What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-13 compared with 2023-11-13 · 193 added, 169 removed, 33 unchanged (92% of the section changed)

1 unchanged sentence

and Analysis of Financial Condition and Results of Operations

This Management’s

Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed

consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (this Report).

This Management’s Discussion

and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated

financial statements and notes included in this Quarterly Report on Form 10-Q (this Report).

This Report contains forward-looking

1 unchanged sentence

include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance

and capital raising efforts, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the

Securities and Exchange Commission on June 26, 2023 and in other reports that we file from time to time with the Securities and Exchange

Any statements about our business, financial results, financial condition and operations contained in this Report that are

not statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words “believes,”

“anticipates,” “expects,” “intends,” “plans,” “projects,” or similar expressions

are intended to identify forward-looking statements.

Our actual results could differ materially from those expressed or implied by these

forward-looking statements as a result of various factors, including the risk factors described under Item 1A of our Annual Report on

Form 10-K for the year ended March 31, 2023.

These forward-looking statements represent our intentions, plans, expectations, assumptions,

and beliefs about future events and are subject to risks, uncertainties and other factors including, without limitation, the direct and

indirect effects of coronavirus disease 2019, or COVID-19, as well as inflationary risks, including the risk that the cost of certain

of the Company’s components is increasing, and related issues that may arise therefrom.

Many of those factors are outside of our

control and could cause actual results to differ materially from those expressed or implied by those forward-looking statements.

of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur

to a different extent or at a different time than we have described.

You are cautioned not to place undue reliance on these forward-looking

statements, which speak only as of the date of this Report.

All subsequent written and oral forward-looking statements concerning other

matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety

by the cautionary statements contained or referred to in this Report.

We undertake no obligation to update or revise any forward-looking

statements, whether as a result of new information, future events, a change in events, conditions, circumstances, or assumptions underlying

such statements, or otherwise.

Our fiscal year ends on

March 31 of each calendar year.

and capital raising efforts, and other aspects of our business identified in our most recent annual report on Form 10-K filed

with the Securities and Exchange Commission on June 26, 2023 and in other reports that we file from time to time with the Securities

and Exchange Commission.

Any statements about our business, financial results, financial condition and operations contained

in this Report that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing,

the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,”

or similar expressions are intended to identify forward-looking statements.

Our actual results could differ materially from those

expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described under Item

1A of our Annual Report on Form 10-K for the year ended March 31, 2023.

These forward-looking statements represent our intentions, plans,

expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors including, without

limitation, the direct and indirect effects of coronavirus disease 2019, or COVID-19, as well as inflationary risks, including

the risk that the cost of certain of the Company’s components is increasing, and related issues that may arise therefrom.

those factors are outside of our control and could cause actual results to differ materially from those expressed or implied by those

forward-looking statements.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements

might not occur or might occur to a different extent or at a different time than we have described.

You are cautioned not to

place undue reliance on these forward-looking statements, which speak only as of the date of this Report.

All subsequent written and oral

forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf

are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

We undertake no obligation

to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions,

circumstances, or assumptions underlying such statements, or otherwise.

Our 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 2024 refers to the fiscal year ending March 31, 2024).

Unless the context requires otherwise, references

to “we,” “us,” “our,” and the “Company” refer to Modular Medical, Inc.

and its consolidated

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, prescription,

reimbursement, training and day-to-day use, we seek to expand the wearable insulin delivery device market beyond the highly motivated

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

The product seeks to serve both the type 1 and the rapidly growing,

especially in terms of device adoption, type 2 diabetes markets.

Historically, we have financed our operations

principally through private placements and public offerings of our common stock and sales of convertible promissory notes.

on our current operating plan, substantial doubt about our ability to continue as a going concern for a period of at least one year from

the date that the financial statements included in this Report are issued exists.

Our ability to continue as a going concern depends

on our ability to raise additional capital, likely through the sale of equity or debt securities, to support our future operations.

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

measures to reduce costs.

We have provided additional disclosure in Note 1 to the consolidated financial statements in Item 1 of this

Report and under Liquidity below.

Unless the context requires otherwise,

references to “we,” “us,” “our,” and the “Company” refer to Modular Medical, Inc.

its consolidated subsidiary.

Company Overview

We 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

By simplifying and streamlining the user experience from introduction, prescription, reimbursement, training and day-to-day use,

we seek to expand the wearable insulin delivery device market beyond the highly motivated “super users” and expand the category

into the mass market.

The product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type

2 diabetes markets.

In January 2024, we made the premarket submission of our MODD1 next-generation insulin pump to the U.S.

