# Modular Medical, Inc.: Form 10-K for the period ended Mar 31, 2019

- Company: [Modular Medical, Inc.](/companies/modd.md) (CIK 1074871)
- Form: 10-K
- Filed: 2019-06-27
- Accepted by EDGAR: Jun 26, 2019, 21:38 ET
- Period: 2019-03-31
- Accession: 0001019056-19-000385
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1074871/000101905619000385/modular_10k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1074871/000101905619000385/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 12 months, 2018-04-01 to 2019-03-31 | $1.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 12 months, 2018-04-01 to 2019-03-31 | −$2.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 12 months, 2018-04-01 to 2019-03-31 | $1.6k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2018-04-01 to 2019-03-31 | −$2.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2018-04-01 to 2019-03-31 | −$0.15 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 12 months, 2018-04-01 to 2019-03-31 | 16,589,633 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2018-04-01 to 2019-03-31 | −$1.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2018-04-01 to 2019-03-31 | $77.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2019-03-31 | $6.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-03-31 | $6.6m | us-gaap:AssetsCurrent |
| Total assets | at 2019-03-31 | $6.7m | us-gaap:Assets |
| Current liabilities | at 2019-03-31 | $178.9k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-03-31 | $178.9k | us-gaap:Liabilities |
| Shareholders' equity | at 2019-03-31 | $6.5m | us-gaap:StockholdersEquity |

## Business

As filed, 29,788 characters.

### Overview

We are a development stage company focused on designing and commercializing an innovative form of insulin pump to better serve the diabetes market. Our goal is to expand access to such state-of-the-art therapies and better serve those requiring daily administration of insulin or other drugs.

It is our view that people with diabetes currently see a number of problems and/or shortcomings with the current offerings in the insulin pump market and that by alleviating these issues, we can expand the scope insulin pump usage. We believe that, to achieve broader market acceptance, an insulin pump must be simpler to learn, less time consuming to operate as well as more intuitive to both patients and physicians to reduce the friction of current products. We also believe that a product must be specifically designed to be covered by insurance with affordable co-payments.

Among the more prominent issues are:

- Complexity: Many existing pumps are highly complex and require significant technical expertise to use effectively. We believe such pumps were designed for “super users” who have high levels of motivation and technical competence and that their complexity proves daunting to less technically inclined users.
- Cumbersome: We believe that a majority of existing pumps are bulky and difficult to manage, in many cases requiring additional equipment to introduce a catheter to the patient’s body and 48 inches of tubing, which must be replaced frequently to connect this catheter to a pump. This requires users to carry spare parts and other equipment adding to the encumbrance of using the pump.
- Cost: Costs associated with insulin pump therapy are high and can be prohibitive especially for those on fixed or limited incomes. These costs vary by pump, but multi-thousand-dollar upfront payments often with substantial co-payments in addition to possible daily co-payments on consumables can easily place current pumps out of reach for patients. This makes insurers very hesitant to pay for them leading to limited or absent reimbursement/coverage.

Our team has extensive knowledge of the diabetes space and experience in developing, winning approval for, and bringing insulin pumps to market. Based on this experience, the Company believes that its innovative insulin pump, using a new and proprietary method of pumping insulin, can address most or all of these shortcomings. It provides a state-of-the-art insulin pump capable of both basal (steady flow) and bolus (mealtime dosing) insulin disbursement and with a natural migration path to multi-chamber/multi liquid pumps with exciting array of new therapies being available to patients. Our goal is to become the leader in expanding access to insulin pump technology to a wider portion of diabetes sufferers and provide not just care for the super users, but “diabetes care for the rest of us.”

