What changed in this filing

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Item 1. Financial Statements

2022-02-14 compared with 2021-11-12 · 320 added, 278 removed, 350 unchanged (63% of the section changed)

Financial Statements

Modular Medical,

Medical, Inc.

Condensed Consolidated Balance Sheets

September 30,

CURRENT ASSETS

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PPP note payable

Promissory note payable

Convertible notes payable

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Common Stock, $ 0.001 par value, 50,000,000 shares authorized;

18,982,562 and 18,906,148 shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively

6,373,706 and 6,302,050 shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively

Additional paid-in capital

Common stock issuable

Accumulated deficit

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notes are an integral part of these condensed consolidated financial statements.

Modular Medical,

Medical, Inc.

Condensed Consolidated Statements of Operations

Three Months Ended

September 30,

Six Months Ended

September 30,

Nine Months Ended

Operating expenses

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( 1,010,247 )

( 2,204,917 )

Loss on debt extinguishment

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notes are an integral part of these condensed consolidated financial statements.

Modular Medical,

Medical, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

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$ ( 5,100,814 )

Private placement of common stock

Shares issued for services

Shares issuable for services

Shares issued for reverse stock split

Stock-based compensation

( 4,841,307 )

Balance as of December 31, 2021

( 30,005,165 )

( 8,246,635 )

Stockholders’

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$ ( 12,303,920 )

Private placement of common stock

Stock-based compensation

( 1,870,545 )

Balance as of December 31, 2020

$ ( 14,174,465 )

The accompanying

notes are an integral part of these condensed consolidated financial statements.

Modular Medical,

Medical, Inc.

Condensed Consolidated Statements of Cash Flows

Six Months Ended

September 30,

Nine Months Ended

$ ( 14,058,155 )

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Shares issued for services

Shares issuable for services

Amortization of lease right-to-use asset

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Proceeds from issuance of convertible notes, net of placement fees

Proceeds from issuance of promissory note

Proceeds from issuance of PPP note payable

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( 1,264,367 )

( 2,525,592 )

Cash and cash equivalents at beginning of period

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notes are an integral part of these unaudited condensed consolidated financial statements.

MODULAR MEDICAL,

MEDICAL, INC.

F/K/A BEAR LAKE RECREATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Modular Medical,

1 – THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Medical, Inc.

(the Company) was incorporated in Nevada in October 1998 under the name Bear Lake Recreation, Inc.

The Company had no material

business operations from 2002 until approximately 2017 when it acquired all of the issued and outstanding shares of Quasuras,

Inc., a Delaware corporation (Quasuras).

As the major shareholder of Quasuras retained control of both the Company and Quasuras,

the share exchange was accounted for as a reverse merger.

As such, the Company recognized the assets and liabilities of Quasuras

acquired in the merger, at their historical carrying amounts.

Prior to the acquisition of Quasuras and since at least 2002, the

Company was a shell company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange Act).

The Company had

no material business operations from 2002 until approximately 2017 when it acquired all of the issued and outstanding shares of

Quasuras, Inc., a Delaware corporation (Quasuras).

As the major shareholder of Quasuras retained control of both the Company and

Quasuras, the share exchange was accounted for as a reverse merger.

As such, the Company recognized the assets and liabilities

of Quasuras acquired in the merger, at their historical carrying amounts.

Prior to the acquisition of Quasuras and since at least

2002, the Company was a shell company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the Exchange

In June 2017, the Company changed its name from Bear Lake Recreation, Inc.

to Modular Medical, Inc.

Company is a development-stage, medical-device company focused on the design, development, and commercialization of an innovative

insulin pump using modernized technology to increase pump adoption in the diabetes marketplace.

Through the creation of a novel

two-part, patch pump product, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access to

the higher standards of care that presently available insulin pumps provide.

By simplifying and streamlining the user experience

from introduction, prescription, reimbursement, training and day-to-day use, the Company seeks to expand the wearable insulin

delivery device market beyond the highly motivated “super users” and expand the category into the mass market.

Company’s pump product seeks to serve both the type 1 and type 2 diabetes markets.

is a development-stage, medical-device company focused on the design, development, and commercialization of an innovative insulin

pump using modernized technology to increase pump adoption in the diabetes marketplace.

Through the creation of a novel two-part,

patch pump product, the Company seeks to fundamentally alter the trade-offs between cost and complexity and access to the higher

standards of care that presently available insulin pumps provide.

By simplifying and streamlining the user experience from introduction,

prescription, reimbursement, training and day-to-day use, the Company seeks to expand the wearable insulin delivery device market

beyond the highly motivated “super users” and expand the category into the mass market.

The Company’s pump product

seeks to serve both the type 1 and type 2 diabetes markets.

