What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-13 compared with 2022-11-14 · 143 added, 126 removed, 86 unchanged (76% of the section changed)

34 unchanged sentences

or otherwise.

year ends on March 31 of each calendar year.

Each reference to a fiscal year in this Report, refers to the fiscal year ended March

31 of the calendar year indicated (for example, fiscal 2023 refers to the fiscal year ending March 31, 2023).

Unless the context

requires otherwise, references to “we,” “us,” “our,” and the “Company” refer to

Modular Medical, Inc.

fiscal year ends on March 31 of each calendar year.

Each reference to a fiscal year in this Report, refers to the fiscal year

ended March 31 of the calendar year indicated (for example, fiscal 2023 refers to the fiscal year ending March 31, 2023).

the context requires otherwise, references to “we,” “us,” “our,” and the “Company”

refer to Modular Medical, Inc.

and its consolidated subsidiary .

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, our MODD1 product, we seek to fundamentally alter the trade-offs between cost and complexity and access to the higher standards

of care that presently-available insulin pumps provide.

are 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, our MODD1 product, we seek 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,

14 unchanged sentences

1 to the condensed consolidated financial statements in Item 1 of this Report and under Liquidity below.

COVID-19 and Macroeconomic Factors

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

and Macroeconomic Factors

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

emergency by the U.S.

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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and cannot be predicted.

Since March 2020, the jurisdiction

in which we operate has issued ’shelter-in-place” orders.

We have complied with these orders, and, when such orders

were in place, minimized business activities at our facility.

We have implemented a teleworking policy for our employees and contractors

to reduce on-site activity, as necessary.

We have and continue to experience longer lead times for certain components used to

manufacture initial quantities of our products for our submission to the U.S.

Food and Drug Administration (FDA) for approval

to commercialize our pump product.

We remain diligent in continuing to identify and manage risks to our business given the changing

uncertainties related to COVID-19.

While we believe that our operations personnel are currently in a position to build an adequate

supply of products for our FDA submission, we recognize that unpredictable events could create difficulties in the months ahead.

We may not be able to address these difficulties in a timely manner, which could delay our submission to the FDA and negatively

impact our business, results of operations, financial condition and cash flows.

that as the COVID-19 pandemic evolves, the direct and indirect impacts of the pandemic on global macroeconomic conditions, as

well as conditions specific to us, are becoming more difficult to isolate or quantify.

March 2020, the jurisdiction in which we operate has issued “shelter-in-place” orders from time to time.

complied with these orders, and, when such orders were in place, minimized business activities at our facility.

We have implemented

a teleworking policy for our employees and contractors to reduce on-site activity, as necessary.

We have and continue to experience

longer lead times for certain components used to manufacture initial quantities of our products for our submission to the U.S.

and Drug Administration (FDA) for approval to commercialize our pump product.

We remain diligent in continuing to identify and

manage risks to our business given the changing uncertainties related to COVID-19.

While we believe that our operations personnel

are currently in a position to build an adequate supply of products for our FDA submission, we recognize that unpredictable events

could create difficulties in the months ahead.

We may not be able to address these difficulties in a timely manner, which could

delay our submission to the FDA and negatively impact our business, results of operations, financial condition and cash

believe that as the COVID-19 pandemic evolves, the direct and indirect impacts of the pandemic on global macroeconomic conditions,

as well as conditions specific to us, are becoming more difficult to isolate or quantify.

In addition, these direct and indirect

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has subsided.

The continued

spread of COVID-19 has also led to disruption and volatility in the global capital markets.

The Russian invasion of Ukraine in

February 2022 has led to further economic disruptions.

Mounting inflationary costs pressures and recessionary fears have negatively

impacted the global economy.

The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets.

The Russian invasion of

Ukraine in February 2022 has led to further economic disruptions.

Mounting inflationary costs pressures and recessionary fears

have negatively impacted the global economy.

During the third quarter of 2022, the U.S.

Federal Reserve continued to aggressively address elevated

inflation by increasing interest rates.

Federal reserve increased interest rates by 75 basis points in each of its meetings

held in July, September and November 2022, with an additional increase forecasted for December 2022, as inflation remains elevated.

