# Modular Medical, Inc.: Form 10-Q for the period ended Sep 30, 2018

- Company: [Modular Medical, Inc.](/companies/modd.md) (CIK 1074871)
- Form: 10-Q
- Filed: 2018-11-19
- Accepted by EDGAR: Nov 19, 2018, 16:42 ET
- Period: 2018-09-30
- Accession: 0001019056-18-001081
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1074871/000101905618001081/modular_2q18.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1074871/000101905618001081/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2018-07-01 to 2018-09-30 | $0 | us-gaap:Revenues |
| Revenue | 6 months, 2018-04-01 to 2018-09-30 | $0 | us-gaap:Revenues |
| Research and development | 3 months, 2018-07-01 to 2018-09-30 | $367.6k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2018-04-01 to 2018-09-30 | $503.3k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2018-07-01 to 2018-09-30 | −$549.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2018-04-01 to 2018-09-30 | −$804.2k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2018-07-01 to 2018-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2018-04-01 to 2018-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-07-01 to 2018-09-30 | −$543.8k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2018-04-01 to 2018-09-30 | −$793.3k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-07-01 to 2018-09-30 | −$0.03 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2018-04-01 to 2018-09-30 | −$0.05 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2018-07-01 to 2018-09-30 | 15,983,273 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2018-04-01 to 2018-09-30 | 15,983,273 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2018-04-01 to 2018-09-30 | −$576.1k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2018-04-01 to 2018-09-30 | $32.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2018-09-30 | $3.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-09-30 | $3.7m | us-gaap:AssetsCurrent |
| Total assets | at 2018-09-30 | $3.7m | us-gaap:Assets |
| Total liabilities | at 2018-09-30 | $46.8k | us-gaap:Liabilities |
| Shareholders' equity | at 2018-09-30 | $3.7m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2018-09-30 | 15,983,273 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 9,904 characters.

### 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. In June of 2017, the Company changed its name to Modular Medical, Inc. by filing a Certificate of Amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State.

Our initial operations consisted of renting snowmobiles and ATVs. 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 the Acquisition Agreement, the Company acquired all 4,400,000 shares of Quasuras’ common stock owned by the three Quasuras shareholders (which represented one hundred percent (100%) of the issued and outstanding shares of Quasuras) resulting in Quasuras becoming our wholly-owned subsidiary and Mr. Paul DiPerna owning approximately forty-seven percent (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. James Besser resigned as president and a director and Mr. Morgan Frank resigned as chief executive officer, chief financial officer, secretary, and treasurer but remained a director of the Company, and (ii) Mr. Paul 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.

The Company is focused on providing next generation products and services to address the disease and condition diabetes.

This discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

### Critical Accounting Policies

### Use of Estimates

The preparation of financial statements in conformity with U.S. 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 September 30, 2018, 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.

### Results of Operations

For the Three & Six Months Ended September 30,

|  | Three Months Ended September 30, 2018 | September 30, 2017 | Six Months Ended September 30, 2018 | September 30, 2017 |
| --- | ---: | ---: | ---: | ---: |
| Sales, net | $— | $— | $— | $— |
| Cost of sales | — | — | — | — |
| Gross profit | — | — | — | — |
| Gross profit margin | 0% | 0% | 0% | 0% |
| Operating expenses |  |  |  |  |
| Professional expenses | 81,883 | 79,939 | 123,593 | 117,131 |
| Research and development | 367,550 | 83,408 | 503,340 | 87,754 |
| General and administrative | 99,565 | 12,639 | 177,255 | 14,426 |
| Total operating expenses | 548,998 | 175,986 | 804,188 | 219,311 |
| Operating loss | (548,998) | (175,986) | (804,188) | (219,311) |
| Interest income | 5,224 | 784 | 10,848 | 1,020 |
| Income tax | — | (800) | — | (800) |
| Net loss | $(543,774) | $(176,002) | $(793,340) | $(219,091) |

#### Overview:

We reported a net loss of $543,774 and $176,002 for the three months ended September 30, 2018 and 2017, respectively, and losses for the six months ended September 30, 2018 and 2017 of $793,340 and $219,091, respectively. The increase in our net loss from September 30, 2018 to September 30, 2017 is due to an increase in research and developments, consulting fees, professional fees and general and administrative expenses.

