Modular Medical, Inc. 10-K

ITEM 9A: CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed with or furnished to the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. 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 our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Chief Executive Officer, who also serves as our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based on this evaluation, our management concluded that as of March 31, 2021, our disclosure controls and procedures were effective. 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 Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls. Internal control over financial reporting is the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures 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 financial statements. 46 Because of its inherent limitations, cost-effective 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. Under the supervision and with the participation of our management, including our Chief Executive Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K. In making this assessment, we used the criteria based on the framework in Internal Control—Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management concluded that our internal control over financial reporting was effective as of March 31, 2021. Changes in Internal Control over Financial Reporting There were no changes in our internal controls over financial reporting during the fourth fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B: OTHER INFORMATION None. 47 PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The names of our directors and certain information about each of them at March 31, 2021 are set forth below. Name Age Position Paul DiPerna 64 Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director (Chairman of the Board of Directors) Liam Burns(1) 55 Director William J. Febbo(2) 52 Director Morgan C. Frank(2) 49 Director Carmen Volkart(1)(2) 60 Director (1) Member of Audit Committee (2) Member of Compensation Committee The principal occupations and positions for at least the past five years of our directors are described below. There are no family relationships among any of our directors or executive officers. Paul DiPerna. Mr. DiPerna has been our chairman, chief executive officer, chief financial officer, secretary and treasurer since we acquired Quasuras, Inc. (Quasuras) in July 2017. In 2015, he founded Quasuras, an early-stage medical device company developing an insulin pump product, and, until its acquisition by us, he served as its chief executive officer and chairman. Prior to that, Mr. DiPerna founded Fuel Source Partners, LLC to incubate early stage medical device products and accumulate technical talent. Our current pump product was one of such proposed products and was spun-out to Quasuras in 2015. From 2012 to 2015, he served as a co-inventor at a private company with property rights in a medical device used for blood borne infection control called the Curos Cap, which was acquired by 3M Corporation. In 2003, Mr. DiPerna founded Tandem Diabetes Care, Inc. (Tandem) and held various positions, including as director, chief executive officer and chief technology officer and was primarily responsible for the design concept and development of Tandem’s initial insulin pump. Prior to that, he held executive and management positions at Baxter Healthcare Corporation (Baxter) where he was tasked with identifying synergistic opportunities in the diabetes industry. As a result, Mr. DiPerna developed substantial expertise and knowledge in the diabetes industry and led attempts by Baxter to acquire three insulin pump manufacturers. Previously, he held mechanical design engineering positions in the automated test equipment and blood separation sciences industries. Mr. DiPerna holds a number of patents and patents pending and is a member of the American Diabetes Association. Mr. DiPerna received a Masters in Engineering Management from Northeastern University and a B.S. in Mechanical Engineering from the University of Lowell. We believe that Mr. DiPerna is qualified to serve as the chairman of our board of directors due to his extensive knowledge and experience in the medical device industry generally, and, in particular, with regard to insulin pumps and the diabetes industry, as well as his management and leadership experience from holding director and senior executive positions in other public and private companies and leading project development teams of medical device companies. Liam Burns . Mr. Burns was appointed to our board of directors in January 2019. Since that time, he has also been the Chief Executive Officer of Endo-TAGSS, LLC, a privately-held company developing a novel surgical access system for treatment of gastrointestinal diseases. From December 2017 to December 2018, Mr. Burns was the Chief Executive Officer of CuraSeal Inc., a privately-held regenerative medical company. From January 2014 to March 2018, he was the Vice President, Global Sales and Marketing for Dextera Surgical Inc., which marketed the world’s smallest surgical stapler. Dextera Surgical Inc. filed for bankruptcy protection on December 11, 2017 and was subsequently sold to B. Braun Aesculap in 2018. From January 2013 to September 2016, Mr. Burns was the managing member and majority interest holder in Bensi Flemington LLC, which operated a restaurant in Flemington, New Jersey. Bensi Flemington LLC filed for bankruptcy protection on August 11, 2015. Prior to that, Mr. Burns held a variety of commercial leadership roles at Ethicon and various early stage medical device companies. Mr. Burns received a B.A. in Economics from the College of the Holy Cross and an Executive MBA from the Weatherhead School of Management at Case Western Reserve University. We believe that Mr. Burns is qualified to serve as a member of our board of directors due to his extensive experience and background in developing and launching new medical technologies, commercial strategy, marketing and branding, as well as his experience in metabolic health. William J. Febbo. Mr. Febbo