated by the Board.

Stock-Based Compensation Expense

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant date fair value. As of September 30, 2023, the unamortized compensation cost was approximately $2,645,000 related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 1.7 years.

During the three months ended September 30, 2023, the Company issued 6,265 shares to members of the Board in accordance with its outside director compensation plan and recorded approximately $7,000 of stock-based compensation expense for these share awards.

The weighted-average grant date fair value of options granted was $1.00 and $4.17 per share for the six months ended September 30, 2023 and 2022, respectively, and $1.02 and $4.06 for the three months ended September 30, 2023 and 2022, respectively. The following assumptions were used in the fair-value method calculations:

The fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified methods to establish the fair term of options, as well as average volatility. The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. A dividend yield of zero was applied because the Company has never paid dividends and has no intention to pay dividends in the foreseeable future. The Company accounts for forfeitures as they occur.

The following table summarizes the activity in the shares available for grant under the Plan during the six months ended September 30, 2023:

There were no stock options exercised during the six months ended September 30, 2023 and 2022.

A summary of RSU activity under the Plan is presented below.

The total intrinsic value of the RSUs outstanding as of September 30, 2023 was approximately $266,000. The unamortized compensation cost at September 30, 2023 was approximately $209,000 related to RSUs and is expected to be recognized as expense over a period of approximately 2.75 years.

The following table summarizes the range of outstanding and exercisable options as of September 30, 2023:

The intrinsic value per share is calculated as the excess of the closing price of the common stock on the Company’s principal trading market over the exercise price of the option.

NOTE 6 – INCOME TAXES

The Company has 5,000,000 shares of preferred stock authorized. The par valuedetermines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the sharesCompany’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is $0.001. As of December 31, 2017, noneestablished for any deferred tax assets for which it is more likely than not that all or a portion of the shares of preferred stock of the Company were issued.

Stock Options

On October 19, 2017, the board approved an Employee Stock Option Program (“ESOP”) that reserves 3,000,000 shares todeferred tax assets will not be issued. As of December 31, 2017, no options has been granted.

NOTE 6 - INCOME TAXES

realized. Based on the available information and other factors, management believes it is more likely than not that theits federal and state net deferred tax assets at, December 31, 2017 and 2016, will not be fully realizable. Accordingly, managementrealized, and the Company has recorded a full valuation allowance againstallowance.

The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. All tax returns for fiscal 2016 to fiscal 2023 may be subject to examination by the U.S. federal and state tax authorities. As of September 30, 2023, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Litigations, Claims and Assessments

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.

Indemnification

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its net deferred tax assets at, December 31, 2017officers and 2016.directors. No amounts were reflected in the Company’s consolidated financial statements for the six months ended September 30, 2023 and 2022 related to these indemnifications. The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any payments related to these indemnification agreements.

Purchase Obligations

The Company’s primary purchase obligations include purchase orders for machinery and equipment. At December 31, 2017 and March 31, 2017,September 30, 2023, the Company had federal net operating loss carry-forwardsoutstanding purchase orders for machinery and equipment and related expenditures of approximately $290,000 and $75,000, respectively, expiring beginning in 2037.$996,000.

Deferred tax assets consist of the following components:

NOTE 7 – ROYALTY AGREEMENT

On July 12, 2017, the Company entered into a royalty agreement with the founder and major shareholder. Pursuant to the agreement, the founder and major shareholder is assigning and transferring all of his rights in the intellectual property in return for royalty payments. The Company shall pay royalty to the founder on any sales of the royalty product sold or otherwise commercialized by the Company, equal to (a) US$0.75 on each sale of a royalty product, or (b) 5% of the gross sale price of the royalty product, whichever is less. The royalty payments shall cease and this agreement shall terminate, at such time as the total sum of royalty payments actually paid to the founder, pursuant to this agreement, reaches $10,000,000. The Company shall have the option to terminate this agreement at any time upon payment, to the founder, of the difference between total royalty payments actually made to him to date and the sum of $10,000,000. All payments of the royalties, if due, for the preceding quarter, shall be made by the Company within thirty days after the calendar quarter.