Accounting Standards Board (FASB) Accounting Standard Update (ASU) No.

2014-15 (ASU 2014-15), Going Concern , requires

management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about

the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going

concern, management must consider if there are plans that are probable to be implemented, and whether it is probable that the

plans will mitigate the conditions or events raising the substantial doubt about the entity’s ability to continue as a going

If the substantial doubt is not alleviated after consideration of management’s plans, the entity must include

a statement in the notes to the financial statements indicating that there is substantial doubt about the entity’s ability

to continue as a going concern within one year after the date that the financial statements are issued including:

1) the principal

conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, 2) management’s

evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations,

and 3) management’s plans to attempt to mitigate the conditions or events causing the substantial doubt about the entity’s

ability to continue as a going concern.

The Company expects to continue to

incur operating losses for the foreseeable future and incur cash outflows from operations as it continues to invest in the development

and subsequent commercialization of its product.

The Company expects that its research and development and general and administrative

expenses will continue to increase, and, as a result, it will eventually need to generate significant product revenues to achieve

profitability.

The Company’s expected operating losses and cash burn and the need to repay the convertible promissory notes

and accrued interest in the first half of 2022 raise substantial doubt about the Company’s ability to continue as a going

concern within one year after the date that these financial statements are issued.

Implementation of the Company’s plans

and its ability to continue as a going concern will depend upon the Company’s ability to raise additional capital, through

the sale of additional equity or debt securities, to support its future operations.

There can be no assurance that such additional

capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital

will be offered on terms and conditions acceptable to the Company.

As disclosed in note 9, the Company recently sold shares

of its common stock to two of its officers, obtained access to a credit facility and filed a registration statement to offer shares

of its common stock.

The Company’s

operating needs include the planned costs to operate its business, including amounts required to repay its convertible promissory

notes (if not converted), fund working capital and capital expenditures.

The Company’s future capital requirements and the

adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize

its product, competing technological and market developments, and the need to enter into collaborations with other companies or

acquire other companies or technologies to enhance or complement its product offering.

If the Company is unable to secure additional

capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in

order to conserve its cash.

These condensed consolidated financial statements do not include any adjustments that might result

from this uncertainty.

Basis of Presentation

2014-15 (ASU 2014-15), Going Concern , requires management

to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s

ability to continue as a going concern within one year after the date that the financial statements are issued.

If management

identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management

must consider if there are plans that are probable to be implemented, and whether it is probable that the plans will mitigate

the conditions or events raising the substantial doubt about the entity’s ability to continue as a going concern.

substantial doubt is not alleviated after consideration of management’s plans, the entity must include a statement in the

notes to the financial statements indicating that there is substantial doubt about the entity’s ability to continue as a

going concern within one year after the date that the financial statements are issued including:

1) the principal conditions or

events that raise substantial doubt about the entity’s ability to continue as a going concern, 2) management’s evaluation

of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, and 3) management’s

plans to attempt to mitigate the conditions or events causing the substantial doubt about the entity’s ability to continue

as a going concern.

expects to continue to incur operating losses for the foreseeable future and incur cash outflows from operations as it continues

to invest in the development and subsequent commercialization of its product.

The Company expects that its research and development

and general and administrative expenses will continue to increase, and, as a result, it will eventually need to generate significant

product revenues to achieve profitability.

The Company’s expected operating losses and cash burn and the need to repay the

convertible promissory notes and accrued interest in the first half of 2022 raise substantial doubt about the Company’s

ability to continue as a going concern within one year after the date that these financial statements are issued.

Implementation

of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to raise

additional capital, through the sale of additional equity or debt securities, to support its future operations.

There can be no

assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and,

if available, that such capital will be offered on terms and conditions acceptable to the Company.

As disclosed in note 9, the

Company recently sold shares of its common stock to two of its officers, obtained access to a credit facility and filed a registration

statement to offer shares of its common stock.

The Company’s operating needs include the planned costs to operate its business,

including amounts required to repay its convertible promissory notes (if not converted), fund working capital and capital expenditures.

The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including

the Company’s ability to successfully commercialize its product, competing technological and market developments, and the

need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its

product offering.

If the Company is unable to secure additional capital, it may be required to curtail its research and development

initiatives and take additional measures to reduce costs in order to conserve its cash.

These condensed consolidated financial

statements do not include any adjustments that might result from this uncertainty.

of Presentation

The Company’s

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Exchange Commission (SEC).

The information in this report should be read in conjunction with the Company’s consolidated

financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting

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and cash flows for the interim periods presented.

The operating results for the three months ended September 30, 2021 are not

necessarily indicative of the results that may be expected for the year ending March 31, 2022 or for any other future period.