was appointed to our board of directors in January 2020. He is currently the Chief Executive Officer and a director of OptimizeRx Corporation, a digital health company focused on bringing life sciences support to patients and providers, having joined the company in 2016. Mr. Febbo founded Plexuus, LLC, a payment processing business for medical professionals in September 2015 and remained its Chairman from September 2015 to December 2020. From April 2007 to September 2015, he served as Chief Operating Officer of Merriman Holdings, Inc., an investment banking firm, where he assisted with capital raises in the technology, biotechnology, clean technology, consumer and resources industries. Mr. Febbo was a co-founder of, and from September 2013 to September 2015 served as Chief Executive Officer of, Digital Capital Network, Inc. a transaction platform for institutional and accredited investors. He was a co-founder of, and from January 1999 to September 2015 was Chief Executive Officer of, MedPanel, LLC, a provider of market intelligence and communications for the pharmaceutical, biomedical, and medical device industries. Since 2017, Mr. Febbo has been a faculty member of the Massachusetts Institute of Technology’s linQ program, which is a collaborative initiative focused on increasing the potential of innovative research to benefit society and the economy. Since 2004, he has been a board member of the United Nations Association of Greater Boston, a resource for the citizens of Greater Boston on the broad agenda of critical global issues addressed by the United Nations and its agencies. 48 On January 29, 2018, the Financial Industry Regulatory Authority (FINRA) accepted a Letter of Acceptance, Waiver and Consent (the Consent) submitted by Mr. Febbo. Without admitting or denying the findings, Mr. Febbo consented to the sanctions and to the entry of findings that he permitted Merriman Capital, Inc. to conduct a securities business while below its net capital requirement. From August 2012 to October 2015, he was the Financial and Operations Principal (FinOp) for a registered broker-dealer, Merriman Capital, Inc. (Merriman). During certain months, while Mr. Febbo was FinOp, FINRA found that certain of Merriman’s net capital filings with FINRA were inaccurate because of the method by which Merriman calculated net capital and that, when corrected, it was retroactively determined that Merriman had operated below its minimum net capital requirements. Mr. Febbo, as FinOp, signed certain of these reports and was thus held responsible. Based on the Consent, in settlement, Mr. Febbo, who was then no longer registered with any broker-dealer, accepted a fine of $5,000, a 10-business day suspension from acting as FinOp for any FINRA member and required to requalify by examination for the Series 27 license before again acting in a FinOp capacity. Mr. Febbo is qualified to serve on our board of directors because of his wealth of experience in building and managing health services and financial businesses. Mr. Febbo brings more than 20 years of experience in building and managing health services and financial businesses. Morgan C. Frank. Mr. Frank was appointed to our board of directors in April 2017. Mr. Frank has worked with Manchester since May 2002, and, prior to such time, he was a founder and managing director at First Principles Group, a boutique consultancy and principal investor specializing in corporate restructuring, restarts, intellectual property assessment and salvage, and spin outs. Prior to such time, Mr. Frank spent approximately five years as an analyst and portfolio manager at Hollis Capital, a San Francisco based hedge fund and prior thereto, Mr. Frank worked for an independent private client group at Paine Webber specializing in primary research to develop investment ideas (particularly short sale ideas) for institutional clients. Prior to his employment at Paine Webber, Mr. Frank was a currency trader for Eastern Vanguard. Mr. Frank holds a BA in Economics and in Political Science from Brown University. We believe that Mr. Frank is qualified to serve as member of our board of directors due to his extensive prior experience conducting financial analysis of public companies (certain of which were in the development stage), including such public companies’ management teams, products, including products in the development stage, the potential markets for such products and other factors that could affect the likelihood and timing of success and market penetration of such entities’ products as well as his capital raising activities. We believe this provides us with valuable insights into the financial markets and investment criteria of institutional and other investors as well as capital raising activities. Carmen Volkart. Ms. Volkart was appointed to our board of directors in December 2019. She has served as chief financial officer of Natureworks LLC, an advanced materials company offering a portfolio of renewably-sourced polymers, since October 2018. From October 2012 to July 2018, Ms. Volkart served as chief financial officer and, for a portion of that time, as senior vice president of commercialization for NxThera, Inc., a medical device company pioneering the application of convective radiofrequency thermotherapy to treat endurological conditions. She served as global chief financial officer of Tornier N.V. from 2010 to 2012, and was chief operating and financial officer, corporate secretary, compliance officer and treasurer of Spine Wave, Inc. from 2006 to 2010. Prior to 2006, Ms. Volkart held various executive and financial positions at American Medical, Inc., Medtronic, Inc. and Honeywell, Inc. She holds a B.S. in accounting from the University of North Dakota and an MBA with a concentration in strategic management from the University of Minnesota. Ms. Volkart is qualified to serve on our board of directors because of her substantial financial and public-company experience, as she has served as chief financial officer at multiple medical device and other companies. The names of our executive officers and certain