On August 21, 2017, the Company entered into a sublease agreement to rent office space. The term of the lease commences on September 1, 2017 and expires on December 14, 2019. The monthly rent for the lease is $3,000. The Company paid a deposit of $7,500 upon execution of the lease which has been recorded as a security deposit in the accompanying financial statements. The amounts of minimum lease payments and periods during which they become due are as follows:

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations

Forward-looking Statements

When usedThis Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this AnnualQuarterly Report the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identifyon Form 10-Q (this Report). This Report contains forward-looking statements within the meaning of Section 27a27A of the Securities Act of 1933 as amended (“Securities Act”) and Section 21e21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) regarding events, conditions, andwhich include, without limitation, statements about the market for our technology, our strategy, competition, expected financial trends that may affect our future plans of operations, business strategy, operating results, and financial position.

Persons reviewing this Quarterly Report are cautioned that these statements reflect our current expectations regarding our possible future results of operations, performance and achievementscapital raising efforts, and any forward-looking statements are not guaranteesother aspects of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors.

Such factors are discussed further below under “Trends and Uncertainties,” and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.

Overview

The Company was organized under the laws of the State of Nevada on October 22, 1998 under the name Bear Lake Recreation Inc. Our initial operations consisted of renting snowmobiles and all-terrain vehicles (ATV’s). We had also planned on organizing snowmobile rental packages, which would have included lodging at Ideal Beach Resort at Bear Lake, Utah. On or about October 1999, we abandoned the snowmobile, ATV and lodging plans. On June 27, 2000, we entered into a licensing agreement with AlCORP, an Oregon limited liability company, to purchase the right to manufacture, use, market and sell the “NetCaddy,” a backpack style bag used to transport fishing gear. By the end of the first quarter of 2002, we had also abandoned the “Net Caddy” operations.

We had no material business operations from 2002 through June 2017 and we were a shell company as definedidentified in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). As a shell company, we did not have material operations and had assets consisting solely of cash and cash equivalents. On April 26, 2017, there was a change of control of the Company. See our Current Reportmost recent annual report on Form 8-K dated April 5, 201710-K filed with the Securities and Exchange Commission on April 5, 2017June 26, 2023 and our Current Report on Form 8-K dated April 26, 2017 filedin other reports that we file from time to time with the Securities and Exchange CommissionCommission. Any statements about our business, financial results, financial condition and operations contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” or similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described under Item 1A of our Annual Report on May 1, 2017

On July 24, 2017, pursuantForm 10-K for the year ended March 31, 2023. These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors including, without limitation, the direct and indirect effects of coronavirus disease 2019, or COVID-19, as well as inflationary risks, including the risk that the cost of certain of the Company’s components is increasing, and related issues that may arise therefrom. Many of those factors are outside of our control and could cause actual results to differ materially from those expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a Reorganizationdifferent extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and Share Exchange Agreement,oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by and among, the Company, Paul M. DiPerna,cautionary statements contained or referred to in this Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances, or assumptions underlying such statements, or otherwise.

Our fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Report, refers to the sole officer and directorfiscal year ended March 31 of the calendar year indicated (for example, fiscal 2024 refers to the fiscal year ending March 31, 2024). Unless the context requires otherwise, references to “we,” “us,” “our,” and the controlling stockholder of Quasuras“Company” refer to Modular Medical, Inc., a Delaware company (“Quasuras”), Messrs. Besser and Frank (Messrs. Besser, Frank and Mr. DiPerna, shall sometimes be collectively referred to as the “3 Quasuras Shareholders”) and Quasuras (the “Acquisition Agreement”), the its consolidated subsidiary.

Company acquired all 4,400,000 issued and outstanding shares of Quasuras’ common stock owned by the 3 Quasuras Shareholders (which represented 100% of the issued and outstanding shares of Quasuras) in exchange for 7,582,060 shares of our common stock, resulting in Quasuras becoming our wholly-owned subsidiary (the “Acquisition”) and Mr. DiPerna owning approximately 47% of our issued and outstanding common stock.Overview

Simultaneously with the closing of the Acquisition and pursuant to the Acquisition Agreement (i) Mr. Besser resigned as president and a director and Mr. Frank resigned as chief executive officer, chief financial officer, secretary, and treasurer but remained a director of the Company, and (ii) Mr. DiPerna was appointed our chairman, chief executive officer, chief financial officer, secretary and treasurer.