The operating results for the three months ended December 31, 2021 are not necessarily

indicative of the results that may be expected for the year ending March 31, 2022 or for any other future period.

Reverse Stock Split

24, 2021, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary

of State of the State of Nevada to effect a 1-for-3 reverse stock split of the Company’s shares of common stock.

Such amendment

and ratio were previously approved by a majority of the Company’s stockholders and the board of directors.

As a result of

the reverse stock split, which was effective November 29, 2021, every three shares of the Company’s pre-reverse split outstanding

common stock were combined and reclassified into one share of common stock.

Proportionate voting rights and other rights of common

stock holders were not affected by the reverse stock split.

Any fractional shares of common stock resulting from the Reverse Split

were rounded up to the nearest whole share.

All stock options outstanding and common stock reserved for issuance under the

Company’s equity incentive plans and warrants outstanding immediately prior to the reverse stock split were adjusted by

dividing the number of affected shares of common stock by three (3) and, as applicable, multiplying the exercise price by three

(3), as a result of the reverse stock split.

The preparation

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Actual results could differ from those estimates.

Reportable Segment

The Company operates in one

business segment and uses one measurement of profitability for its business.

Research and Development

operates in one business segment and uses one measurement of profitability for its business.

and Development

expenses research and development expenditures as incurred.

General and Administrative

and Administrative

and administrative expenses consist primarily of payroll and benefit costs, rent, stock-based compensation, legal and accounting

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of public markets.

The global outbreak

of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by

outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency

government in March 2020.

This has negatively affected the U.S.

and global economy, disrupted global supply

chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place”

and global economy, disrupted global supply chains,

significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place”

and created significant disruption of the financial markets.

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control, and cannot be predicted.

Cash and Cash Equivalents

and Cash Equivalents

and cash equivalents include cash on hand and cash in demand deposits, certificates of deposit and highly liquid debt instruments

with original maturities of three months or less.

Property & Equipment

equipment are originally recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful lives

of the assets, generally three to five years.

Depreciation is recorded in operating expenses in the condensed consolidated statements

of operations.

Leasehold improvements and assets acquired through capital leases are amortized over the shorter of their estimated

useful life or the lease term, and amortization is recorded in operating expenses in the condensed consolidated statements of

Fair Value of Financial

and equipment are originally recorded at cost.

Depreciation is computed using the straight-line method over the estimated useful

lives of the assets, generally three to five years.

Depreciation is recorded in operating expenses in the condensed consolidated

statements of operations.

Leasehold improvements and assets acquired through capital leases are amortized over the shorter of

their estimated useful life or the lease term, and amortization is recorded in operating expenses in the condensed consolidated

statements of operations.

Value of Financial Instruments

measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques

used to measure fair value into three broad levels:

1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology

include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or

liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to

the valuation methodology are unobservable and significant to the fair value measurement.

1 inputs to the valuation methodology are quoted prices for identical assets or liabilities

in active markets.

2 inputs to the valuation methodology include quoted prices for similar assets and liabilities

in active markets, and inputs that are observable for the asset or liability, either

directly or indirectly, for substantially the full term of the financial instrument.

3 inputs to the valuation methodology are unobservable and significant to the fair value

their short-term nature, the carrying values of cash equivalents, accounts payable and accrued expenses approximate fair value.

Per-Share Amounts

Basic net loss per share is

computed by dividing loss for the period by the weighted-average number of shares of common stock outstanding during the period.

net loss per share is computed by dividing loss for the period by the weighted-average number of shares of common stock outstanding

during the period.

Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period.

For the six months

ended September 30, 2021 and 2020, outstanding options to purchase 4,972,948 and 3,480,088 shares of common stock, respectively,

were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

For the nine months ended December 31, 2021 and 2020, outstanding options to purchase 1,967,188 and 1,170,863 shares of common

stock, respectively, were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

Reclassification

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effect on the reported results of operations or cash flows.

Comprehensive Loss

Comprehensive

loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions.

comprehensive loss may include certain changes in equity that are excluded from net loss.

For the three and six months ended September

30, 2021 and 2020, the Company’s comprehensive loss was the same as its net loss.

For the three and nine months ended

December 31, 2021 and 2020, the Company’s comprehensive loss was the same as its net loss.

Adopted Accounting Pronouncement

In August 2020,

2020, the FASB issued ASU No.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and

Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity’s

Own Equity (ASU 2020-06) .

ASU 2020-06 simplifies the accounting for convertible instruments by removing major separation

models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument

with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions that are required

for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an

Entity’s Own Equity (ASU 2020-06) .

ASU 2020-06 simplifies the accounting for convertible instruments by removing

major separation models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single

liability instrument with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions

that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts

to qualify for it.

ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas.

