Modular Medical, Inc.: Form 10-K for the period ended Jun 30, 2017

Corporate History

The Company was organized under the laws of the State of Nevada on October 22, 1998 under the name Bear Lake Recreation Inc., with an initial authorized capital consisting of 50,000,000 shares of $0.001 par value common voting stock.

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. Our lack of success was attributed to entering the marketplace comprising this endeavor during a year that was the beginning of a drought cycle, resulting in below average snowfall and competitive growth from one to three self-promoting developmental properties. Our operations ceased due to depleted capital resources resulting from offering vacation packages lacking in demand.

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 realized only minimal sales through our e-commerce site and 800 number infomercial advertisements. Additionally, due to the exhaustion of our capital resources, we could no longer maintain the infrastructure required for sales promotion while faced with limited consumer demand.

All computations herein take into account a one for three and one-half (1 for 3.5) share reverse split of our outstanding shares of common stock that was effective on or about October 23, 2006, and which is discussed below under this heading.

The following is a summary of material business developments since our inception through April 2017:

• 285,734 shares of our common stock were issued to our principal founder at inception for services valued at $1,000.
• Completed the offer and sale of approximately 12,868 shares of our common stock to public investors under Rule 504 of Regulation D of the Securities and Exchange Commission (the “SEC”) in March, 1999, for aggregate consideration of $45,000.
• Completed the offer and sale of approximately 94,066 shares of our common stock to persons who were “accredited investors” under Rule 506 of Regulation D in July and August, 2000, for aggregate consideration of $41,150.
• Issued our three directors and executive officers a total of approximately 428,574 (approximately 142,857 shares each, to Todd L. Albiston, Wayne Bassham and Derrick Albiston) for services valued at an aggregate consideration of $1,500 in September, 2004.
• Issued the same three directors and executive officers a total of approximately 428,574 (approximately 142,857 shares each) for services valued at an aggregate consideration of $1,500 in September, 2005.
• Our common stock was granted quotations on the OTC Bulletin Board (“OTCBB”) on or about December 31, 2005, and we were assigned a trading symbol of “BLKR.”
• On March 1, 2006, we amended Section 2.11 of our Bylaws to allow for written action to be taken without a meeting by less than all of the stockholders.
• Amended and restated our Articles of Incorporation, effective in April, 2006. The Amended and Restated Articles of Incorporation were unanimously adopted by our Board of Directors, who then also constituted our majority stockholders, collectively beneficially owning approximately 857,143 shares of our common stock or approximately 68.6% of our outstanding voting securities, as Board members and stockholders. No other votes were required or necessary to adopt the amendments to our Articles of Incorporation, and none were solicited. The following is a summary of the material changes to our Articles of Incorporation: (i) five million (5,000,000) shares of preferred stock with a par value of $0.001 per share were authorized; (ii) the minimum number of our directors was reduced to one; (iii) our Board of Directors was authorized to change our name in certain circumstances, without stockholder approval; and (iv) our Board of Directors was authorized to effect recapitalizations in the form of forward or reverse splits in certain circumstances, without a stockholder approval. We filed a Definitive Information Statement with the SEC on March 20, 2006.
• We effected a one for three and one-half (1 for 3.5) share reverse split of our outstanding shares of common stock that was effective on or about October 23, 2006, and our then OTCBB trading symbol was changed to “BLKE” on or about October 23, 2006. All share and per share amounts have been retroactively adjusted to reflect the reverse stock split.

Description of Business

We had no material business operations from 2002 until the Acquisition and prior to the Acquisition we were a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”).

The Control Block Acquisition

On April 26, 2017, pursuant to a Common Stock Purchase Agreement dated as of April 5, 2017 by and among Manchester Explorer, LP, a Delaware limited partnership (“Manchester”), the Company and certain person named therein (the “SPA”) Manchester purchased from the Company (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 the Company. In connection with the Control Block Acquisition, James E. Besser was appointed president and a director and Morgan C. Frank was appointed the chief executive officer, chief financial officer, secretary, treasurer and a director of the Company and immediately following such appointments Wayne R. Bassham resigned as director and President, Derrick M. Albiston resigned as director and Vice President and Todd L. Albiston resigned as director, Secretary and Treasurer of the Company. For additional information regarding the Control Block Acquisition, see our Current Report on Form 8-K that was filed with the Securities and Exchange Commission (the “SEC”) on May 1, 2017.

The Acquisition

On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, the Company, Paul M. DiPerna, the sole officer and director and the controlling stockholder of Quasuras 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 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, after giving effect to the Private Placement (as defined below) and the Share Cancellation (as defined below). 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.

In anticipation of the closing of the Acquisition, on June 27, 2017, the Company changed its name from “Bear Lake Recreation, Inc.” to “Modular Medical, Inc.” and changed its trading symbol from “BLKE” to “MODD” which symbol and name change was approved by FINRA and became effective on June 29, 2017.

The Acquisition was accounted for as a recapitalization effected by a share exchange, wherein Quasuras is considered the acquirer for accounting and financial reporting purposes.

Unless otherwise indicated, all information contained in this Annual Report on Form 10-K with respect to periods prior to the date on which we consummated the Acquisition relates solely to Modular, without regard to the Acquisition.

For additional information regarding the Acquisition, see our Current Report on Form 8-K that was filed with the Securities and Exchange Commission (the “SEC”) on July 28, 2017.