We are now a development stagedevelopment-stage medical device company focused on designing, developingthe design, development and commercializingcommercialization of an innovative insulin pump using modernized technology to better serveincrease pump adoption in the diabeticdiabetes marketplace. Through the creation of a novel two-part patch pump, our MODD1 product, we seek to fundamentally alter the trade-offs between cost and complexity and access to the higher standards of care that presently-available insulin pumps provide. By simplifying and streamlining the user experience from introduction, prescription, reimbursement, training and day-to-day use, we seek to expand the wearable insulin delivery device market beyond the highly motivated “super users” and expand the category into the mass market. The product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets.

Historically, we have financed our operations principally through private placements and public offerings of our common stock and sales of convertible promissory notes. Based on our current operating plan, substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included in this Report are issued exists. Our ability to continue as a going concern depends on our ability to raise additional capital, likely through the sale of equity or debt securities, to support our future operations. If we believeare unable to secure additional capital, we will be required to curtail our research and development initiatives and take additional measures to reduce costs. We have provided additional disclosure in Note 1 to the consolidated financial statements in Item 1 of this Report and under Liquidity below.

Economic Disruptions

The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020. This negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the financial markets. While the U.S. national emergency expired in May 2023 and substantially improveall closures and “shelter-in-place” orders have ended, there can be no assurance that the quality of life of persons requiring daily administration of fast acing insulin. Diabetes is a chronic, life-threatening disease for which there is no known cure. Type 1 diabetes is an auto immune disease whereby the immune system attacksCOVID-19 pandemic will not impact our operational and destroys beta cellsfinancial performance in the pancreas leaving itfuture, as the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease spread are uncertain, out of our control, and cannot be predicted.

Wars and acts of terrorism have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. Since mid-2022, the U.S. Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation remains elevated. While we were able to access the capital markets in May 2023 and 2022, in the future, we may be unable to produce insulin. Type 2 diabetes is most commonly caused byaccess the development of insulin resistancecapital markets, and additional capital may only be available to us on terms that prevents the body from properly using insulin. Insulin is a life sustaining hormone that allows cells in the bodycould be significantly detrimental to absorb glucose and store it or covert it to energy, those with diabetes are left unable to properly process sugars resulting in excessive sugar in their bloodstream.

Our developed hardware technology, we believe, allows people with diabetes to receive their daily insulin in two ways, through a continuous “basal” delivery allowing a small amount of insulin to be in the blood at all times and a “bolus” delivery to address meal time glucose inputour existing stockholders and to address when the blood glucose level elevates beyond an acceptable level. See Part II – Other Information – Item 2.our business.

For additional information regarding the Acquisition, seeon risks that could impact our Current Report on Form 8-K that was filed with the Securities and Exchange Commission (the “SEC”) on July 28, 2017.future results, please refer to “Risk Factors” in Part I, Item 1A of this Report.

Results of Operations – for the Nine Months Ended December 31, 2017 and Compared to the Nine Months ended December 31, 2016

Overview:

We reported a net loss of $477,863 for the nine months ended December 31, 2017 and $7,568 for the nine months ended December 31, 2016. The increase in our net loss from December 31, 2016 to December 31, 2017, is due to an increase in Consulting fee, Professional fee and General and Administrative Expenses.

Revenues:

Revenue for the nine month period ended December 31, 2017 and for the nine month period ended December 31, 2016 respectively was $0.

Operating Expenses:

Operating expenses were $480,971 for the nine month period ended December 31, 2017 and $7,567 for the nine month period ended December 31, 2016, which increase was largely attributed to the consulting fee paid to outside consultants, professional fee paid for the quarterly filings and the general and administrative expenses. The Company had minimal operations during the nine months ended December 31, 2016 hence the operating expenses were also low.