The new guidance is effective for annual

and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December

15, 2020, and interim periods within those fiscal years.

The Company early adopted ASU 2020-06 effective April 1, 2021, and the

impact of the adoption was not material to the Company’s consolidated financial statements.

NOTE 2 – LEASES

The new guidance

is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years

beginning after December 15, 2020, and interim periods within those fiscal years.

The Company early adopted ASU 2020-06 effective

April 1, 2021, and the impact of the adoption was not material to the Company’s consolidated financial statements.

Effective April

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to the leased space.

Future minimum

payments under the facility operating lease, as of September 30, 2021, are listed in the table below.

minimum payments under the facility operating lease , as of December 31, 2021, are listed in the table below.

Annual Fiscal Years

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Present value of lease liabilities

Cash paid for

amounts included in the measurement of lease liabilities was $ 76,716 for the six months ended September 30, 2021.

was $ 53,768 and $ 53,768 for the six months ended September 30, 2021 and 2020, respectively, and $ 26,884 and $ 26,844 for

the three months ended September 30, 2021 and 2020, respectively.

2020, the Company received a $ 368,780 unsecured loan (the PPP Note) under the Paycheck Protection Program (the PPP), which was

established under the U.S.

paid for amounts included in the measurement of lease liabilities was $ 115,073 for the nine months ended December 31, 2021.

expense was $ 80,698 and $ 80,654 for the nine months ended December 31, 2021 and 2020, respectively, and $ 26,930 and $ 26,844 for

the three months ended December 31, 2021 and 2020, respectively.

24, 2020, the Company received a $ 368,780 unsecured loan (the PPP Note) under the Paycheck Protection Program (the PPP), which

was established under the U.S.

government’s Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

to the Company was made through Silicon Valley Bank (the Lender), and the Company entered into a U.S.

Note to the Company was made through Silicon Valley Bank (the Lender), and the Company entered into a U.S.

Small Business Administration

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4 – CONVERTIBLE PROMISSORY NOTES

From February

through April 2021, the Company sold $2,310,000 of convertible promissory notes (each an Original Notes and, collectively, the

Original Notes), at par in a private placement transaction effected pursuant to an exemption from the registration requirements

February through April 2021, the Company sold $2,310,000 of convertible promissory notes (each an Original Notes and, collectively,

the Original Notes), at par in a private placement transaction effected pursuant to an exemption from the registration requirements

under the Securities Act of 1933, as amended.

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and interest expense of $ 70,647 for unamortized debt issuance costs as of April 30, 2021.

May 2021, pursuant to a Securities Purchase Agreement by and between the Company and each investor (the SPA), the Company sold

to investors $ 4,250,000 aggregate principal amount of convertible promissory notes (the Notes) and warrants to purchase shares

and May 2021, pursuant to a Securities Purchase Agreement by and between the Company and each investor (the SPA), the Company

sold to investors $ 4,250,000 aggregate principal amount of convertible promissory notes (the Notes) and warrants to purchase shares

of its common stock (the Warrants).

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No Note may be prepaid in whole or in part after the Trigger Date.

Notes outstanding

after the Trigger Date may be converted into shares of the Company’s common stock at an initial conversion price of $2.87

provided that a Note holder may not convert any portion of its Note that would cause it to beneficially own in excess

of 4.99% of the Company’s outstanding common stock.

The conversion price and number of shares of Company common stock issuable

upon conversion of the Notes are subject to adjustment from time to time for subdivisions and consolidations of shares and other

standard dilutive and corporate events, as provided in the Notes.

Subject to certain Exempt Issuances (as defined in the Notes),

if while a Note is outstanding, the Company sells, issues or grants any shares of its common stock or other securities to acquire

shares of common stock at a price per share less than the then conversion price, such conversion price shall be reduced to such

lesser price, and the number of conversion shares issuable upon conversion of the Notes shall be increased, as provided in the

If the Company

completes an offering of its common stock or other securities in excess of $12,000,000 of gross proceeds (a Qualified Capital

Raise, as defined in the Notes), each Note holder will be required to convert its Adjusted Note Amount (as defined below) into

the securities of such Qualified Capital Raise.

Adjusted Note Amount equals the product of (i) the sum of all outstanding principal

plus accrued interest on a Note, multiplied by (ii) 1.25.

The Notes contain

a number of Company events of default (Events of Default) including, without limitation (i) failure to pay any principal or interest

thereon when due, (ii) failure to timely deliver shares upon conversions, (iii) failure to comply with SEC reporting requirements

under the Exchange Act, (iv) certain breaches of the SPA, the Notes, the Warrants, and the Registration Rights Agreement, (v)

material restatements of the Company’s consolidated financial statements filed with the SEC, (vi) a holder’s inability

outstanding after the Trigger Date may be converted into shares of the Company’s common stock at an initial conversion price

of $8.61 per share;

provided that a Note holder may not convert any portion of its Note that would cause it to beneficially own

in excess of 4.99% of the Company’s outstanding common stock.