We were recently able to raise additional capital through equity offerings in February 2022 and May 2022, however, we will need

to raise additional capital to commercialize our pump product candidate and support our operations in the future.

We may be unable

to access the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental

to our existing stockholders and to our business.

For additional

information on risks that could impact our future results, please refer to “Risk Factors” in Part II, Item 1A of this

Federal Reserve continued to aggressively

address elevated inflation by increasing interest rates.

Federal reserve increased interest rates by 75 basis points

in each of its meetings held in July, September and November 2022, 50 basis points in its meeting held in December 2022, and 25

basis points in its meeting held in February 2023, as inflation remains elevated.

We were able to raise additional capital through

equity offerings in February 2022 and May 2022, however, we will need to raise additional capital to commercialize our pump product

candidate and support our operations in the future.

We may be unable to access the capital markets, and additional capital may

only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

additional information on risks that could impact our future results, please refer to “Risk Factors” in Part II, Item

1A of this Report.

Accounting Policies and Estimates

The discussion

and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements,

which have been prepared in accordance with U.S.

The preparation of these condensed consolidated financial statements requires

us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, and expenses.

On an ongoing

basis, we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances.

Actual results may differ from these estimates and reported results could differ under different assumptions or conditions.

significant accounting policies and estimates are disclosed in Note 1 of the Notes to Consolidated Financial Statements in our

Annual Report on Form 10-K for the year ended March 31, 2022.

As of September 30, 2022, there have been no material changes to

our significant accounting policies and estimates.

of Operations

and Development

September 30,

Research and development – Three months ended

Research and development – Six months ended

and development expenses include personnel, consulting, product prototyping and other costs associated with the development and

initial production of our insulin pump product.

discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial

statements, which have been prepared in accordance with U.S.

The preparation of these condensed consolidated financial statements

requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, and expenses.

an ongoing basis, we make these estimates based on our historical experience and on assumptions that we consider reasonable under

the circumstances.

Actual results may differ from these estimates and reported results could differ under different assumptions

or conditions.

Our significant accounting policies and estimates are disclosed in Note 1 of the Notes to Consolidated Financial

Statements in our Annual Report on Form 10-K for the year ended March 31, 2022.

As of December 31, 2022, there have been no material

changes to our significant accounting policies and estimates.

Results of Operations

Research and Development

Fiscal 2022 to

and development – Three months ended

and development – Nine months ended

research and development expenses include personnel, consulting, product prototyping and other costs associated with the development

and initial production of our insulin pump product.

We expense research and development costs as they are incurred.

and development, or R&D, expenses increased for the three and six months ended September 30, 2022 compared with the same period

and development, or R&D, expenses increased for the three and nine months ended December 31, 2022 compared with the same period

of fiscal 2021, primarily due to increased engineering and operations personnel costs, prototype and production component and

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The increases in R&D expenses were partially offset by a decrease

in consulting costs, as we reduced our utilization of consultants, as we increased our employee headcount and completed development

of aspects of our pump design and features.

Our full-time R&D employee headcount increased to 28 at September 30, 2022 from

15 at September 30, 2021.

R&D expenses included stock-based compensation expenses of $361,829 and $116,742 for the three months

ended September 30, 2022 and 2021, respectively, and $677,923 and $255,027 for the six months ended September 30, 2022 and 2021,

respectively.

We expect research and development expenses to increase for the remainder of fiscal 2023, as we continue to advance

the development of our pump product and hire additional personnel to develop our manufacturing process.

in consulting costs, as we reduced our utilization of consultants, as we increased our employee headcount and the consultants

completed development of aspects of our pump design and features.

Our full-time R&D employee headcount increased to 32 at

December 31, 2022 from 18 at December 31, 2021.

R&D expenses included stock-based compensation expenses of $356,752 and $204,962

for the three months ended December 31, 2022 and 2021, respectively, and $1,034,674 and $459,989 for the nine months ended December

31, 2022 and 2021, respectively.