Food and Drug

Administration (the FDA) for 510(k) clearance.

We expect the FDA to provide initial feedback on our submission during the quarter ending

June 30, 2024.

Historically, we have financed

our operations principally through private placements and public offerings of our common stock and sales of convertible promissory

Based on our current operating plan, substantial doubt about our ability to continue as a going concern for a period of at least

one year from the date that the financial statements included in this Report are issued exists.

Our ability to continue as a going

concern depends on our ability to raise additional capital, likely through the sale of equity or debt securities, to support our future

If we are unable to secure additional capital, we will be required to curtail our research and development initiatives and

take additional measures to reduce costs.

We have provided additional disclosure in Note 1 to the consolidated financial statements

in Item 1 of this Report and under Liquidity below.

Economic Disruptions

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This 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 created significant disruption of the financial markets.

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.

While the U.S.

national emergency expired in May 2023 and substantially all closures and “shelter-in-place” orders have ended,

there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance in the future, as the duration

and spread of the pandemic and related actions taken by U.S.

and foreign government agencies to prevent disease spread are uncertain,

out of our control, and cannot be predicted.

Wars and acts of terrorism have led to further

economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy.

Since mid-2022,

Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation remains elevated.

While we were able

to access the capital markets in May 2023 and 2022, 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 I, Item 1A of this Report.

Critical 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

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.

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, 2023.

September 30, 2023, there have been no material changes to our significant accounting policies and estimates.

national emergency expired in May 2023 and substantially all closures and “shelter-in-place”

orders have ended, there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance

in the future, as the duration and spread of the pandemic and related actions taken by U.S.

and foreign government agencies to prevent

disease spread are uncertain, out of our control, and cannot be predicted.

Wars and acts of terrorism have led

to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the global

Since mid-2022, the U.S.

Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation

remains elevated.

While we were able to access the capital markets in May 2023 and 2022, 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 I, Item 1A of this Report.

Critical Accounting Policies and

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

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.

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, 2023.

As of December 31, 2023, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

Research and Development

September 30,

(dollar amounts in thousands)

Research and development – Three months ended

Research and development – Six months ended

Research and development – Nine months ended

Our research and development expenses

include personnel, overhead and other costs associated with the development and initial production of our insulin pump products.

research and development costs as they are incurred.

Research and development, or R&D,

expenses increased for the three months ended September 30, 2023 compared with the same period of 2022, primarily due to increased

employee-related costs of approximately $377,000, increased material costs of approximately $165,000 and increased consulting

expenses of approximately $41,000.

The increases in material and consulting costs were primarily attributable to pre-submission

activities, as we are producing units and incurring testing costs in anticipation of the 510(k) submission of our pump product to

Food and Drug Administration, or FDA.

R&D expenses increased for the six months

ended September 30, 2023 compared with the same period of 2022, primarily due to increased employee-related costs of approximately of

$786,000, an increase of approximately $61,000 in stock-based compensation expense and an increase in materials costs of $342,000.

increases were partially offset by an approximately $213,000 decrease in consulting costs, as we have increased our employee headcount

and completed development of our pump product.

The increase in material costs were primarily attributable to pre-submission activities,

as we are producing units and incurring testing costs in anticipation of our 510(k) submission to the FDA.

Our R&D employee headcount increased to 35

at September 30, 2023 from 28 at September 30, 2022.

R&D expenses included stock-based compensation expenses of approximately $373,000

and $362,000 for the three-months ended September 30, 2023 and 2022, respectively, and $739,000 and $678,000 for the six months ended

September 2023 and 2022, respectively.

We expect research and development expenses to increase for the remainder of fiscal 2024, as we

expect to incur increased costs in connection with our pre-submission testing for submission of our MODD-1 insulin pump to the FDA.

include personnel and related costs, materials and other costs associated with the development and initial production of our insulin pump

We expense research and development costs as they are incurred.

Research and development, or R&D, expenses increased for the three

months ended December 31, 2023 compared with the same period of 2022, primarily due to increases in employee-related costs of approximately

$348,000, stock-based compensation of approximately $324,000 and consulting costs of approximately $766,000.

The increase in consulting

costs was primarily attributable to pre-submission testing and related activities performed during the third quarter of fiscal 2024 in

preparation for our 510(k) submission to the FDA, which was completed in January 2024.

R&D expenses increased for the nine months ended December 31, 2023

compared with the same period of 2022, primarily due to increases in employee-related costs of approximately $1,134,000, consulting costs

of $580,000, stock-based compensation expense of $385,000 and materials costs of approximately $300,000.