Effect of Existing or Probable Governmental Regulations on the Business

Smaller Reporting Company

We are subject to the reporting requirements of Section 13 of the Exchange Act, and we are subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.” That designation will relieve us of some of the informational requirements of Regulation S-K.

Sarbanes-Oxley Act

We are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act will substantially increase our legal and accounting costs.

Exchange Act Reporting Requirements

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to our stockholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.

We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities Exchange Commission on a regular basis, and are required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.

Number of Total Employees and Number of Full-Time Employees

From June 30, 2016 through the date of the Acquisition, none.

Additional Information

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports or registration statements that we have previously filed electronically with the SEC at its Internet site at www.sec.gov (http://www.sec.gov). Please call the SEC at 1-202-551-8090 for further information on this or other Public Reference Rooms. Our SEC reports and registration statements are also available from commercial document retrieval services, such as CCH Washington Service Bureau, whose telephone number is 1-800-955-0219.

As of June 30, 2017, we had no property or business; our principal executive office address was located at 3 West Hill Place, Boston, MA 02110, which was provided free of charge by Manchester, and telephone number was 617-856-8995. Following the Acquisition, our executive offices are located at 17995 Bear Valley Lane Escondido, CA 92027, and our telephone number is (949)370-9062.

We are not a party to any pending legal proceeding. To the knowledge of our management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than 5% of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.

When used in this Annual Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees 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., with an initial authorized capital consisting of 50,000,000 shares of $0.001 par value common voting stock.

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. Our lack of success was attributed to entering the marketplace comprising this endeavor during a year that was the beginning of a drought cycle, resulting in below average snowfall and competitive growth from one to three self-promoting developmental properties. Our operations ceased due to depleted capital resources resulting from offering vacation packages lacking in demand.

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 realized only minimal sales through our e-commerce site and 800 number infomercial advertisements. Additionally, due to the exhaustion of our capital resources, we could no longer maintain the infrastructure required for sales promotion while faced with limited consumer demand.

We had no material business operations from 2002 through the Acquisition and we were a shell company as defined 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 July 24, 2017, pursuant to a the Acquisition Agreement, by and among, the Company, 3 Quasuras Shareholders and Quasuras, the Company acquired all 4,400,000 shares of Quasuras’ common stock owned by the 3 Quasuras Shareholders (which represented 100% of the issued and outstanding shares of Quasuras) 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 and the Share Cancellation. 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.

The Acquisition was accounted for as a recapitalization effected by a share exchange, wherein Quasuras is considered the acquirer for accounting and financial reporting purposes.

Because the Acquisition occurred after June 30, 2017, the disclosure related to that transaction is contained in a Current Report on Form 8-K filed with the Commission on July 28, 2017. As a result, this management discussion and analysis covers our operations as they existed at June 30, 2017, without regard for the Acquisition or Quasuras’ operations.

Results of Operations – for the Year Ended June 30, 2017 and Compared to Year Ended June 30, 2016

Overview:

We reported a net loss of $106,559 for the year ended June 30, 2017 and $31,084 for the year ended June 30, 2016. The increase in our net loss from June 30, 2016 to June 30, 2017, is due to an increase in General and Administrative Expenses.

Revenues:

Revenue for the year ended June 30, 2017 and for the year ended June 30, 2016 respectively was $0.

General and Administrative Expenses:

General and administrative expenses were $91,051 for the year ended June 30, 2017 and $13,163 for the year ended June 30, 2016, which increase was largely attributed to work performed in connection with the Control Block Acquisition

Interest Expense-Related Party:

Interest expense-related party for the year ended June 30, 2017 and for the year ended June 30, 2016 was $15,508 and $17,921, respectively.

Assets and Liabilities:

As of June 30, 2017, we had total current assets of $1,372,400 and current liabilities of $74,420. As of June 30, 2016, we had total current assets of $0 and current liabilities of $193,763.

Liquidity and Capital Resources

As of June 30, 2017, we had cash and cash equivalents on hand amounting to $1,372,400.

Net Cash Used In Operating Activities

Our net cash used in operating activities for the year ended June 30, 2017 and for the year ended June 30, 2016, was $94,810 and $10,663, respectively.

Net Cash Used In Investing Activities

There were no cash flows from investing activities during the year ended June 30, 2017 or for the year ended June 30, 2016.

Net Cash Provided By Financing Activities

Our net cash provided by financing activities for the year ended June 30, 2017 and for the year ended June 30, 2016, was $1,467,210 and $10,663, respectively. The net cash provided by financing activities for the year ended June 30, 2017 was primarily attributable to proceeds from the sale of common stock of $240,000, collection for shares to be issued in private placement of $1,372,400, offset by repayments to related parties of $131,092 and repurchase and cancellations to shares of common stock of $14,098.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to accruals, stock-based compensation and income taxes. Actual results could materially differ from those estimates.

Off-Balance Sheet Arrangements

As of June 30, 2017, we had not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Recent Accounting Pronouncements

See Note 1 in the Notes to the Financial Statements for recent accounting pronouncements.

There were various other accounting standards and interpretations recently issued, none of which are expected to have a material impact on our financial position, operations or cash flows.

Our management, with the participation of our CEO/CFO, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on that evaluation, our CEO/CFO concluded that our disclosure controls and procedures as of the end of the period covered by the Annual Report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO/CFO, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management, with the participation of the CEO/CFO, evaluated the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on this evaluation, our management, with the participation of the CEO/CFO, concluded that, as of June 30, 2017, our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Security and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting for the quarter ended June 30, 2017.