information about them are set forth either above or below: Name Age Position Paul DiPerna 64 Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director (Chairman of the Board of Directors) Stephen Daly 53 Chief Commercial Officer Stephen Daly. Mr. Daly became our Chief Commercial Officer in March 2020. From December 2014 until February 2020, he served as U.S. General Manager for Adocia, a clinical-stage, French biotechnology company. Before joining Adocia, Mr. Daly served in senior roles for the commercialization of therapeutics in the diabetes and metabolism fields at companies such as Halozyme, Amylin Pharmaceuticals and Affymax. Prior to his industry-specific experience in diabetes and metabolism, he held portfolio planning and commercialization roles in the generic and biosimilar marketplace for Baxter International and Sicor, a division of Teva Pharmaceuticals. Mr. Daly holds a Bachelor of Science in business administration (finance and information systems) from Northeastern University. 49 Involvement in Legal Proceedings Except with regard to Messrs. Burns and Febbo, to our knowledge, none of our executive officers or our directors has, during the last ten years: · had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; · been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; · been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; · been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or · been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. To our knowledge, there are no material proceedings to which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of voting securities of us, or any associate of any such director, officer, affiliate of ours, or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries. Arrangements for Appointment of Directors and Officers Pursuant to the Reorganization and Share Exchange Agreement dated as of July 24, 2017, by and among us, Quasuras, Mr. DiPerna and the other stockholders of Quasuras (the Share Agreement), until July 24, 2022, our board of directors shall consist of no more than five and no less than two directors of which (i) Manchester has the right to appoint two directors, pursuant to which Manchester appointed Mr. Frank and Ms. Volkart and (ii) Mr. DiPerna, in addition to being our chairman of the board, has the right to appoint two additional directors, pursuant to which he appointed Messrs. Burns and Febbo. In May 2021, the parties amended the Share Agreement and removed Manchester’s and Mr. DiPerna’s rights to appoint directors. In addition, the parties agreed that Mr. DiPerna shall remain chairman of our board of directors until July 2022; provided, that in the event Mr. DiPerna resigns or is otherwise replaced as our chief executive officer, Mr. DiPerna shall remain as chairman of our board of directors for an additional period of three years. Following such amendment, our board of directors increased the size of the board to six members and, on May 18, 2021, appointed Ellen O’Connor Vos as director to our board. The DiPerna Employment and Related Agreements We entered into an employment agreement dated August 1, 2018, with Mr. DiPerna pursuant to which Mr. DiPerna is employed by us as our chief executive officer and president for an initial 2-year term with automatic one-year renewals. Pursuant to such agreement, we agreed to pay Mr. DiPerna: i) an annual salary of $200,000 in cash, ii) $100,000 per year in fully-vested stock options granted monthly at an exercise price determined by our board of directors in its sole discretion and iii) an annual bonus of $300,000, payable at the discretion of our board of directors, either in shares or in cash. If the board chooses to pay the bonus in shares, such shares will be valued at a price determined by our board of directors. Pursuant to such employment agreement (i) if (a) we terminate Mr. DiPerna’s employment without cause or he resigns with good reason, we will pay Mr. DiPerna a lump sum of $200,000, and (b) we terminate Mr. DiPerna’s employment for cause, we are not obligated to make any severance payment and Mr. DiPerna will receive only his base compensation through the last day of his employment, (ii) upon Mr. DiPerna’s death or disability, he will receive his base compensation through the last day of his employment and will remain eligible for all applicable benefits relative to death or disability pursuant to any plans that we have in place at such time, and (iii) upon a change of control (as defined in the employment agreement), Mr. DiPerna will be paid a lump sum of $100,000 within sixty days of the time at which such change of control takes place. 50 In May 2020, we amended our employment agreement with Mr. DiPerna to provide that in the event of a change in control: · within 60 days of the date the change in control occurs, Mr. DiPerna shall be paid by us or our successor in interest a lump sum cash payment equal to 12 months of Mr. DiPerna’s then annual Base Compensation (as defined in the employment agreement); and · immediately prior to such change of control, any unvested stock options or other unvested securities of ours issued to Mr. DiPerna shall automatically accelerate and immediately become fully vested and exercisable. In June 2020, our board of directors approved an amendment to the employment agreement to provide that Mr. DiPerna’s base salary would be paid entirely in cash commencing July 1, 2020. The payment of the additional cash component of Mr. DiPerna’s annual base salary ($8,333.33 per month) shall initially be deferred (the Deferred Salary) and accrue for Mr. DiPerna’s benefit until the Company has received $5,000,000 of cumulative gross proceeds of financing, at which time the Deferred Salary shall be paid to Mr. DiPerna and the salary deferrals will cease. On April 15, 2021, our board of directors authorized a $50,000 bonus for Mr. DiPerna for fiscal 2021. If a change of control occurred on March 31, 2021, under his employment agreement, Mr. DiPerna would be entitled to the following: · payment of a lump sum of $300,000 within 60 days of the time at which