Mr. DiPerna, our founder, chairman and chief executive officer, chief financial officer, secretary and treasurer began his career in approximately 1980 as a mechanical design engineer in the automated test equipment industry before moving in approximately 1989 to a start-up in the blood separation sciences industry. This company was eventually acquired in approximately 1991 by Baxter Healthcare (“Baxter”). Following such acquisition, Mr. DiPerna became employed by Baxter and held various positions during his approximate 12 years at Baxter. While at Baxter, Mr. DiPerna led significant projects and initiatives including leading a team of approximately 50 engineers in developing equipment in the blood separation sciences industry. In approximately 1996, Mr. DiPerna was promoted to General Manager of Baxter’s business development group to identify expansion opportunities in the medical device industry for Baxter. While holding such position, Mr. DiPerna led a team of 20- 25 people researching custom orthopedics, digital dentistry and rapid prototyping. In such role, one of Mr. DiPerna’s assignments was identifying opportunities in the diabetes industry. As a result, Mr. DiPerna developed an expertise and knowledge and became well known in the diabetes industry and led attempts by Baxter to acquire three then leading insulin pump manufacturers. In 2003, Mr. DiPerna using his knowledge and experience acquired at Baxter in the diabetes industry and in the “pump” product business in particular, left Baxter and founded what subsequently became Tandem Diabetes Care, Inc. (“Tandem”). While at Tandem, Mr. DiPerna held various positions including a director, chief executive officer and chief technology officer. Tandem is a medical device company that designs, develops and commercializes products for people with insulin dependent diabetes. Tandem’s common stock is listed on the NASDAQ Global Market under the symbol “TNDM”. Tandem was founded by Mr. DiPerna to design, develop and commercialize a “state of the art” user-friendly insulin pump. Under the leadership of Mr. DiPerna, Tandem raised approximately $52,000,000 from well-known venture capital firms. Mr. DiPerna was the person primarily responsible for the design concept and development of Tandem’s insulin pump, which after commercial introduction it is estimated by Mr. DiPerna such insulin pump had a quick ramp up to 5,000 purchasers. In 2011, Mr. DiPerna resigned from his executive officer position and board seat at Tandem and continued to assist the company through 2013. He co-invented a medical device used for blood borne infection control called the “Curos Cap.” Curos Cap was owned by a private company which was acquired by 3M Corporation in 2015 for $150,000,000. Thereafter, Mr. DiPerna founded a company Fuel Source Partners, LLC, where he is the manager, to incubate early stage medical device products and accumulate technical talent. One of such proposed products was spun-out to Quasuras in March 2015, which Modular Medical acquired in 2017. Mr. DiPerna owns a variety of patents and patents pending and is a member of the American Diabetes Association. Mr. DiPerna received a Master’s in Engineering Management from Northeastern University and a BS in Mechanical Engineering from the University of Lowell. In January 2017, Mr. DiPerna joined National Cardiac Incorporated as the Chief Executive Officer and as a board member to leverage their technology in the cardiac monitoring space.

The Market

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. If not closely monitored and properly treated, such excess blood sugar can lead to serious medical complications including damage to organs and tissues, seizures, coma, and death. By injecting controlled doses of insulin, people with diabetes can reduce their blood glucose levels to mitigate these complications and allow better processing and storage of sugars.

Generally, there are two primary therapies used by people with insulin-dependent diabetes: insulin injections and insulin pumps. Each is designed to supplement or replace the insulin-producing function of the pancreas. Insulin injections are often referred to as multiple daily injection (or “MDIs”) and involve the use of syringes or insulin pens to inject insulin into the person’s body as required. Insulin pumps are used to provide a steady flow of insulin (often referred to as continuous subcutaneous insulin infusion or basal rate insulin) and bursts of mealtime insulin (boluses). Insulin pump therapy has been shown to provide people with insulin-dependent diabetes with numerous advantages compared to MDI’s. The steady flow of insulin and the easier application of mealtime boluses has been shown by numerous clinical studies to result in lower HbA1c’s (a measure of the amount of glucose in the bloodstream) when compared to MDI therapy. This results in lower rates of hospitalization and overall adverse events for people with diabetes.