Interest Income:

Interest income for the nine months ended December 31, 2017 and 2016 was $3,908 and $799, respectively.

Assets and Liabilities:

As of December 31, 2017, we had total current assets of $4,532,965 of which $4,510,052 were cash and cash equivalents, and current liabilities of $32,601. As of December 31, 2016, we had total current assets of $392,313 and current liabilities of $29,681.

Results of Operations – for the Three Months Ended December 31, 2017 and Compared to the Three Months ended December 31, 2016

Overview:

We reported a net loss of $258,772 for the three months ended December 31, 2017 and $6,427 for the three months ended December 31, 2016. The increase in our net loss from December 31, 2016 to December 31, 2017, is due to an increase in Consulting fee, Professional fee and General and Administrative Expenses.

Revenues:

Revenue for the three month period ended December 31, 2017 and for the three month period ended December 31, 2016 respectively was $0.

Operating Expenses:

Operating expenses were $260,860 for the three month period ended December 31, 2017 and $5,812 for the three month period ended December 31, 2016, which increase was largely attributed to the consulting fee paid to outside consultants, professional fee paid for the quarterly filings and the general and administrative expenses. The Company had minimal operations during the three months ended December 31, 2016 hence the operating expenses were also low.

Interest Income:

Interest income for the nine months ended December 31, 2017 and 2016 was $2,888 and $185, respectively.

Liquidity and Capital Resources

Net Cash Used In Operating Activities

We used $544,837 of cash to fund operating activities during the nine months ended December 31, 2017, compared to $7,874 in the nine months ended December 31, 2016.  More cash was used to fund operating activities during the first nine months of 2017 due to increased losses generated by our Company and the increase in accounts receivables security deposit.

Net Cash Used In Investing Activities

Investing activities provided $4,684,138 cash in the nine months ended December 31, 2017, compared to no cash generated by investing and financing activities in the comparable prior year period.  The main source of the cash was the reverse acquisition completed in July 2017. The subsidiary issued shares pursuant to a private placement completed simultaneously with the reverse acquisition. The cash collected in the private placement was acquired by the Company at the time of the reverse acquisition.

Net Cash Provided By Financing Activities

We used $21,256 of cash from financing activities in the nine months ended December 31, 2017, compared to using $380,284 of cash from financing activities in the comparable prior year period.  The decrease in cash from financing activities was attributable the repayment of $21,256 to the related party. For the same period in the prior year, the Company paid $187,951 pursuant to a repurchase of common stock and repaid $192,333 to the related party.

Critical Accounting Policies and Estimates

Use

The discussion and analysis of Estimates

our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make certain estimates and assumptionsjudgments that affect the reported amounts of assets, and liabilities, and disclosureexpenses. On an ongoing basis, we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances. Actual results may differ from these estimates and reported results could differ under different assumptions or conditions. Our significant accounting policies and estimates are disclosed in Note 1 of contingentthe Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2023. As of September 30, 2023, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

Research and Development

Our research and development expenses include personnel, overhead and other costs associated with the development and initial production of our insulin pump products. We expense research and development costs as they are incurred.

Research and development, or R&D, expenses increased for the three months ended September 30, 2023 compared with the same period of 2022, primarily due to increased employee-related costs of approximately $377,000, increased material costs of approximately $165,000 and increased consulting expenses of approximately $41,000. The increases in material and consulting costs were primarily attributable to pre-submission activities, as we are producing units and incurring testing costs in anticipation of the 510(k) submission of our pump product to the U.S. Food and Drug Administration, or FDA.

R&D expenses increased for the six months ended September 30, 2023 compared with the same period of 2022, primarily due to increased employee-related costs of approximately of $786,000, an increase of approximately $61,000 in stock-based compensation expense and an increase in materials costs of $342,000. These increases were partially offset by an approximately $213,000 decrease in consulting costs, as we have increased our employee headcount and completed development of our pump product. The increase in material costs were primarily attributable to pre-submission activities, as we are producing units and incurring testing costs in anticipation of our 510(k) submission to the FDA.