such change of control takes place; and · accelerated vesting of 183,333 shares of common stock under an unvested stock option. The value of the shares subject to accelerated vesting is calculated as the intrinsic value per share multiplied by the number of shares that would become fully vested upon a change of control. The intrinsic value per share would be calculated as the excess of the closing price of the common stock of $5.25 on the OTCQB Venture Market on March 31, 2021 over the exercise price of the option. As of March 31, 202, the intrinsic value was approximately $550,000. In connection with our acquisition of Quasuras, we entered into an Intellectual Property Transfer Agreement dated as of July 24, 2017, with Quasuras and Mr. DiPerna, pursuant to which Mr. DiPerna transferred to us all intellectual property rights owned directly and/or indirectly by him related to our business. Separately, we agreed to pay Mr. DiPerna, as part of his compensation for services to be performed for us, pursuant to a royalty agreement, certain fees based upon future sales, if any, of our potential product subject to a maximum $10,000,000 cap on the aggregate amount of fees that Mr. DiPerna could earn from such arrangement. Communications with our Board of Directors Our stockholders may send correspondence to our board of directors to the attention of our corporate secretary at the address set forth on the cover page of this Annual Report on Form 10-K. Our corporate secretary will forward stockholder communications to our board of directors prior to the board of director’s next scheduled meeting following the receipt of the communication. Corporate Governance Board Leadership Structure and Role in Risk Oversight Due to the small size and early stage of the Company, we have not adopted a formal policy on whether the chairman and chief executive officer positions should be separate or combined. Our board of directors has oversight responsibility for our risk management processes. Our board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate, regarding our assessment of risks. Our board of directors will focus on the most significant risks facing us and our general risk management strategy, and also ensure that risks undertaken by us are consistent with our appetite for risk. While our board of directors oversees our risk management processes, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing us and that the leadership structure of our board of directors supports this approach. Audit Committee Our board of directors established the audit committee for the purpose of overseeing the accounting and financial reporting processes and audits of our financial statements. The audit committee also is charged with reviewing any internal control violations under our whistleblower policy are directed to the members of the audit committee. The responsibilities of our audit committee are described in the Audit Committee Charter adopted by our board of directors, a current copy of which can be found on the investors section of our website, www.modular-medical.com. 51 Carmen Volkart and Liam Burns are the current members of the Audit Committee. Ms. Volkart serves as the chairperson and has been designated by the board of directors as the “audit committee financial expert,” as defined by Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended, and the Exchange Act. That status does not impose duties, liabilities or obligations that are greater than the duties, liabilities or obligations otherwise imposed on her as a member of the audit committee and the board of directors, however. Our board of directors has determined that she is an independent director, as determined in accordance with Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act). Ms. Volkart is responsible for review and pre-approval of services proposed to be provided by our independent registered public accounting firm. Compensation Committee Our board of directors established a compensation committee in January 2020 for the purpose of reviewing, recommending and approving our compensation policies and benefits, including the compensation of all of our executive officers and directors . William Febbo, Morgan Frank and Carmen Volkart are the current members of the compensation committee, and Mr. Febbo serves as the chairperson. Our compensation committee is responsible for reviewing, recommending and approving our compensation policies and benefits, including the compensation of all of our executive officers and directors, and it also has the principal responsibility for the administration of our equity incentive plan. The responsibilities of our compensation committee are more fully described in the Compensation Committee Charter adopted by our board of directors, a current copy of which can be found on the investors section of our website, www.modular-medical.com. Nominations Process We do not have a nominating committee, as we are a small company. Prior to May 2021, Manchester and Mr. DiPerna had the right to appoint directors to our board of directors, as discussed above. Instead of having such a committee, Messrs. DiPerna and Frank would identify and evaluate qualified individuals to become nominees for director and board committee members. When new candidates for our board of directors are sought, our board of directors evaluates each candidate for nomination as a director within the context of the needs and the composition of the board of directors as a whole. Our board of directors conducts any appropriate and necessary inquiries into the backgrounds and qualifications of candidates. When evaluating director nominees, our board of directors generally seeks to identify individuals with diverse, yet complementary business backgrounds. Although we have no formal policy regarding diversity, our directors consider both the personal characteristics and experience of director nominees, including each nominee’s independence, diversity, age, skills, expertise, time availability and industry background in the context of the needs of the board of directors and the Company. The board of directors believes that director nominees should exhibit proven leadership capabilities and experience at a high level of responsibility within their chosen fields, and must have the experience and ability to analyze the complex business issues facing us, and specifically, the issues inherent in the medical device industry. In addition to business expertise, the board of directors requires that director nominees have the highest personal and professional ethics, integrity and values and, above all, are committed to representing the long-term interests of our stockholders and other stakeholders. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of ours. Directors, executive officers and greater than 10% holders are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. Based on our review of Forms 3 and 4 filed during fiscal 2021 (and any written representations to us by such persons), we believe that all directors, executive officers and 10% stockholders complied with all applicable Section 16(a) filing requirements during fiscal 2021, except that: · Mr. DiPerna failed to timely file three Form 4s; and · Mr. Frank failed to timely file a Form 4. 52 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth compensation information for fiscal 2021 and 2020 for each of our named executive officers. Name and Principal Position Year Salary ($) Stock Awards ($) Option Awards ($)(1) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($) Total ($) Paul DiPerna, CEO, CFO, Secretary, 2021 200,000 — 25,000 — 50,000 (3) 275,000 Treasurer and Director(2) 2020 200,000 — 584,200 — 280,000 (4) 1,064,200 Stephen Daly, Chief Commercial Officer(5) 2021 234,000 — — — — 234,000 2020 20,833 — 355,240 — — 376,073 (1) Award amounts reflect the aggregate grant date fair value with respect to awards granted, as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the aggregate grant date fair value of option awards are set forth in the notes to the consolidated financial statements included in item 8 of this Report. These amounts do not reflect actual compensation earned or to be earned by our named executive officers. (2) Mr. DiPerna’s annual salary base was increased from $180,000 to $300,000 in August 2018, under the terms of an employment agreement between us and Mr. DiPerna. From August 2018 until June 30, 2020, Mr. DiPerna’s $300,000 annual salary was paid $200,000 in cash and $100,000 in fully-vested stock options granted monthly. In June 2020, our board of directors amended the salary payment composition effective July 1, 2020, such that the $100,000 component of Mr. DiPerna’s salary would be deferred until the Company had achieved $5,000,000 in financing proceeds from a subsequent financing. (3) Earned as a bonus of which $22,000 was paid on April 30, 2021, and the remainder will be paid in four quarterly installments commencing on July 15, 2021. (4) Earned as a bonus, and is being paid in quarterly installments over the 24-month period that commenced on March 31, 2020. (5) Mr. Daly became our Chief Commercial Officer in March 2020 at an annual base salary of $250,000. In February 2021, Mr. Daly converted to part time and his annual base salary was reduced to $125,000. 53 Outstanding Equity Awards at Fiscal Year-End The following table shows certain information regarding outstanding equity awards held by our named executive officers as of March 31, 2021. Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price($) Option Expiration Date(1) Paul DiPerna 3,465 (2) — 3.16 6/1/2030 3,504 (3) — 3.16 5/1/2030 3,507 (4) — 3.16 4/1/2030 4,979 (5) — 2.48 3/2/2030 5,235 (3) — 2.48 2/1/2030 5,181 (4) — 2.48 1/1/2030 5,424 (5) — 2.25 12/1/2029 5,431 (6) — 2.25 11/1/2029 5,161 (7) — 2.25 10/1/2029 4,986 (8) — 2.25 9/15/2029 4,998 (9) — 2.25 8/15/2029 4,979 (10) — 2.25 7/15/2029 4,948 (11) — 2.25 6/15/2029 5,028 (12) — 2.25 5/15/2029 4,869 (13) — 2.25 4/15/2029 5,082 (14) — 2.25 3/15/2029 4,921 (15) — 2.25 2/15/2029 4,808 (16) — 2.25 1/15/2029 5,324 (17) — 2.25 12/28/2028 5,324 (18) — 2.25 11/14/2028 18,013 (19) — 0.66 10/14/2028 18,013 (20) — 0.66 09/14/2028 18,013 (21) — 0.66 08/14/2028 116,667 (22) 183,333 2.25 11/25/2029 Stephen Daly 66,667 (23) 133,333 2.25 3/3/2030 (1) The standard option term is ten years, but all of the options expire automatically unless exercised within 90 days after the cessation of service as an employee, director or consultant. (2) The option was granted on June 1, 2020, and the shares subject to this option were fully vested on the grant date. (3) The option was granted on May 1, 2020, and the shares subject to this option were fully vested on the grant date. (4) The option was granted on April 1, 2020, and the shares subject to this option were fully vested on the grant date. (5) The option was granted on March 2, 2020, and the shares subject to this option were fully vested on the grant date. (6) The option was granted on February 1,2020, and the shares subject to this option were fully vested on the grant date. (7) The option was granted on January 1, 2020, and the shares subject to this option were fully vested on the grant date. (8) The option was granted on December 1, 2019, and the shares subject to this option were fully vested on the grant date. (9) The option was granted on November 1, 2019, and the shares subject to this option were fully vested on the grant date. (10) The option was granted on October 1, 2019, and the shares subject to this option were fully vested on the grant date. (11) The option was granted on September 15, 2019, and the shares subject to this option were fully vested on the grant date. (12) The option was granted on August 15, 2019, and the shares subject to this option were fully vested on the grant date. (13) The option was granted on July 15, 2019, and the shares subject to this option were fully vested on the grant date. (14) The option was granted on June 15, 2019, and the shares subject to this option were fully vested on the grant date. (15) The option was granted on May 15, 2019, and the shares subject to this option were fully vested on the grant date. (16) The option was granted on April 15, 2019, and the shares subject to this option were fully vested on the grant date. (17) The option was granted on March 15, 2019, and the shares subject to this option were fully vested on the grant date. (18) The option was granted on February 15, 2019, and the shares subject to this option were fully vested on the grant date. (19) The option was granted on January 15, 2019, and the shares subject to this option were fully vested on the grant date. (20) The option was granted on December 15, 2018, and the shares subject to this option were fully vested on the grant date. (21) The option was granted on November 15, 2018, and the shares subject to this option were fully vested on the grant date. (22) The option was granted on October 15, 2018, and the shares subject to this option were fully vested on the grant date. (23) The option was granted on September 15, 2018, and the shares subject to this option were fully vested on the grant date. 54 (24) The option was granted on August 15, 2018, and the shares subject to this option were fully vested on the grant date. (25) The option was granted on November 25, 2019, and the shares subject to this option vest monthly over three years commencing January 1, 2020, subject to continued service as an employee, director or consultant. (26) This option was granted on March 3, 2020, and the shares subject to this option vest as to 1/3rd of the shares the annual anniversary of the grant date and as to 1/36th of the shares subject to the option on each monthly anniversary thereafter, subject to continued service as an employee, director or consultant . Employment Agreements We have entered into our standard form of employment, confidential information and invention assignment agreement with each of our named executive officers. We also have entered into agreements to indemnify our directors and certain executive officers, in addition to the indemnification provided for in our certificate of incorporation and bylaws. These agreements, among other things, provide for indemnification of our directors and certain executive officers for many expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director or executive officer of ours, any subsidiary of ours or any other company or enterprise to which such person provided services at our request. Director Compensation The following table summarizes the compensation we paid to our non-employee directors in fiscal 2021: Fee Restricted Stock Option Compensation Awards Awards All Other Total Name ($) ($) ($)(1)(2) Compensation ($) Liam Burns 10,000 — — — 10,000 William Febbo 10,000 — — — 10,000 Morgan Frank(3) — — 375,105 — 375,105 Carmen Volkart 10,000 — — — 10,000 (1) Award amounts reflect the aggregate grant date fair value with respect to awards granted, as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the aggregate grant date fair value of option awards are set forth in the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These amounts do not reflect actual compensation earned or to be earned by our directors. (2) As of March 31, 2021, our non-employee directors each held outstanding options to purchase the following number of shares of our common stock: Liam Burns, 197,062; William Febbo, 200,000; Morgan Frank, 150,000; Carmen Volkart, 150,000. (3) Mr. Frank was granted an option to purchase 150,000 shares of our common stock in May 2020. During fiscal 2021, our board of directors had authorized an annual cash retainer fee of $10,000, payable in quarterly installments, for our non-employee directors, with the exception of Mr. Frank, as compensation for their service. Effective April 1, 2021, our board of directors approved our outside (non-employee) director compensation plan (the Director Plan). Pursuant to the Director Plan, outside directors will be paid the following annual retainers: · $30,000 for service as a member of the board of directors; · $5,000 for service as chair of the audit committee; and · $5,000 for service as chair of the compensation committee. The retainers will be paid in quarterly installments in either cash or in shares of common stock of the Company, as directed by each director based on an annual election. In addition, under the Director Plan, each director will also receive an annual service equity award of $100,000 paid in quarterly installments in either options to purchase shares of the Company’s common stock or shares of the Company’s common stock, as directed by each director based on an annual election. In addition, upon appointment to our board of directors, we award our non-employee directors a stock option grant under our Amended 2017 Equity Incentive Plan (the 2017 Plan) ranging from 50,000 to 200,000 shares of our common stock. These options vest annually over three years from the date of appointment to our board of directors. 55 ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information as of June 15, 2021 concerning the ownership of our common stock by: · each shareholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock (currently our only class of voting securities); · each of our directors; · each of our executive officers; and · all directors and executive officers as a group. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act, and includes all shares over which the beneficial owner exercises voting or investment power. Shares that are issuable upon the exercise of options, warrants and other rights to acquire common stock that are presently exercisable or exercisable within 60 days of June 15, 2021 are reflected in a separate column in the table below. These shares are taken into account in the calculation of the total number of shares beneficially owned by a particular holder and the total number of shares outstanding for the purpose of calculating percentage ownership of the particular holder. We have relied on information supplied by our officers, directors and certain stockholders and on information contained in filings with the SEC. Except as otherwise indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 18,966,148 shares of common stock outstanding as of June 15, 2021. Unless otherwise stated, the business address of each of our directors and executive officers listed in the table is 16772 West Bernardo Drive, San Diego, California 92127. Name and principal position Number of Shares Beneficially Owned (Excluding Outstanding Options)(1) Number of Shares Issuable on Exercise of Outstanding Options(2) Percent of Class James Besser 6,558,906 (3) — 34.58 % JEB Partners, L.P. 6,558,906 (3) — 34.58 % Manchester Explorer L.P. 6,558,906 (3) — 34.58 % Manchester Management LLC 6,558,906 (3) — 34.58 % Directors and Officers: Paul DiPerna 7,523,430 (4) 317,860 40.59 % Liam Burns — 144,652 * Stephen Daly — 66,667 * William J. Febbo — 66,667 * Morgan C. Frank 6,558,906 (3) 50,000 34.60 % Carmen Volkart — 50,000 * Ellen O’Connor Vos(5) — — — All current directors and executive officers as a group (7 persons) 14,082,336 695,846 76.87 % * Represents less than 1% (1) Excludes shares subject to outstanding options to acquire common stock that are exercisable within 60 days of June 15, 2021. (2) Represents the number of shares subject to outstanding options to acquire common stock that are exercisable within 60 days of June 15, 2021. (3) Includes (i) 269,719 shares directly held by Mr. Besser, of which: (a) 180,830 shares were received in exchange for Mr. Besser’s shares as a result of our acquisition of Quasuras and (b) 88,889 shares purchased in the 2018 Placement; (ii) 5,051,409 held by Manchester Explorer, L.P. (Manchester) of which: (a) 4,545,455 shares were purchased in a private placement in 2017 (the 2017 Placement), (b) 471,111 shares were purchased in the 2018 Placement, and (c) 34,483 were purchased in the 2020 Placement; (iii) 1,056,948 shares held by JEB Partners, L.P. (JEB Partners) of which (a) 757,576 shares were purchased in the 2017 Placement, (b) 160,000 shares were purchased in the 2018 Placement and (c) 139,372 shares were purchase in the 2020 Placement; and (iv) 180,830 shares held by Mr. Frank, which shares were received in our acquisition of Quasuras in exchange for Mr. Frank’s shares of Quasuras. Mr. Besser, as the managing member, and Mr. Frank, as the portfolio manager and consultant of Manchester Management, LLC (MMC), the general partner of Manchester and JEB Partners, have shared voting and dispositive power over shares held by Manchester and JEB Partners. The address for Manchester and Mr. Besser is c/o MMC, 2 Calle Candina, No. 1701, San Juan, Puerto Rico 00907. 56 (4) Includes (i) 6,000,000 shares directly held by the Paul DiPerna Irrevocable Trust (the Irrevocable Trust), (ii) 1,000,000 shares directly held by Mr. DiPerna’s adult daughters, Kelsie DiPerna and Alaria DiPerna, which shares Mr. DiPerna has sole voting power over; (iii) 523,430 shares directly held by the Paul DiPerna Trust (the Trust), of which 303,030 shares were purchased in the 2017 Placement, and (iv) 278,015 shares issuable upon exercise of stock options granted to Mr. DiPerna under the 2017 Plan. The 6,000,000 shares held by the Irrevocable Trust, 1,000,000 shares held by Mr. DiPerna’s adult daughters and 220,440 shares held by the Trust were issued in 2017 to Mr. DiPerna in the Acquisition and transferred to such persons in December 2020 by Mr. DiPerna. Mr. DiPerna is the chairman of our board of directors, and also serves as our chief executive officer, chief financial officer, and secretary. Mr. DiPerna is the trustee of the Irrevocable Trust and the Trust. (5) Ms. Vos was appointed to our board of directors in May 2021. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Transactions with Related Persons As disclosed elsewhere in this Annual Report on Form 10-K, Mr. DiPerna, is a party to related party transactions with us, see Item 10. In March 2021, we paid Mr. Burns, a member of our board of directors, $5,585 in settlement of a liability outstanding at March 31, 2020 for consulting services rendered during fiscal 2020. Mr. Burns provided no consulting services to us during fiscal 2021. In February 2021, Mr. DiPerna and Manchester, which is represented by Mr. Frank, purchased $100,000 and $1,000,000, respectively, aggregate principal amount of our 2021 Notes. As of March 31, 2021, interest payable by us on such 2021 Notes totaled $1,677 and $16,766 for Mr. DiPerna and Manchester, respectively. Director Independence See Item 10. Directors, Executive Officers and Corporate Governance. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table shows the fees billed to us by Farber Hass Hurley LLP, or Farber, our independent registered public accounting firm, for the audit of our consolidated financial statements and other services provided. 2021 2020 Audit fees(1) $ 34,500 $ 28,900 Audit-related fees(2) 3,700 7,600 Total(3) $ 38,200 $ 36,500 (1) Audit fees consisted of fees for professional services rendered for the audit of our annual consolidated financial statements, review of our quarterly consolidated financial statements and services provided in connection with our issuance of SEC registration statements. (2) Audit-related fees consisted of fees for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements fees and primarily related to the issuance of SEC registration statements. (3) Farber did not provide any non-audit or other services other than those reported under “Audit fees” and “Audit-related fees.” 57 PART IV ITEM 15: EXHIBITS (a)(1) Consolidated financial statements . See the audited consolidated financial statements for the year ended March 31, 2021 contained in Item 8 of this Report which are incorporated herein by this reference. (2) Financial statement schedul es. Omitted because they are not required, not applicable or because the required information is shown in the consolidated financial statements or notes thereto. (3) Exhibits . Required exhibits are incorporated by reference or are filed with this Report. No. Description 2.1(1) Reorganization and Share Exchange Agreement dated as of July 24, 2017, by and among the Registrant, Quasuras, Inc., Paul DiPerna and the other stockholders of Quasuras, Inc. 2.2(2) Addendum