The conversion price and number of shares of Company common

stock issuable upon conversion of the Notes are subject to adjustment from time to time for subdivisions and consolidations of

shares and other standard dilutive and corporate events, as provided in the Notes.

Subject to certain Exempt Issuances (as defined

in the Notes), if while a Note is outstanding, the Company sells, issues or grants any shares of its common stock or other securities

to acquire shares of common stock at a price per share less than the then conversion price, such conversion price shall be reduced

to such lesser price, and the number of conversion shares issuable upon conversion of the Notes shall be increased, as provided

in the Notes.

Company completes an offering of its common stock or other securities in excess of $12,000,000 of gross proceeds (a Qualified

Capital Raise, as defined in the Notes), each Note holder will be required to convert its Adjusted Note Amount (as defined below)

into the securities of such Qualified Capital Raise.

Adjusted Note Amount equals the product of (i) the sum of all outstanding

principal plus accrued interest on a Note, multiplied by (ii) 1.25.

contain a number of Company events of default (Events of Default) including, without limitation (i) failure to pay any principal

or interest thereon when due, (ii) failure to timely deliver shares upon conversions, (iii) failure to comply with SEC reporting

requirements under the Exchange Act, (iv) certain breaches of the SPA, the Notes, the Warrants, and the Registration Rights Agreement,

(v) material restatements of the Company’s consolidated financial statements filed with the SEC, (vi) a holder’s inability

to rely on Rule 144 for sales of shares underlying the Notes, (vii) the Company’s common stock is suspended or halted from

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event the Company is not the survivor of such transaction.

Upon an Event

of Default, a Note holder may declare all amounts under its Note(s) due and payable, in which event the Company will be required

to pay such Note holder the sum of (i) the product of (a) all then outstanding principal amount and accrued interest thereon,

multiplied by (b) 125%;

an Event of Default, a Note holder may declare all amounts under its Note(s) due and payable, in which event the Company will

be required to pay such Note holder the sum of (i) the product of (a) all then outstanding principal amount and accrued interest

thereon, multiplied by (b) 125%;

and (ii) all collection costs including legal fees and expenses in connection therewith.

At the option

of a Note holder, in the event the Company receives cash proceeds as a result of certain events, including, but not limited to,

payments from customers, issuances of debt or equity securities, exercise of warrants or asset sales, the Company will be required

to use such proceeds to repay all or any lesser outstanding amounts due under such holder’s Note.

The Notes include

covenants, representations, warranties, other payment obligations and agreements by the Company including, without limitation,

option of a Note holder, in the event the Company receives cash proceeds as a result of certain events, including, but not limited

to, payments from customers, issuances of debt or equity securities, exercise of warrants or asset sales, the Company will be

required to use such proceeds to repay all or any lesser outstanding amounts due under such holder’s Note.

include covenants, representations, warranties, other payment obligations and agreements by the Company including, without limitation,

most-favored nation rights, rights of participation and first refusal and exchange rights.

In connection

with the issuance of the Notes, the Company issued Warrants to purchase in the aggregate 2,303,348 shares of its common stock

at an initial exercise price of $8.00 per share.

with the issuance of the Notes, the Company issued Warrants to purchase in the aggregate 767,796 shares of its common stock at

an initial exercise price of $24.00 per share.

The Warrants may be exercised for a period of five years from the Trigger Date,

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amortized to interest expense over the term of the Warrants, and $1,321,450 was recorded as a loss on debt extinguishment.

The Company calculated the fair value of the

Warrants utilizing the Black-Scholes valuation model with the following assumptions:

volatility of 88.98 % , risk-free interest rate of

0.86 % , a term of 5.75 years and a dividend yield of zero .

In connection with the April and

May 2021 sales of the $4,250,000 aggregate principal amount of the Notes, the Company incurred debt issuance costs of $116,000,

which were recorded as a debt discount and are being amortized to interest expense over the term of the Notes using the effective

interest rate method.

The interest expense attributable to the debt discount, comprising the debt issuance costs and Warrants,

during the three and six months ended September 30, 2021 was $485,820 and $824,439, respectively.

Company calculated the fair value of the Warrants utilizing the Black-Scholes valuation model with the following assumptions:

volatility of 88.98 % , risk-free interest rate of 0.86 % , a term of 5.75 years and a dividend yield of zero .

In connection

with the April and May 2021 sales of the $4,250,000 aggregate principal amount of the Notes, the Company incurred debt issuance

costs of $116,000, which were recorded as a debt discount and are being amortized to interest expense over the term of the Notes

using the effective interest rate method.