We expect research and development expenses to remain comparable for the remainder of fiscal

2023, as we continue to advance the development of our pump product and develop our manufacturing

and Administrative

September 30,

General and administrative – Three months ended

General and administrative – Six months ended

and administrative expenses consist primarily of personnel and related overhead costs for marketing, finance, human resources,

legal and general management.

and administrative expenses, or G&A, decreased for the three and six months ended September 30, 2022 compared with the same

period of 2021, primarily as a result of decreased personnel, stock-based compensation, professional services and marketing costs.

G&A expenses included stock-based compensation expenses of $380,611 and $745,689 for three months ended September 30, 2022

and 2021, respectively and $803,086 and $1,263,324 for the six months ended September 30, 2022 and 2021, respectively.

G&A expenses to remain flat for the remainder of fiscal 2023.

Fiscal 2022 to

General and administrative

– Three months ended

General and administrative – Nine

$ (1,654,123 )

and administrative expenses consist primarily of personnel and related overhead costs for finance, human resources, legal, marketing

and general management.

and administrative, or G&A, expenses decreased for the three months ended December 31, 2022 compared with the same period

of 2021, primarily as a result of decreased stock-based compensation, personnel and benefit costs and legal fees, which in fiscal

2022 related to our public offering and listing on the Nasdaq that was completed in February 2022.

These decreases were partially

offset by increased consulting and professional services fees.

expenses decreased for the nine months ended December 31, 2022 compared with the same period of 2021, primarily as a result of

decreased stock-based compensation, personnel and benefit costs, consulting and legal fees and marketing costs.

These decreases

were partially offset by increased accounting fees, travel costs and office-related expenses.

Our full-time G&A employee headcount

increased to 3 at December 31, 2022 from 2 at December 31, 2021.

G&A expenses included stock-based compensation expenses of

$282,753 and $1,016,774 for the three months ended December 31, 2022 and 2021, respectively and $1,085,839 and $2,280,098 for

the nine months ended December 31, 2022 and 2021, respectively.

We expect G&A expenses to remain flat for the remainder of

and Capital Resources

development-stage enterprise, we do not currently have revenues to generate cash flows to cover operating expenses.

a development-stage enterprise, we do not currently have revenues to generate cash flows to cover operating expenses.

inception, we have incurred operating losses and negative cash flows in each year due to costs incurred in connection with R&D

activities and G&A expenses associated with our operations.

For the six months ended September 30, 2022, we incurred a net

For the nine months ended December 31, 2022, we incurred a net

loss of approximately $10.3 million.

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million and $7.4 million, respectively.

At September 30, 2022, we had a cash balance of approximately $10.8 million and an accumulated

At December 31, 2022, we had a cash balance of approximately $7.7 million and an accumulated

deficit of approximately $44.9 million.

When considered with our current operating plan,

these conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from

the date that of issuance of the consolidated financial statements included in Item 1 of this Report.

Our consolidated financial

statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should

we be unable to continue as a going concern.

Our ability to continue as a going concern depends on our ability to raise additional

capital through the sale of equity or debt securities to support our future operations, and we are currently seeking such additional

In May 2022, we completed a registered direct offering of securities for net proceeds

of approximately $7.4 million.

When considered with our current operating plan, these conditions raise substantial doubt

about our ability to continue as a going concern for a period of at least one year from the date that of issuance of the consolidated

financial statements included in Item 1 of this Report.

Our consolidated financial statements do not include adjustments to the

amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern depends on our ability to raise additional capital through the sale of equity or debt

securities to support our future operations, and we are currently seeking such additional financing.

May 2022, we completed a registered direct offering of securities for net proceeds of approximately $7.4 million.

operating needs include the planned costs to operate our business, including amounts required to fund research and development

activities, including clinical studies, working capital and capital expenditures.

Our future capital requirements and the adequacy

of our available funds will depend on many factors, including, without limitation, our ability to successfully commercialize our

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 our product offerings.