Our R&D employee headcount increased to 35 at September 30, 2023 from 28 at September 30, 2022. R&D expenses included stock-based compensation expenses of approximately $373,000 and $362,000 for the three-months ended September 30, 2023 and 2022, respectively, and $739,000 and $678,000 for the six months ended September 2023 and 2022, respectively. We expect research and development expenses to increase for the remainder of fiscal 2024, as we expect to incur increased costs in connection with our pre-submission testing for submission of our MODD-1 insulin pump to the FDA.

General and Administrative

General and administrative expenses consist primarily of personnel and related overhead costs for finance, human resources, marketing, and general management.

General and administrative, or G&A, expenses increased for the three months ended September 30, 2023 compared with the same period of the prior year, primarily as a result of increases in facility-related expenses of approximately $120,000, marketing-related expenses of approximately $85,000, depreciation expense of approximately $72,000, and employee-related costs of approximately $70,000, as partially offset by a decrease in expenses for stock-based compensation of approximately $190,000 and consulting and professional services of approximately $90,000.

G&A expenses increased for the six months ended September 30, 2023 compared with the same period of the prior year, primarily as a result increases in facility-related costs of approximately $230,000, employee-related costs of approximately $150,000, depreciation expense of approximately $110,000, and marketing-related expenses of approximately $80,000, as partially offset by decreases in stock-based compensation expenses of approximately $495,000 and consulting and professional services expenses of approximately $238,000.

Our G&A employee headcount increased to four at September 30, 2023 from two at September 30, 2022. G&A expenses included stock-based compensation expenses of approximately $191,000 and $381,000 for the three months ended September 30, 2023 and 2022, respectively, and $308,000 and $803,000 for the six months ended September 30, 2023 and 2022, respectively. We expect G&A expenses to remain consistent for the remainder of fiscal 2024.

Liquidity and Going Concern

As a development-stage enterprise, we do not currently have revenues to generate cash flows to cover operating expenses. Since our inception, we have incurred operating losses and negative cash flows from operations in each year due to costs incurred in connection with R&D activities and G&A expenses associated with our operations. For the six months ended September 30, 2023 and year ended March 31, 2023, we incurred net losses of $7.9 million and $13.9 million, respectively. At September 30, 2023, we had a cash balance of approximately $6.3 million and an accumulated deficit of $56.4 million. When considered with our current operating plan, these conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included in this Report are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities atthat may be necessary should we be unable to continue as a going concern. Our operating needs include the dateplanned costs to operate our business, including amounts required to fund research and development activities, including clinical studies, working capital and capital expenditures. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of the financial statementsequity or debt securities to support our future operations. In May 2023, we completed a public offering of units, comprising shares of our common stock and warrants to purchase shares of our common stock, for net proceeds of $9.7 million. Our future capital requirements and the reported amountsadequacy of revenuesour available funds will depend on many factors, including, without limitation, our ability to successfully commercialize our product, competing technological and expenses duringmarket developments, and the reporting periods. Estimatesneed to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product offerings. If we are unable to secure additional capital timely, we may include those pertainingbe required to accruals,curtail R&D initiatives, reduce headcount and take additional measures to reduce costs in order to conserve our cash.

For the six months ended September 30, 2023, we used approximately $6,484,000 in operating activities, which primarily resulted from our net loss of approximately $7,920,000 and net changes in operating assets and liabilities of approximately $224,000, as adjusted for non-cash items, including stock-based compensation expenses of approximately $1,048,000, depreciation and income taxes. Actual results could materially differamortization expenses of approximately $153,000 and other immaterial adjustments. For the six months ended September 30, 2022, we used $5,527,000 in operating activities, which primarily resulted from those estimates.

Off-Balance Sheet Arrangements

Asour net loss of December 31, 2017$6,949,000, as adjusted for changes to operating assets and December 31, 2016,liabilities of approximately $194,000, as adjusted for non-cash items, including stock-based compensation expenses of approximately $1,481,000, approximately $101,000 for issuances of shares of common stock in exchange for services, depreciation and amortization expenses of approximately $60,000 and other immaterial adjustments.

For the six months ended September 30, 2023 and 2022, cash used in investing activities of approximately $718,000 and $81,000, respectively, was for the purchase of property and equipment.