No. 1 to Reorganization and Share Exchange Agreement dated as of July 24, 2017, by and among the Registrant, Quasuras, Inc., Paul DiPerna and the other Stockholders of Quasuras, Inc. dated May 3, 2021 3.1(3) Second Amended and Restated Articles of Incorporation, as filed with the Secretary of State of Nevada on June 27, 2017 3.2(4) Amended Bylaws 4.1(5) + 2017 Equity Incentive Plan, as amended 4.2* Description of Registrant’s Securities 10.1(6) Common Stock Purchase Agreement, dated as of April 5, 2017, by and among Bear Lake Recreation, Inc., Manchester Explorer, LP, a Delaware limited partnership, and certain persons named therein 10.2(1) Form of Common Stock Purchase Agreement, dated as of July 24, 2017, by and between the Registrant and the purchaser named therein 10.3(7) Form of Common Stock Purchase Agreement dated as of November 19, 2018 among the Registrant and the Investors named therein 10.4(8) + Employment Agreement dated August 1, 2018, by and between the Registrant and Paul DiPerna 10.5(1) Intellectual Property Assignment Agreement dated July 24, 2017, by and between the Registrant, Quasuras, Inc. and Paul DiPerna 10.6(1) + Technology Royalty Agreement dated as of July 24, 2017, by and between the Registrant, Quasuras, Inc. and Paul DiPerna 10.7(8) Service Agreement effective January 16, 2019 between the Registrant and Liam Burns 10.8(8) Standard Sublease Agreement, dated August 21, 2017, between the Registrant and Western Education Corporation 10.9(9) Lease between MCP Socal Industrial – Bernardo, LLC and the Registrant dated January 10, 2020 10.10(9) Consulting Agreement between the Registrant and Liam Burns dated April 15, 2019 10.11(9) Consulting Agreement between the Registrant and Liam Burns dated July 15, 2019 10.12(9) Consulting Agreement between the Registrant and Liam Burns dated September 3, 2019 10.13(9) Service Agreement effective December 31, 2019 between the Registrant and Carmen Volkart 10.14(9) Service Agreement effective January 23, 2020 between the Registrant and William Febbo 10.15(9) Form of Indemnification Agreement between the Registrant and each of its directors and officers used from January 23, 2020 10.16(9) + Form of Notice of Stock Option Grant and Stock Option Agreement under the Amended 2017 Equity Incentive Plan 10.17(10) + First Amendment to Employment Agreement between the Registrant and Paul DiPerna effective as of May 12, 2020 10.18(11) U.S. Small Business Administration Paycheck Protection Program Note dated April 23, 2020 10.19(11) Second Amendment to Employment Agreement between the Registrant and Paul DiPerna effective as of July 1, 2020 10.21(12) Form of Convertible Promissory Note dated February 8, 2021 10.22(13) Form of Convertible Promissory Note issued in the 2021 Placement 10.23(13) Form of Common Stock Purchase Warrant issued in the 2021 Placement 10.24(13) Form of Securities Purchase Agreement for the 2021 Placement 10.26* Service Agreement effective May 18, 2020 between the Registrant and Ellen O'Connor Vos 21.1 Sole Subsidiary of the Registrant (as disclosed in the Notes to Consolidated Financial Statements as of March 31, 2021 in Item 8 of this Report) 23.1* Consent of Independent Registered Public Accounting Firm - Farber Hass & Hurley LLP 24.1 Power of Attorney (see signature page of this Report) 31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 58 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase (1) As filed with the Registrant’s Current Report on Form 8-K filed July 28, 2017, and incorporated herein by reference. (2) As filed with the Registrant’s Current Report on Form 8-K filed May 12, 2021, and incorporated herein by reference. (3) As filed with the Registrant’s Current Report on Form 8-K filed June 29, 2017, and incorporated herein by reference. (4) As filed with the Registrant’s Annual Report on Form 10-K/A for the year ended June 30, 2008, and incorporated herein by reference. (5) As filed with the Registrant’s Annual Report on Form 10-K filed June 29, 2018, and incorporated herein by reference. (6) As filed with the Registrant’s Current Report on Form 8-K filed April 5, 2017, and incorporated herein by reference. (7) As filed with the Registrant’s Current Report on Form 8-K filed November 20, 2018 and incorporated herein by reference. (8) As filed with the Registrant’s Registration Statement on Form S-1, as amended, originally filed June 27, 2019, declared effective October 22, 2019 (Commission File No. 333-232377), and incorporated herein by reference. (9) As filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2019, and incorporated herein by reference. (10) As filed with the Registrant’s Current Report on Form 8-K filed May 27, 2020, and incorporated herein by reference. (11) As filed with the Registrant’s Current Report on Form 8-K filed May 12, 2020, and incorporated herein by reference. (12) As filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, and incorporated herein by reference. (13) As filed with the Registrant’s Current Report on Form 8-K filed May 12, 2021, and incorporated herein by reference. + Management contract, compensatory plan or arrangement. * Filed herewith 59 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29 th day of June, 2021. MODULAR MEDICAL, INC. By: /s/ Paul M. DiPerna Paul M. DiPerna Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director (principal executive, financial and accounting officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul DiPerna as true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and him and in her or his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in- fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ Paul M. DiPerna Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, (principal financial and accounting officer) and June 29, 2021 Paul M. DiPerna Director (Chairman of the Board) Director Liam Burns /s/ William Febbo Director June 29, 2021 William Febbo /s/ Morgan Frank Director June 29, 2021 Morgan Frank /s/ Carmen Volkart Director June 29, 2021 Carmen Volkart /s/ Ellen O’Connor Vos Director June 29, 2021 Ellen O’Connor Vos 60