#### Revenues:

Revenue for the three and six months ended September 30, 2018 and 2017 was $0.

#### Operating Expenses:

Professional expenses for the three months ended September 30, 2018 increased to $81,883 as compared to $79,939 for 2017. For the six months ended September 30, 2018 and 2017, professional fees increased to $123,593 in 2018 versus $117,131 in 2017. The increase is attributable to an increase in consulting fees paid to outside consultants and professional services required for our required filings.

Research and development for the three months ended September 30, 2018 increased to $367,550 as compared to $83,408 for 2017. For the six months ended September 30, 2018 and 2017, research and development increased to $503,340 in 2018 versus $87,754 in 2017. The increase in research and development expenditures is attributable to efforts and expenses incurred to design and develop an innovative insulin pump to better serve the diabetic insulin delivery market along with stock-based compensation. We expect to continue to incur costs related to research and development.

General and administrative expenses for the three months ended September 30, 2018 increased to $99,565 as compared to $12,639 for 2017. For the six months ended September 30, 2018 and 2017, general and administrative increased to $177,255 in 2018 versus $14,426 in 2017. The increase in our general and administrative expense is attributable to (i) an increase in employee related cost of approximately $60,000, (ii) an increase in stock-based compensation of approximately $8,334, (iii) an increase in rent & utilities of approximately $17,500, (iv) an increase in insurance expense of approximately $21,400, (v) an increase in marketing of $8,000, and (vi) an increase in equipment supplies of approximately $34,500.

#### Interest Income:

Interest income for the three months ended September 30, 2018 and 2017 was $5,224 and $784, respectively. For the six months ended September 30, 2018 and 2017, interest income was $10,848 and $1,020, respectively.

### Liquidity and Capital Resources

The following summarizes our cash flows for the six months ended September 30,

|  | Six Months Ended September 30, 2018 | September 30, 2017 |
| --- | ---: | ---: |
| Cash used in operating activities | $(576,101) | $(332,192) |
| Cash used in investing activities | (32,753) | (2,929) |
| Cash used in financing activities | — | 4,710,616 |
| Net change in cash | $(608,854) | $4,375,495 |

As a result of our growth stage, the Company has not experienced sales to sustain cash flow to meet our current obligations and operations expenditures. As a result, the Company raised capital though the share exchange to meet our operating expenditures.

As of September 30, 2018, we had total current assets of $3,688,128 of which $3,687,822 were cash and cash equivalents, and current liabilities of $46,837. As of March 31, 2018, we had total current assets of $4,313,480 and current liabilities of $15,471. As of September 30, 2018 and March 31, 2018, we had working capital of approximately of $3,641,291 and $4,298,009, respectively.

#### Net Cash Used In Operating Activities:

We used $576,101 of cash to fund operating activities during six month ended September 30, 2018, compared to $332,192 in 2017. Increased cash usage in 2018 was driven by greater operating losses deriving from development. We reported net losses of $793,340 and $219,091 for the six months ended September 30, 2018 and 2017, respectively.

#### Net Cash Provided By Investing Activities:

We used $32,753 and acquired $2,929 of cash to purchase equipment and intangible assets during the six month ended September 30, 2018 and 2017, respectively.

#### Net Cash Acquired In Financing Activities:

We acquired $0 of cash from financing activities for six month ended September 30, 2018, compared to $4,710,616 in 2017.

Filed Nov 19, 2018.
Source: SEC EDGAR, the filing index for accession 0001019056-18-001081. Last ingested by Listed: Nov 10, 2026, 07:32 ET. No prices; not investment advice.