The increase in material costs

was primarily attributable to pre-submission activities, as we began producing units of our MODD1 pump product during fiscal 2024 in anticipation

of our 510(k) submission to the FDA.

The increase in consulting costs was primarily attributable to third-party testing costs incurred

in fiscal 2024 in anticipation of our 510(k) submission to the FDA, which was completed in January 2024.

Our R&D employee headcount increased to 36 at December 31, 2023

from 32 at December 31, 2022.

R&D expenses included stock-based compensation expenses of approximately $681,000 and $357,000 for the

three-months ended December 31, 2023 and 2022, respectively, and $1,420,000 and $1,035,000 for the nine months ended December 31, 2023

and 2022, respectively.

We expect research and development expenses to decrease for the remainder of fiscal 2024, as we made our 510(k)

submission of our MODD-1 insulin pump to the FDA in January 2024.

General and Administrative

September 30,

(dollar amounts in thousands)

General and administrative – Three months ended

General and administrative – Six months ended

General and administrative expenses consist primarily of personnel

and related overhead costs for finance, human resources, marketing, and general management.

General and administrative – Nine months ended

General and administrative expenses

consist primarily of costs for personnel, finance, human resources, marketing, and general management.

General and administrative, or G&A, expenses

increased for the three months ended September 30, 2023 compared with the same period of the prior year, primarily as a result of increases

in facility-related expenses of approximately $120,000, marketing-related expenses of approximately $85,000, depreciation expense of approximately

$72,000, and employee-related costs of approximately $70,000, as partially offset by a decrease in expenses for stock-based compensation

of approximately $190,000 and consulting and professional services of approximately $90,000.

G&A expenses increased for the six

months ended September 30, 2023 compared with the same period of the prior year, primarily as a result increases in facility-related

costs of approximately $230,000, employee-related costs of approximately $150,000, depreciation expense of approximately $110,000,

and marketing-related expenses of approximately $80,000, as partially offset by decreases in stock-based compensation expenses of

approximately $495,000 and consulting and professional services expenses of approximately $238,000.

increased for the three months ended December 31, 2023 compared with the same period of the prior year, primarily as a result of increases

in legal and other professional services fees of $143,000, rent and other facility-related expenses of approximately $130,000, marketing-related

expenses of approximately $113,000, employee-related costs of approximately $112,000, depreciation and amortization expense of approximately

$97,000, stock-based compensation of approximately $30,000, accounting costs of approximately $22,000 and other expense increases, as

partially offset by a decrease in consulting expenses of approximately $169,000.

G&A expenses increased for the nine months

ended December 31, 2023 compared with the same period of the prior year, primarily as a result of increases in facility-related costs

of approximately $383,000, employee-related costs of approximately $272,000, depreciation expense of approximately $190,000, marketing-related

expenses of approximately $193,000, legal and other professional services fees of $147,000, and other expenses, as partially offset by

decreases in stock-based compensation expenses of approximately $464,000 and consulting services expenses of approximately $415,000.

Our G&A employee headcount increased to four

at September 30, 2023 from two at September 30, 2022.

at December 31, 2023 from three at December 31, 2022.

G&A expenses included stock-based compensation expenses of approximately $313,000

and $381,000 for the three months ended September 30, 2023 and 2022, respectively, and $308,000 and $803,000 for the six months ended

September 30, 2023 and 2022, respectively.

We expect G&A expenses to remain consistent for the remainder of fiscal 2024.

and $283,000 for the three months ended December 31, 2023 and 2022, respectively, and approximately $622,000 and $1,086,000 for the nine

months ended December 31, 2023 and 2022, respectively.

We expect G&A expenses to decrease for the remainder of fiscal 2024.

Liquidity and Going Concern

4 unchanged sentences

our operations.

For the six months ended September 30, 2023 and year ended March 31, 2023, we incurred net losses of $7.9 million and

For the nine months ended December 31, 2023 and year ended March 31, 2023, we incurred net losses of $13.2 million and

$13.9 million, respectively.

At September 30, 2023, we had a cash balance of approximately $6.3 million and an accumulated deficit of

$56.4 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 the financial statements included in this Report are issued.

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 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.

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.

In May 2023, we completed a public offering of units, comprising shares of our common stock and warrants to purchase

shares of our common stock, for net proceeds of $9.7 million.

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 may be required to curtail R&D

initiatives, reduce headcount and take additional measures to reduce costs in order to conserve our cash.