If we are unable to secure additional capital

timely, we will be required to curtail our research and development initiatives and take additional measures to reduce costs in

order to conserve our cash.

six months ended September 30, 2022, we used $5,526,848 in operating activities, which primarily resulted from our net loss of

$6,949,198, net changes in operating lease assets and liabilities of $25,174 and operating assets and liabilities $194,465, as

adjusted for stock-based compensation expenses of $1,481,010, $100,800 for issuances

of shares of common stock in exchange for services, depreciation and amortization expenses of $60,180 and other immaterial adjustments.

For the six months ended September 30, 2021, we used $4,784,725 in operating activities, which

primarily resulted from our net loss of $9,216,848, increased for a non-cash gain on the PPP Note extinguishment of $368,780 and

net changes in operating lease assets and liabilities of $22,947, as adjusted for changes to operating assets and liabilities

of $791,746, a loss on debt extinguishment of $1,321,450 stock-based compensation expenses of $1,518,351, $314,265 for issuances

of shares of common stock in exchange for services, depreciation and amortization expenses of $53,599 and interest expense of

$824,439 for amortization of debt discount.

six months ended September 30, 2022 and 2021, cash used in investing activities of $81,274 and $22,779, respectively, was for

the purchase of property and equipment.

provided by financing activities of $7,372,347 for the six months ended September 30, 2022 was attributable to net proceeds from

During the nine months ended December 31, we

made capital expenditures of approximately $574,000, as we have begun procuring equipment to develop a low-volume manufacturing

production line to build our pump product to demonstrate and develop our manufacturing process.

We expect to incur increased capital

expenditures for the remainder of fiscal 2023.

At December 31, 2022, we had outstanding, non-cancelable purchase orders for production

equipment totaling $735,000, and we expect to receive and pay for this equipment over the following six months.

Our future capital

requirements and the adequacy of our available funds will depend on many factors, including, without limitation, our ability to

successfully commercialize our 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 our product offerings.

If we are unable

to secure additional capital timely, we will be required to curtail our research and development initiatives and take additional

measures to reduce costs in order to conserve our cash.

the nine months ended December 31, 2022, we used $8,184,696 in operating activities, which primarily resulted from our net loss of $10,307,682,

as adjusted for stock-based compensation expenses of $2,120,513, $150,412 for issuances of shares of common stock in exchange for services

and depreciation and amortization expenses of $92,616, and increased by net changes in operating lease assets and liabilities of $37,761

and operating assets and liabilities $202,794 and other immaterial adjustments.

For the nine months ended December 31, 2021, we used

$7,128,787 in operating activities, which primarily resulted from our net loss of $14,058,154, increased for a non-cash gain on

the PPP Note extinguishment of $368,780 and net changes in operating lease assets and liabilities of $34,422, as adjusted for changes

to operating assets and liabilities of $1,197,988, a loss on debt extinguishment of $1,321,450 stock-based compensation expenses of $2,740,086,

$388,021 for issuances of shares of common stock in exchange for services, $149,994 for issuable shares of common stock in exchange for

services, depreciation and amortization expenses of $80,268 and interest expense of $1,454,762 for amortization of debt discount.

the nine months ended December 31, 2022 and 2021, cash used in investing activities of $573,066 and $22,779, respectively, was

for the purchase of property and equipment.

provided by financing activities of $7,372,347 for the nine months ended December 31, 2022 was attributable to net proceeds from

the issuance of common stock upon completion of an equity offering, net of underwriting fees and issuance costs.

Cash provided

by financing activities of $4,137,200 for the six months ended September 30, 2021 was attributable to net proceeds from the issuance

of our convertible promissory notes.

Issued Accounting Pronouncements

by financing activities of $5,887,199 for the nine months ended December 31, 2021 was primarily attributable to $4,137,199 of

net proceeds from the issuance of our convertible promissory notes, $250,000 from the sale of shares of common stock to officers

of the Company and $1,500,000 from the issuance of a promissory bride note.

Recently Issued Accounting

Pronouncements

Issued Accounting Pronouncements are detailed in Note 1 in the Notes to the Condensed Consolidated Financial Statements included

in Item 1 of this Report.

Quantitative and Qualitative Disclosures about Market Risk

and Qualitative Disclosures about Market Risk

Not required.

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 2. Management’s Discussion and Analysis