The interest expense attributable to the debt discount, comprising the debt issuance

costs and Warrants, during the three and nine months ended December 31, 2021 was $630,323 and $1,454,762, respectively.

The $6,610,550

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Date, the Notes can be converted into 767,783 shares of common stock at a conversion price of $8.61 per share.

NOTE 5 – STOCKHOLDERS’

EQUITY (DEFICIT) & STOCK-BASED COMPENSATION

During the six months ended

September 30, 2021, the Company issued 60,000 shares of common stock to a service provider and issued 16,414 shares to its non-employee

directors under the Company’s outside director compensation plan.

Amended 2017 Equity Incentive

In October 2017,

the Company’s board of directors (the Board) approved the 2017 Equity Incentive Plan (the Plan) with 3,000,000 shares of

common stock reserved for issuance.

5 – PROMISSORY NOTE

October 28, 2021, the Company issued a secured promissory note (the Bridge Note) to Manchester Explorer, L.P.

(“Manchester”)

that provides the Company with a $ 3,000,000 revolving credit facility with all amounts being drawn down by the Company thereunder

being due and payable, subject to acceleration in the event of a default, on March 15, 2022 (the “Maturity Date”).

Interest at the rate of 12 % is payable on each drawn down without regard to the draw down date or the date when interest is paid.

principal amount of the Bridge Note and interest due thereon is payable to Manchester no later than the earlier of:

(i) the Maturity

Date and (ii) the date on which the Company has received proceeds in excess of $12,000,000 from a transaction or series of related

transactions occurring prior to the Maturity Date, which such transactions constitute equity financings or other issuances of

the Company’s equity securities.

Provided that no Event of Default (as such term is defined in the Bridge Note) has occurred,

on any date prior to the Maturity Date, upon no less than three days written notice by the Company specifying the draw amount,

Manchester will advance the draw amount to the Company.

No draw amount can be in an amount less than $100,000 or exceed an amount

equal to $3,000,000 minus the aggregate principal amount outstanding under the Bridge Note at the time of such draw request.

an Event of Default occurs and is continuing, Manchester may declare all of the Bridge Note, including any interest and other

amounts due, to be due and payable immediately.

connection with the issuance of the Note, on October 28, 2021, the Company entered into a Security Agreement with Manchester (the

“Security Agreement”) under which the Company granted Manchester a continuing and unconditional first priority security

interest in and to any and all of the Company’s property of any kind or description, tangible or intangible, wheresoever

located and whether now existing or hereafter arising or acquired.

the quarter ended December 31, 2021, the Company made draws on the Bridge Note of $ 1,500,000 and incurred interest charges of

6 – STOCKHOLDERS’ DEFICIT AND STOCK-BASED COMPENSATION

the three months ended December 31, 2021, the Company sold 30,865 shares of common stock to its chief executive officer and its

chairman of the board of directors, president, chief financial officer and treasurer, issued 8,334 shares of common stock to a

service provider and issued 5,775 shares to its non-employee directors under the Company’s outside director compensation

At December 31, 2021, the Company had an obligation to issue 16,666 shares of common stock to service providers, and the

value of these shares was recorded as common stock issuable in the condensed consolidated balance sheet.

2017 Equity Incentive Plan

2017, the Company’s board of directors (the Board) approved the 2017 Equity Incentive Plan (the Plan) with 1,000,000 shares

of common stock reserved for issuance.

In January 2020 and August 2021, the Board approved increases in the number of shares reserved

for issuance under the Plan by 333,334 and 1,333,334 shares, respectively.

Under the Plan, eligible employees, directors and

consultants may be granted a broad range of awards, including stock options, stock appreciation rights, restricted stock, performance-based

Under the Plan, eligible employees, directors and consultants

may be granted a broad range of awards, including stock options, stock appreciation rights, restricted stock, performance-based

awards and restricted stock units.

The Plan is administered by the Board or, in the alternative, a committee designated by the

Stock-Based Compensation

Compensation Expense

relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period,

based on the grant date fair value.

The unamortized compensation cost, as of September 30, 2021, was $ 5,988,541 related to stock

options and is expected to be recognized as expense over a weighted-average period of approximately three years .

the six months ended September 30, 2021, the Company granted options to purchase 1,371,471 shares of its common stock to employees,

The unamortized compensation cost, as of December 31, 2021, was $ 7,419,022 related to stock

options and is expected to be recognized as expense over a weighted-average period of approximately two years.

the nine months ended December 31, 2021, the Company granted options to purchase 723,269 shares of its common stock to employees,

directors and consultants.

The options had 10-year terms, and 85,484 options vested immediately when granted.