We believe that the greater efficacy of pumps compared to MDI makes insulin pumps the more favorable choice for persons in managing diabetes but that the shortcomings and challenges around existing pumps have held back adoption rates.

According to the United States Center for Disease Control and Prevention, (“CDC”), in the United States, in 2012, 86 million people, or 1 out of 3 adults, had pre-diabetes, approximately 21 million people had been diagnosed diabetes and an additional 8.1 million people had diabetes that was undiagnosed. CDC also indicated that in the United States, diabetes was the seventh leading cause of death in the United States in 2010 (which according to CDC, may be underreported). Diabetes was the leading cause of kidney failure, lower-limb amputations, and adult-onset blindness and more than 20% of projected health care spending in 2012 was for people with diagnosed diabetes.

CDC estimated that in 2012 there were 3.1 million people requiring daily administration of rapid acting insulin. According to the American Diabetes Association, roughly 1 million people worldwide use insulin pumps with over 200 million people diagnosed with diabetes.

We believe that due to a number of factors including the large consumption of processed foods and the growing obesity problem in the United States, the number of persons requiring daily administration of insulin is and will continue to grow at rapid rates.

The category of persons with diabetes requiring daily insulin administration is our target market and we believe our proposed product has the potential to substantially improve the day to day quality of life of such persons.

The Opportunity

We believe the insulin pump market is large and growing but generally has been poorly served by existing products that have limited the adoption of insulin pumps. We believe an insulin pump having the correct mix of efficiency, reliability, features that are easy to understand and use and are offered at an affordable price point will drive a substantial percentage of “almost pumpers” to use insulin pumps and persons currently using available, but less than optimum pumps, to switch to such a more desirable product. We believe that such an insulin pump can improve glucose control, and, therefore, the user’s quality of life while substantially mitigating adverse diabetes related health risks and many if not all of the challenges and shortcomings discussed herein.

We believe there is a substantial opportunity to penetrate the type 2 marketplace, whether through a new insulin pump or simplification of pumps for the type 2 marketplace.

As set forth in general terms herein, we believe existing pumps have numerous shortcomings and challenges including:

***Outdated Style.*** Consumer electronics devices have evolved in both form and function. Diabetes pumps have not experienced similar progress. We believe that consumers will be more receptive of products designed with the user experience in mind and that many have low tolerance for complex, difficult procedures for use and maintenance of products.

***Bulky size.*** We believe that consumers view traditional pumps, especially those with tubing, to be large, bulky, and inconvenient to carry or wear, especially when compared to modern consumer electronic devices. The size of the pump further contributes to users being embarrassed by the pump. We believe a simple patch style of pump will drive adoption.

***Pump mechanism limitations.*** Traditional pumps generally utilize a syringe and plunger mechanism to deliver insulin. We believe this design limits the ability to reduce the size of the pump, and also potentially exposes the user to the unintended delivery of the full volume of insulin within the pump, which can cause hypoglycemia or death. We believe that the fear of adverse health events due to technical malfunctions related to traditional pump mechanism limitations deters the adoption of insulin pump therapy.

***Costs.*** Existing pumps are expensive, with the more popular models having purchase prices exceeding $4,000 for individuals without health insurance and often require significant patient copays. Others have daily use costs that exceed the reimbursement rates of many health insurance plans, forcing some users to spend thousands of dollars a year in copays. We believe this makes insurers hesitant to pay for pumps for any but their best and most compliant patients and places them out of reach for many patients who cannot afford such out of pocket expenses.

Our Solution

The Company’s proposed pump is being designed and developed to address the above shortcomings and to appeal to (i) the substantial group of “almost pumpers” who are currently interested in using an insulin pump, but have not done so because of the complexity, cost or cumbersome nature of existing products, and (ii) people who are using one of the currently available insulin pumps but are dissatisfied with such products. We believe that, owing to our new proprietary technology, that our proposed insulin pump will be the simplest and least expensive product on the market and the easiest for physicians to prescribe.

