# Modular Medical, Inc.: Form 10-Q for the period ended Dec 31, 2017

- Company: [Modular Medical, Inc.](/companies/modd.md) (CIK 1074871)
- Form: 10-Q
- Filed: 2018-02-14
- Accepted by EDGAR: Feb 14, 2018, 12:22 ET
- Period: 2017-12-31
- Accession: 0001019056-18-000341
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1074871/000101905618000341/modular_3q18.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1074871/000101905618000341/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2017-10-01 to 2017-12-31 | $0 | us-gaap:Revenues |
| Revenue | 9 months, 2017-04-01 to 2017-12-31 | $0 | us-gaap:Revenues |
| Research and development | 3 months, 2017-10-01 to 2017-12-31 | $171.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2017-04-01 to 2017-12-31 | $258.8k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2017-10-01 to 2017-12-31 | −$260.9k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2017-04-01 to 2017-12-31 | −$481.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2017-10-01 to 2017-12-31 | $800 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2017-04-01 to 2017-12-31 | $800 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2017-10-01 to 2017-12-31 | −$258.8k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2017-04-01 to 2017-12-31 | −$477.9k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2017-10-01 to 2017-12-31 | −$0.02 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2017-04-01 to 2017-12-31 | −$0.04 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2017-10-01 to 2017-12-31 | 15,983,273 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2017-04-01 to 2017-12-31 | 12,895,670 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2017-04-01 to 2017-12-31 | −$544.8k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2017-04-01 to 2017-12-31 | $13.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2017-04-01 to 2017-12-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2017-12-31 | $4.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2017-12-31 | $4.5m | us-gaap:AssetsCurrent |
| Total assets | at 2017-12-31 | $4.5m | us-gaap:Assets |
| Total liabilities | at 2017-12-31 | $32.6k | us-gaap:Liabilities |
| Shareholders' equity | at 2017-12-31 | $4.5m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2017-12-31 | 15,983,273 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 12,320 characters.

### Forward-looking Statements

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 of 1933, as amended (“Securities Act”) and Section 21e of the Securities Exchange Act of 1934, as amended (“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 Quarterly Report are cautioned that these statements reflect our current expectations regarding our possible future results of operations, performance, and achievements and 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. 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 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 April 26, 2017, there was a change of control of the Company. See our Current Report on Form 8-K dated April 5, 2017 filed with the Securities and Exchange Commission on April 5, 2017 and our Current Report on Form 8-K dated April 26, 2017 filed with the Securities and Exchange Commission on May 1, 2017

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.

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 stage medical device company focused on designing, developing and commercializing an innovative insulin pump to better serve the diabetic insulin delivery market that we believe will substantially improve 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 attacks and destroys beta cells in the pancreas leaving it unable to produce insulin. Type 2 diabetes is most commonly caused by the development of insulin resistance that prevents the body from properly using insulin. Insulin is a life sustaining hormone that allows cells in the body 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 input and to address when the blood glucose level elevates beyond an acceptable level. See Part II – Other Information – Item 2.

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.

### 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 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 December 31, 2017 and December 31, 2016, 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.

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. 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 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 at www.sec.gov.

## Controls and procedures

As filed, 1,832 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and 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.

Under the supervision and with the participation of our Chief Executive Officer/ Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer -Chief Financial Officer concluded as of December 31, 2017, that 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.

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 Reporting

During the fiscal quarter covered by this Quarterly Report, there has been 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.

Filed Feb 14, 2018.
Source: SEC EDGAR, the filing index for accession 0001019056-18-000341. Last ingested by Listed: Nov 10, 2026, 07:32 ET. No prices; not investment advice.