Cash provided by financing activities of $9.7 million for the six months ended September 30, 2023 was attributable to net proceeds from the issuance of common stock and warrants in a public offering, which closed in May 2023. Cash provided by financing activities of $7.4 million for the six months ended September 30, 2022 was attributable to net proceeds from the issuance of common stock and warrants in a registered direct offering, which closed in May 2022.

Purchase Obligations

Our primary purchase obligations include purchase orders for machinery and equipment. At September 30, 2023, we had not entered into any off-balance sheet arrangements that have oroutstanding purchase orders for machinery and equipment and related expenditures of approximately $996,000.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements are reasonably likely to have a current or future effect on our financial condition, changesdetailed in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Recent Accounting Pronouncements.

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classifiedNote 1 in the statementNotes to the Condensed Consolidated Financial Statements included in Item 1 of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on our financial position or statement of operations.Report.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Additional Information.

We file reports and other materials with the Securities and Exchange Commission.  These documents may be inspected and copied at the Securities and Exchange Commission, Judiciary Plaza, 100 F Street, N.E., Room 1580, and Washington, D.C. 20549.  You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  You can also get copies of documents that the Company files with the Commission through the Commission’s Internet site atwww.sec.gov.  

Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk.Risk

Not required.

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures.Procedures

Evaluation of

Disclosure Controls and ProceduresProcedures.

Disclosure

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls andmay become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the President and Secretary, to allow timely decisions regarding required disclosures.may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer/ Chief Financial Officer, we evaluatedconducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, (asas defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) asAct of the end of the period covered by this Quarterly Report.1934. Based on this evaluation, our Chief Executive Officer -Chief Financial Officermanagement concluded that, as of December 31, 2017, thatSeptember 30, 2023, our disclosure controls and procedures were not effective due to the material weaknesses material weaknesses of: (i) lack of segregation of incompatible duties, and (ii) insufficient Board of Directors representation.effective.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective.

Changes in Internal Control over Financial ReportingReporting.

During the fiscal quarter covered by this Quarterly Report,three months ended September 30, 2023, there has beenwas no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART

Part II - OTHER INFORMATION

Item 1. Legal Proceedings.Proceedings

ManagementWe are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. To our knowledge, there is not aware of any legal proceedings contemplatedno action, suit, proceeding, inquiry or investigation before or by any governmental authoritycourt, public board, government agency, self-regulatory organization or any other party involvingbody pending or, to the knowledge of the executive officers of us or our properties. As of the date of this Quarterly Report, no director, officersubsidiary, threatened against or affiliate is (i) a party adverse toaffecting us, our common stock, our subsidiary or our subsidiary’s officers or directors in any legal proceeding, or (ii) hastheir capacities as such, in which an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or thatdecision could have been threatened against us or our properties.a material adverse effect.

Item 1A. Risk Factors.Factors

No report is required.We face many significant risks in our business, some of which are unknown to us and not presently foreseen. These risks could have a material adverse impact on our business, financial condition and results of operations in the future. There are no material changes to the risk factors set forth under Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2023, which we filed with the SEC on June 26, 2023.

Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds.Proceeds, and Issuer Repurchases of Equity Securities

ChangeRecent Sales of Control.Unregistered Securities

On April 26, 2017,September 29, 2023, we issued the following shares of unregistered common stock: i) a total of 6,265 shares to four of our non-employee directors in accordance with our Outside Director Compensation Plan; and ii) 20,834 shares to one of our non-employee directors upon vesting of a restricted stock unit award. On August 14, 2023, we issued 1,428 shares of unregistered common stock to a service provider. The aforementioned issuances were made pursuant to a Common Stock Purchase Agreement dated as of April 5, 2017 by and among Manchester Explorer, LP, a Delaware limited partnership (“Manchester”), Bear Lake and certain person named therein (the “SPA”)Manchester purchasedexemptions from Bear Lake (the “Control Block Acquisition”) 2,900,000 shares (the “Control Block”), of newly issued, restricted common stock, par value, $0.001, per share, for a purchase price of $375,000 (approximately $0.13 per share), resulting in a change in control of Bear Lake, Manchester owning approximately 83% of our then issued and outstanding common stock and James E. Besser (“Besser”) being appointed president and a director and Morgan C. Frank (“Frank”) being appointed the chief executive officer, chief financial officer, secretary, treasurer and a director of Bear Lake. Messrs. Besser and Frank may be deemed affiliates (as defined in the Securities Act) of Manchester. The foregoing description of the Control Block Acquisition and the SPA does not purport to be complete and is qualified in its entirety to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 5, 2017.