An early prototype of our proposed pump has been built to test what the Company believes to be our novel approach to insulin pumps. We believe such prototype will need to be modified to provide the safety features required to meet today’s standards and manufacturing considerations to keep costs low.

By providing a pump that we believe will establish industry standards in terms of technology, simplicity to understand, ease of use and price, we believe our proposed pump will offer the vast majority of benefits afforded by more expensive and complex pumps but are accessible to a substantially greater percentage of diabetes sufferers requiring daily insulin therapy.

We believe people generally will not use technology that intimidates them and physicians are hesitant to prescribe such technology. We believe mass market products, such as is intended for our proposed pump must be “user friendly” and affordable. We believe this approach is fundamentally different from that applied to the existing pump market today where most pumps are continuously adding complex features and are “user friendly” to only the most technically astute and are becoming more complex and difficult to use.

Our current goal is to successfully design, develop and obtain all required regulatory approvals for our proposed insulin pump, and, thereafter, commercialize, market and sell the finished product. Our long-term goal is to become a leading provider of insulin pump therapy by focusing on both consumer and clinical needs.

To achieve our above stated immediate and current goals, we intend to pursue the following business strategies:

***Use of Innovative proprietary technology.*** Based upon Mr. DiPerna’s substantial experience in engineering design and innovative technology in the medical device industry and in particular with insulin pumps, we have created certain critical proprietary technology that will be incorporated into our proposed insulin pump. Generally, this technology is involved in the delivery of insulin to the user at the appropriate and necessary times. We believe this technology will greatly assist us in creating a simpler user-friendly pump. We believe the proposed design, engineering and technology being incorporated into our proposed pump, will make our proposed pump substantially simpler than the currently available and that we will be able to offer it at more affordable prices than those currently available. These features together with the safety and reliability of our proposed pump, is designed to create the next generation of insulin pumps that will be superior to those currently available and make it available to consumers across mostly all socioeconomic groups in the United States and around the world.

***Keep costs low during our design and development process.*** To attempt to ensure that we have sufficient funds to design, develop and obtain all required regulatory approvals for our proposed insulin pump without having to sacrifice quality and efficiency, we intend to maintain a tight budget and limit expenditures where possible. We believe this will be possible because of the extensive knowledge and experience of Mr. DiPerna not only in the diabetes industry and more specifically in the insulin pump device market, but also his experience in designing and developing insulin pumps and other medical devices and his ability to manage a small, focused development team. We currently expect various other expenses such as product scale up, sales and marketing costs will not be incurred until such time as development work is completed and regulatory approvals obtained.

***Employ experienced engineers picked, supervised and led by Mr. DiPerna, a highly experienced and respected engineer and executive in the insulin pump industry.*** To attempt to ensure our proposed insulin pump is “state of the art,” functional, and efficient as well as to conserve funds, significantly all of our employees will initially be hand-picked engineers under the direct supervision and leadership of Mr. DiPerna. We believe that there is a strong pool of engineers with significant applicable experience and knowledge who we will be able to initially employ on a contract and/or outsource basis to help us design and develop our proposed insulin pump. We believe by hiring such persons on an out-source basis, we will save substantial resources and by having Mr. DiPerna lead and focus the team on technological and mechanical aspects of our proposed insulin pump, our team will be well guided, focused, cost efficient, and able to efficiently design and develop our product that we believe can eventually be an industry standard.

### Government Regulations

The medical device industry is regulated extensively by governmental authorities, principally the United Stated Food and Drug Administration (the “FDA”) and corresponding state regulatory agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to bring our proposed product to the commercialization stage as a result of higher than anticipated costs to obtain regulatory approval. The FDA and other U.S. governmental agencies regulate numerous elements of our proposed product at various stages, including:

- product design and development;
- pre-clinical and clinical testing and trials;
- product safety;
- establishment registration and product listing;
- labeling and storage;
- marketing, manufacturing, sales and distribution;
- pre-market clearance or approval;
- servicing and post-market surveillance;
- advertising and promotion; and
- recalls and field safety corrective actions.