For the six months ended September 30, 2023, we

used approximately $6,484,000 in operating activities, which primarily resulted from our net loss of approximately $7,920,000 and net

changes in operating assets and liabilities of approximately $224,000, as adjusted for non-cash items, including stock-based compensation

expenses of approximately $1,048,000, depreciation and amortization expenses of approximately $153,000 and other immaterial adjustments.

For the six months ended September 30, 2022, we used $5,527,000 in operating activities, which primarily resulted from our net loss of

$6,949,000, as adjusted for changes to operating assets and liabilities of approximately $194,000, as adjusted for non-cash items, including

stock-based compensation expenses of approximately $1,481,000, approximately $101,000 for issuances of shares of common stock in exchange

for services, depreciation and amortization expenses of approximately $60,000 and other immaterial adjustments.

For the six months ended September 30,

2023 and 2022, cash used in investing activities of approximately $718,000 and $81,000, respectively, was for the purchase of property

and equipment.

At December 31, 2023, we had a cash balance of approximately $2.0 million and an accumulated deficit of $61.4

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 the financial statements included in this Report are issued.

Our 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 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 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

In May 2023, we completed a public offering of units, comprising shares of our common stock and warrants to purchase shares

of our common stock, for net proceeds of $9.7 million.

On November 22, 2023, we entered into a Sales Agreement (the ATM Agreement) with

Leerink Partners LLC (Leerink) under which we may offer and sell, from time to time at our sole discretion, shares of our common stock,

for aggregate gross proceeds of up to $6,500,000 through an “at the market offering” program under which Leerink will act

as sales agent or principal.

The ATM Agreement provides that Leerink will be entitled to compensation for its services equal to 3.0% of

the gross proceeds from sales of any shares of common stock under the ATM Agreement.

In January 2024, we sold 153,879 shares of common

stock for net proceeds of approximately $278,000 under the ATM Agreement.

In addition, in January 2024, we received a total of approximately

$550,000 of proceeds from the exercise of warrants to purchase 445,744 shares of our common stock.

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 o ff erings.

If we are unable to secure additional capital timely, we may be required to curtail R&D initiatives, reduce headcount and take additional

measures to reduce costs in order to conserve our cash.

For the nine months ended December 31, 2023, we used approximately

$10.5 million in operating activities, which primarily resulted from our net loss of approximately $13.2 million, as adjusted for net

changes in operating assets and liabilities of approximately $0.4 million and non-cash items, including stock-based compensation expenses

of approximately $2.0 million, depreciation and amortization expenses of approximately $0.3 million and other immaterial adjustments.

For the nine months ended December 31, 2022, we used approximately $8.2 million in operating activities, which primarily resulted from

our net loss of $10.3 million, as adjusted for changes to operating assets and liabilities of approximately $0.2 million and non-cash

items, including stock-based compensation expenses of approximately $2.1 million, issuances of shares of common stock in exchange for

services of approximately $0.1 million and depreciation and amortization expenses of approximately $0.1 million.

For the nine months ended December 31, 2023 and 2022, cash

used in investing activities of approximately $1.2 million and $0.6 million, respectively, was for the purchase of property and equipment.

Cash provided by financing activities

of $9.7 million for the six months ended September 30, 2023 was attributable to net proceeds from the issuance of common stock and warrants

in a public offering, which closed in May 2023.

Cash provided by financing activities of $7.4 million for the six months ended September

30, 2022 was attributable to net proceeds from the issuance of common stock and warrants in a registered direct offering, which closed

for the nine months ended December 31, 2023 was attributable to $9.7 million of net proceeds from the issuance of common stock and warrants

in a public offering, which closed in May 2023, and approximately $0.2 million of proceeds from the exercise of common stock warrants.

Cash provided by financing activities of $7.4 million for the nine months ended December 31, 2022 was attributable to net proceeds

from the issuance of common stock and warrants in a registered direct offering, which closed in May 2022.

Purchase Obligations

Our primary purchase obligations include purchase orders for

machinery and equipment.

At September 30, 2023, we had outstanding purchase orders for machinery and equipment and related expenditures

of approximately $996,000.

Recently Issued Accounting Pronouncements

Recently 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

As a smaller reporting company, we are not required

to provide the information required by this item.

Our primary purchase obligations include purchase

orders for machinery and equipment and software.

At December 31, 2023, we had outstanding purchase orders for machinery and equipment

and related expenditures of approximately $0.6 million.

In December 2023, we signed a device integration agreement with a provider of

connected-care and remote monitoring diabetes technology solutions for an obligation of approximately $0.6 million for technology integration

and license fees over three years.

Recently Adopted and Issued

Accounting Pronouncements

Recently Adopted and 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

As a smaller reporting company, we are

not required to provide the information required by this item.

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