The Acquisition.

On July 24, 2017,registration pursuant to the Acquisition Agreement, the Company acquired all 4,400,000 sharesSection 4(2) and/or Rule 506 of Quasuras’ common stock (which represented 100% of the issued and outstanding shares of Quasuras) for 7,582,060 shares of our common stock, resulting in Quasuras becoming our wholly-owned subsidiary and Mr. DiPerna owning approximately 47% of our issued and outstanding common stock, after giving effect to the Private Placement (as described below) and the Share Cancellation (as described below). Simultaneously with the closing of the Acquisition and pursuant to the Acquisition Agreement (i) Besser resigned as president and a director and Frank resigned as chief executive officer, chief financial officer, secretary, and treasurer but remained a director of the Company, and (ii) DiPerna was appointed our Chairman, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer.

In anticipation of the closing of the Acquisition, on June 27, 2017, Bear Lake changed its name from “Bear Lake Recreation, Inc.” to “Modular Medical, Inc.” and we changed our trading symbol from “BLKE” to “MODD,” effective on June 29, 2017.

The Private Placement and the Share Cancellation.

Simultaneously with the closing of the Acquisition and as a condition thereto, we sold and issued in a private placement an aggregate of 7,801,212 shares of our common stock pursuant to one or more exemptions from the registration requirementsRegulation D of the Securities Act at a purchase price of $0.66 per share resulting in gross proceeds to us of approximately $5,100,000. Manchester and JEB Partners, L.P. (“JEBP”), an affiliate fund of Manchester (together with Manchester, collectively, the “Purchasing Funds”) purchased in the Private Placement in the aggregate 5,303,030 shares for $3,500,000; and DiPerna, in addition to his prior investment of approximately $600,000 of his personal funds into Quasuras prior to the Acquisition, purchased in the Private Placement 303,030 shares for approximately $200,000. Simultaneously with the Acquisition and Private Placement, Manchester cancelled all 2,900,000 Control Block shares it acquired in the Control Block Acquisition. In connection with the Private Placement, we paid $41,928 as compensation in connection with sales of our shares therein.

Following the Acquisition, the private placement and the share cancellation, we had issued and outstanding 15,983,272 shares of our common stock of which DiPerna owned 7,523,430 shares, Manchester, JEBP, Besser and Frank owned in the aggregate 5,664,690 shares and the other purchasers in the private placement owned 2,195,151 shares. Simultaneously with and as a condition to the closing of the Acquisition and the private placement, pursuant to an intellectual property transfer agreement dated as of July 24, 2017, by and among, us, Quasuras and DiPerna, DiPerna transferred to us all intellectual property rights owned directly and/or indirectly by him related to our proposed business. Separately, we agreed to pay DiPerna as part of his compensation for services to be performed for us pursuant to a royalty agreement certain fees based upon future sales, if any, of our proposed product subject to a maximum $10,000,000 cap on the aggregate amount of fees that DiPerna could earn from such arrangement.

DiPerna is subject to confidentiality, non-compete and invention agreements with us.Act.

The foregoing descriptions of The Acquisition and The Private Placement and Share Cancellation not purport to be complete and are qualified in their entirety by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 28, 2017.

Item 3. Defaults Upon Senior Securities.Securities

No report is required.There has been no default in the payment of principal, interest, or a sinking or purchase fund installment, or any other material default, with respect to any indebtedness of ours.

Item 4. Mine Safety Disclosure.Disclosures

Not Applicable.applicable.

Item 5. Other Information.Information

None.

Item 6. Exhibits

(a) Exhibits furnished as Exhibits hereto:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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