The fair value

of the options was determined to be $ 5,464,619 of which $ 845,979 was recorded as stock-based compensation expense and included

in the condensed consolidated statement of operations for the six months ended September 30, 2021.

The following assumptions were used

in the fair value method calculations:

The fair value of

the options was determined to be $ 8,108,043 of which $ 1,769,805 was recorded as stock-based compensation expense and included

in the condensed consolidated statement of operations for the nine months ended December 31, 2021.

The following

assumptions were used in the fair value method calculations:

Schedule of Fair Value Assumptions

September 30,

interest rates

1.26 % - 1.36 %

Expected life

0.8 % - 1.36 %

0.28 % - 0.38 %

Expected life (years)

Dividend yield

fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified

methods to establish the fair term of options as well as average volatility of three comparable organizations.

values of options at the grant date were estimated utilizing the Black-Scholes valuation model, which includes simplified methods

to establish the fair term of options as well as average volatility of three comparable organizations.

The risk-free interest

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Options granted

( 1,189,150 )

Options cancelled and returned to the Plan

Balance at September 30, 2021

There were no

stock options exercised during the six months ended September 30, 2021 and 2020.

Options granted

Options cancelled and returned to the Plan

Balance at December 31, 2021

were no stock options exercised during the nine months ended December 31, 2021 and 2020.

The following

table summarizes the range of outstanding and exercisable options as of September 30, 2021:

table summarizes the range of outstanding and exercisable options as of December 31, 2021:

Outstanding and Exercisable Option, Range

3 unchanged sentences

$ 1.98 - $ 17.70

The intrinsic value per share is

calculated as the excess of the closing price of the common stock on the Company’s principal trading market over the exercise

price of the option at September 30, 2021.

The intrinsic

value per share is calculated as the excess of the closing price of the common stock on the Company’s principal trading

market over the exercise price of the option at December 31, 2021.

is required to present the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise

of stock options as financing cash flows in the consolidated statements of cash flows.

For the six months ended September 30,

For the nine months ended December 31,

2021 and 2020, there were no such tax benefits associated with the exercise of stock options.

NOTE 6 – INCOME TAXES

7 – INCOME TAXES

determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the

10 unchanged sentences

federal and state tax authorities.

As of September 30, 2021, the

As of December 31, 2021, the

Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

NOTE 7 – RELATED

PARTY TRANSACTIONS

2021, the Company’s chairman of the Board and president and an existing investor, who is represented by a member of the

Company’s board of directors, purchased $100,000 and $1,000,000, aggregate principal amount of the Original Notes, respectively.

Effective April 30, 2021, the related party holders entered into revocation agreements with the Company pursuant to which their

collective $ 1,100,000 aggregate principal amount of Original Notes and accrued interest of $ 50,091 were replaced with Notes.

September 30, 2021, the investor and executive officer held Notes in an aggregate principal amount of $ 1,026,630

8 – RELATED PARTY TRANSACTIONS

February 2021, the Company’s chairman of the board of directors and president and an existing investor, who is represented by

a member of the Company’s board of directors, purchased $100,000 and $1,000,000, aggregate principal amount of the Original

Notes, respectively.

Effective April 30, 2021, the related party holders entered into revocation agreements with the Company

pursuant to which their collective $ 1,100,000

aggregate principal amount of Original Notes and accrued interest of $ 50,091

were replaced with Notes.

At December 31, 2021, the investor and executive officer held Notes in an aggregate principal amount of

$ 1,026,630 and

respectively, with $ 51,640

of interest payable thereon.

For the three months ended September 30, 2021, the Company

incurred interest expense of approximately $ 31,105 and $ 3,100 , respectively, and for the six months ended September 30, 2021,

the Company incurred interest expense of approximately $ 51,600 and $ 5,160 , respectively, on the related party holder Notes.

In May 2021, a

member of the Board purchased $ 200,000 aggregate

principal amount of Notes (the Director Note).

For the three and six months ended September 30, 2021, the Company incurred expense

of approximately $ 4,000 and $ 10,060 , respectively, on the Director Note.

At September 30, 2021, approximately $ 10,060 of

interest was payable by the Company on the Director Note.

respectively, with $ 82,693 and

interest payable thereon.

For the three months ended December 31, 2021, the Company incurred interest expense of approximately

and $ 3,105 ,

respectively, and for the nine months ended December 31, 2021, the Company incurred interest expense of approximately $ 82,693

and $ 8 ,269,

respectively, on the related party holder Notes.

2021, a member of the Board purchased $ 200,000 aggregate principal amount of Notes (the Director Note).

For the three and nine

months ended December 31, 2021, the Company incurred expense of approximately $ 6,049 and $ 16,110 , respectively, on the Director

At December 31, 2021, approximately $ 16,110 of interest was payable by the Company on the Director Note.