Even if we obtain all regulatory approvals, before we can market or sell our proposed product, we must obtain either clearance under Section 510(k) of the United States Food, Drug and Cosmetic Act or approval of a pre-market approval application (a “PMA”) from the FDA, unless an exemption from pre-market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support a determination of substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, such as our proposed insulin pump. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). The process of obtaining regulatory clearances or approvals to market a medical device, such as our proposed insulin pump, can be costly and time-consuming, and we may not be able to obtain such clearances or approvals on a timely basis or at all for our proposed product.

If the FDA requires us to go through a more rigorous examination for our proposed product than we currently expect, we may require substantial additional funding sooner than anticipated and/or our product could be severely delayed, or our efforts ceased. We anticipate that our proposed product will require the more costly, lengthy and uncertain PMA approval process.

The FDA can delay, limit or deny clearance or approval of our proposed pump device for many reasons, including:

- our inability to demonstrate that our product is safe and effective for its intended users;
- the data from our clinical trials may be insufficient to support clearance or approval; and
- failure of the manufacturing process or facilities we use to meet applicable requirements.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our proposed product.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue therefrom or achieving profitability. Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some customers from using our proposed product and adversely affect our reputation and the perceived safety and efficacy of our proposed product.

Failure to comply with applicable regulations could jeopardize our ability to commercialize and sell our proposed pump and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs and have a material adverse effect on our reputation, business and financial condition.

### Number of Total Employees and Number of Full-Time Employees

We currently employ six (6) full-time employees, including one executive officer, Paul DiPerna, our Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director.

### Competition

Medtronic, Tandem Diabetes Care and Insulet, all much larger companies with substantially greater resources than the Company’s resources, make similar products for the more sophisticated, technically capable person with diabetes. The Company does not intend to compete for those patients, instead by offering a simple to use more cost-effective solution the Company intends to attract the more mainstream patients.

### Patents

The Company has applied to the U.S. Patent and Trademark Office for two US patents on its proprietary fluid movement technology and the configuration of its product offering. There is no assurance that these patents will be issued, and no assurance that they will prevent other companies from competing with the Company. The Company will continue to attempt to patent its innovations as appropriate to help ensure a sustainable competitive advantage.

### Corporate History and Background

We were formed as a corporation under the laws of the State of Nevada on October 22, 1998 under the name Bear Lake Recreation Inc. We had no material business operations from 2002 until approximately April 26, 2017 when we acquired Quasuras, Inc., a Delaware corporation (“Quasuras”), in the Acquisition (as defined below). Prior to the Acquisition and since at least 2002 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 Explorer”), the Company and certain persons named therein, Manchester Explorer purchased from us 2,900,000 shares of our common stock representing in excess of a majority of our then issued and outstanding common stock, for a purchase price of $375,000 (the “Control Block Acquisition”), 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, our then officers and directors resigned. Mr. Besser is the managing member of and Mr. Frank is the portfolio manager and a consultant to Manchester Management Company, LLC, a Delaware limited liability company “MMC”). MMC is the general partner of Manchester Explorer and Jeb Partners, L.P. (“Jeb Partners,” and together with Manchester Explorer, collectively, the “Purchasing Funds”).

***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, director and a controlling stockholder of Quasuras, Messrs. Besser and Frank (Messrs. Besser, Frank and DiPerna, collectively, the “3 Quasuras Shareholders”), and Quasuras, the Company acquired all of the issued and outstanding shares of Quasuras owned by the 3 Quasuras Shareholders in exchange for 7,582,060 shares of our common stock of which Messrs DiPerna, Besser and Frank received 7,523,430 shares, 180,830 shares and 180,830 shares, respectively, resulting in Quasuras becoming our wholly-owned subsidiary (the “Acquisition”). Simultaneously with the closing of the Acquisition, Manchester Explorer cancelled the 2,900,000 shares of our common stock purchased in April 2017 Control Block Acquisition, Mr. Besser resigned as our president and a director and Mr. Frank resigned as our chief executive officer, chief financial officer, secretary, and treasurer, but remained a director and Mr. DiPerna was appointed our chairman, chief executive officer, chief financial officer, secretary and treasurer. Messrs. Besser and Frank had each previously purchased for $50,000 approximately 2.25% of the capital stock of Quasuras, and as a result each received the above 180,830 shares of our common stock in the Acquisition.

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

***2017 Private Placement.*** Simultaneously with the closing of the Acquisition, we sold in a private placement an aggregate of 7,233,031 shares of our common stock resulting in gross proceeds to us of approximately $4,731,872 (the 2017 Private Placement”). In connection with the 2017 Private Placement, we paid $41,928 as compensation in connection with sales of our shares therein. Manchester Explorer and JEB Partners purchased 5,303,031 shares in the aggregate for $3,500,000 in the 2017 Private Placement; and Mr. DiPerna, in addition to his prior investment of approximately $600,000 of his personal funds into Quasuras prior to the Acquisition, purchased 303,030 shares for approximately $200,000 in the 2017 Private Placement.

Following the Acquisition, the 2017 Private Placement and related transactions, we had issued and outstanding 15,983,273 shares of our common stock of which Mr. DiPerna owned 7,523,430 shares, the Purchasing Funds and Messrs. Besser and Frank owned in the aggregate 5,664,690 shares and the other purchasers in the Private Placement owned 2,195,151 shares.

Following the closing of the Acquisition, on July 28, 2017, we filed with the Securities and Exchange Commission (the “SEC”), a Current Report on Form 8-K (the “Super 8-K”), disclosing the Acquisition, the Private Placement, the Share Cancellation and related transactions, which upon the filing of the Super 8-K we ceased being a shell company.

### 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.

### 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. Please call the SEC at (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.

## Legal proceedings

As filed, 411 characters.

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 five percent (5%) of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.

## Management's discussion and analysis

As filed, 6,373 characters.

### Overview

The Company was incorporated under the laws of the State of Nevada on October 22, 1998 under the name Bear Lake Recreation Inc.

We had no material business operations from 2002 through July 24, 2017, when we acquired Quasuras in the Acquisition.

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

Following the Acquisition, we have been singularly focused on designating and developing our innovative insulin pump which we believe will substantially improve the quality of life of persons requiring daily administration of fast acting insulin.

From July 24, 2017 through March 29, 2019, we have conducted 2 private placements, the 2017 Private Placement and the 2018 Private Placement of shares of our common stock discussed elsewhere in this Report pursuant to which we received in the aggregate $8,874,538 of gross proceeds. We are using the net proceeds from such private placements in connection with the design and development of our insulin pump.

### Results of Operations – for the Fiscal Year Ended March 31, 2019 and Compared to Fiscal Year Ended March 31, 2018

For the Years Ended March 31,

| Operating expenses | 2019 | 2018 |
| --- | ---: | ---: |
| Professional expenses | $260,396 | $232,961 |
| Research and development | 1,882,345 | 332,642 |
| General and administrative and depreciation expenses | 434,558 | 100,561 |
| Total operating expenses | 2,577,299 | 666,164 |
| Operating loss | (2,577,299) | (666,164) |
| Interest income | 39,390 | 8,518 |
| Income tax | (1,589) | (1,600) |
| Net loss | $(2,539,498) | $(659,246) |

#### Overview:

We reported a net loss of $2,539,498 and $659,246 for the fiscal years ended March 31, 2019 and 2018, respectively. The increase in our net loss is primarily due to an increase in our research and development expenses.

#### Operating Expenses:

During the fiscal year ended March 31, 2019, professional expenses increased by 12% to $260,396, as compared to $232,961 for the prior fiscal year. The increase is primarily due to an increase in fees paid for consulting fees.

During the fiscal year ended March 31, 2019, research and development expenses increased by 466% to $1,882,345 as compared to $332,642 for the prior fiscal year. The increase in research and development expenses is primarily due to increased engineering headcount and increasing outside expenses necessary to the design and development of our innovative insulin pump. We expect research and development expenses to continue to increase.

During the fiscal year ended March 31, 2019, general and administrative expenses increased by 332% to $434,558 as compared to $100,561 for the prior fiscal year. The increase in our general and administrative expense is attributable primarily to an increase in employee related cost.

#### Interest Income:

Interest income for or the fiscal year ended March 31, 2019 and 2018 was $39,390 and $8,518, respectively.

### Liquidity and Capital Resources

The following summarizes our cash flows for the fiscal years ended March 31,:

|  | 2019 | 2018 |
| --- | ---: | ---: |
| Cash used in operating activities | $(1,807,934) | $(791,131) |
| Cash used in investing activities | (77,124) | (15,332) |
| Cash provided by financing activities | 4,142,150 | 4,711,132 |
| Net change in cash and cash equivalents | 2,257,092 | 3,904,669 |
| Cash and cash equivalents at beginning of period | 4,296,676 | 392,007 |
| Net change in cash | $6,553,768 | $4,296,676 |

As a development stage enterprise, the Company does not currently have revenues to generate cash flow to cover operating expenses. The Company has historically raised capital through the 2017 Private Placement and the 2018 Private Placement. Management expects to continue to raise capital through future equity offerings in order to finance its operations.

As of March 31, 2019, we had total current assets of $6,569,358 of which $6,553,768 were cash and cash equivalents, and current liabilities of $178,929. As of March 31, 2018, we had total current assets of $4,313,480 and current liabilities of $15,471. As of March 31, 2019 and 2018, we had working capital of approximately of $6,390,429 and $4,298,009, respectively.

#### Net Cash Used In Operating Activities

We used $1,807,934 of cash to fund operating activities during the fiscal year ended March 31, 2019, compared to $791,131 in 2018. Increased cash usage during the recent fiscal year was due to increasing operating expenses to fund research and development.

#### Net Cash Used In Investing Activities

We used $77,124 of cash to purchase equipment and intangible assets during the fiscal year ended March 31, 2019, compared to $15,332 in the prior fiscal year.

#### Net Cash Provided By Financing Activities

The 2018 Private Placement accounted for an increase of $4,142,150 of cash from financing activities during fiscal year ended March 31, 2019, compared to $4,711,132 to the year ended March 31, 2018.

### 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 March 31, 2019, 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.

## Controls and procedures

As filed, 5,310 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures as of the Evaluation Date, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.

### 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 such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2019. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its evaluation, our Management concluded that there are material weaknesses in our internal control over financial reporting and Management has concluded that the Company’s internal controls over financial reporting are not effective as of March 31, 2019. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

The material weaknesses relate to inadequate internal controls over financial reporting, and the lack of segregation of duties in our financial reporting process. We do not have a separately designated audit committee or independent director. To remedy these material weaknesses, we intend to engage an internal accountant to assist with financial reporting as soon as our finances will allow.

### Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the fiscal year ended March 31, 2019.

Subsequent to the end of the most recent fiscal year, we hired a full-time Accounting Manager to bring the accounting function in-house and to implement new policies and procedures to ensure effective internal controls over financial reporting which are necessary to provide reliable financial reports, as well as adequate disclosure controls and procedures designed to prevent fraud.

Filed Jun 27, 2019.
Source: SEC EDGAR, the filing index for accession 0001019056-19-000385. Last ingested by Listed: Nov 10, 2026, 07:32 ET. No prices; not investment advice.