October 2021, the Company entered into purchase agreements with Ellen O’Connor (Lynn) Vos , the Company’s chief executive

officer, and Paul DiPerna , the chairman of the Company’s board of directors and its president, chief financial officer and

treasurer, providing for the sale and issuance by the Company of 30,864 shares of the Company’s common stock, par value

$0.001 per share at the closing market price on October 28, 2021 of $8.10 per share.

The Company received proceeds of approximately

$250,000 from the sale of the shares, comprising $ 150,000 from Ms.

Vos and $ 100,000 from Mr.

9 – COMMITMENTS AND CONTINGENCIES

Claims and Assessments

In the normal

course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of

normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course

The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable

Indemnification

In the ordinary

course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties

ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties

from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims

4 unchanged sentences

No amounts were reflected in the

Company’s consolidated financial statements for the six months ended September 30, 2021 and 2020 related to these indemnifications.

Company’s consolidated financial statements for the nine months ended December 31, 2021 and 2020 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited

3 unchanged sentences

10 – SUBSEQUENT EVENTS

Stock Purchases

October 28, 2021, the Company entered into purchase agreements with two of its executive officers, providing for the sale and

issuance by the Company of 92,592 shares of the Company’s common stock at the closing market price on October 28, 2021 of

$2.70 per share.

The Company received proceeds of approximately $ 250,000 from the sale of the shares.

Facility and Security Agreement

October 28, 2021, the Company issued a secured promissory note (the Bridge Note) to Manchester Explorer, L.P.

(Manchester) that

provides the Company with a $ 3,000,000 revolving credit facility with all amounts being drawn down by the Company thereunder being

due and payable, subject to acceleration in the event of a default, on March 15, 2022 (the Maturity Date).

Interest at the rate

of 12% is payable on each drawn down without regard to the draw down date or the date when interest is paid.

principal amount of the Bridge Note and interest due thereon is payable to Manchester no later than the earlier of:

(i) the Maturity

Date and (ii) the date on which the Company has received proceeds in excess of $12,000,000 from a transaction or series of related

transactions occurring prior to the Maturity Date, which such transactions constitute equity financings or other issuances of

the Company's equity securities.

Provided that no Event of Default (as such term is defined in the Bridge Note) has occurred,

on any date prior to the Maturity Date, upon no less than three days written notice by the Company specifying the draw amount,

Manchester will advance the draw amount to the Company.

No draw amount can be in an amount less than $100,000 or exceed an amount

equal to $3,000,000 minus the aggregate principal amount outstanding under the Note at the time of such draw request.

of Default occurs and is continuing, Manchester may declare all of the Bridge Note, including any interest and other amounts due,

to be due and payable immediately.

connection with the issuance of the Bridge Note, on October 28, 2021, the Company entered into a security agreement with Manchester

under which the Company granted Manchester a continuing and unconditional first priority security interest in and to any and all

of the Company’s property of any kind or description, tangible or intangible, wheresoever located and whether now existing

or hereafter arising or acquired.

November 9, 2021, the Company made an initial draw of $ 500,000 on the Bridge Note.

to December 31, 2021, the Company made additional draws totaling $ 600,000 under the Bridge Note.

9, 2022, the Company entered into an underwriting agreement (the Underwriting Agreement), with Oppenheimer & Co.

which acted as the representative of the several underwriters (the “Representative”), in a firm commitment underwritten

public offering (the Offering) pursuant to which the Company agreed to sell to the Representative an aggregate of 2,500,000 shares

of the Company’s common stock, par value $0.001 per share (the Common Stock), and 2,500,000 warrants (Warrants and, collectively

with the Common Stock, the Units), each to purchase one share of Common Stock, at a public offering price of $6.00 per Unit.

Warrants included in the Units are exercisable immediately, have an exercise price of $6.60 per share and expire five years from

the date of issuance.

The Common Stock was approved to list on the Nasdaq Capital Market under the symbol “MODD” and

began trading there on February 10, 2022.

The gross proceeds from the Offering were $ 15 million , before deducting underwriting

discounts and commissions and other offering expenses.

The Units were

offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No.

333-260682), initially

filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the Securities

Act), on November 2, 2021, and declared effective on February 9, 2022.

The Underwriting

Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification

obligations of the Company and the Representative, including for liabilities under the Securities Act of 1933, as amended,

other obligations of the parties and termination provisions.

In addition, pursuant to the terms of the Underwriting Agreement and

related “lock-up” agreements, the Company, each director and executive officer of the Company, and certain stockholders

have agreed with the Representative not to offer for sale, issue, sell, contract to

sell, pledge or otherwise dispose of any of our Common Stock or securities convertible into Common Stock for a period of 180 days

after February 9, 2022, the date of the final prospectus.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements