Modular Medical, Inc. 10-Q

Item 2. Management’s Discussion 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 Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which 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 20, 2025 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, 2025. 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, inflationary risks, including the risk of increasing costs for certain of the Company’s components 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. 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 2026 refers to the fiscal year ending March 31, 2026). Unless the context requires otherwise, references to “we,” “us,” “our,” and the “Company” refer to Modular Medical, Inc. and its consolidated subsidiary . Company Overview We are a pre-revenue medical device company focused on the design, development and commercialization of innovative insulin pumps using modernized technology to increase pump adoption in the diabetes marketplace. Through the creation of a novel two-part patch pump, 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. In January 2024, we submitted a 510(k) premarket notification to the United States Food and Drug Administration (the “FDA”) for our initial product, our MODD1, and, in September 2024, we received FDA clearance to market and sell our MODD1 pump in the United States. In August 2025, we announced the first human use of our MODD1 pump delivering insulin to a human patient. In addition, in August 2025, we announced our next-generation patch pump, branded as Pivot. We submitted a 510(k) premarket notification to the FDA for our Pivot product on November 13, 2025, when the United States government shutdown ended. We intend to initiate our commercial launch with the Pivot product, when the required regulatory approval from the FDA is received, which is expected in the first quarter of 2026. We are actively working to i) obtain regulatory clearance and prepare to commence commercialization of our Pivot product, ii) obtain regulatory clearance to market and sell our Pivot product in foreign jurisdictions, iii) improve the manufacturability and usability of our Pivot product and iv) develop new pump products. Historically, we have financed our operations principally through private placements and public offerings of our common stock and warrants and sales of convertible promissory notes. 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 Item 1 of this Report are issued exists. 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. 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. 15 Recent Developments Financing As disclosed in Note 4 to the condensed consolidated financial statements in this Report, in September 2025, we effected a warrant inducement offering for net proceeds of approximately $3.9 million, after deducting servicing agent fees and other offering expenses payable by us, and, during the six months ended September 30, 2025, we received net proceeds of approximately $0.7 million from sales of shares of our common stock under our at-the-market sales program. Compliance with Nasdaq Continued Listing Requirements On June 30, 2025, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days ending on June 27, 2025, we no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until December 29, 2025, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period. In the event we do not regain compliance within this 180-day period, we may be eligible to seek an additional compliance period of 180 calendar days provided we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and if we provide written notice to Nasdaq of our intent to cure the deficiency during this second compliance period by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice to us that our common stock will be subject to delisting. The above mentioned letter does not result in the immediate delisting of our common stock from the Nasdaq Capital Market. We are monitoring the closing bid price of our common stock and considering our available options in the event the closing bid price of our common stock remains below $1 per share. 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 U.S. GAAP. 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, 2025. As of September 30, 2025, there have been no material changes to our significant accounting policies and estimates. Results of Operations Research and Development September 30, Change 2025 2024 2024 to 2025 (dollar amounts in thousands) Research and development – Three months ended $ 5,593 $ 3,702 $ 1,891 51.1 % Research and development – Six months ended $ 10,727 $ 6,907 $ 3,820 55.3 % Our research and development, or R&D, expenses include personnel, consulting, testing, materials and supplies, depreciation and amortization and other non-capitalizable operational costs associated with the production of our insulin pump product. We expense R&D costs as they are incurred. R&D expenses increased for the three months ended September 30, 2025 compared with the same period of 2024, primarily due to increased personnel-related costs of approximately $1.0 million, an increase in depreciation expense of approximately $0.1 million, an increase in consulting costs of $0.4 million and an increase in materials and supplies costs of $0.4 million. R&D expenses increased for the six months ended September 30, 2025 compared with the same period of 2024, primarily due to increased personnel-related costs of approximately $1.9 million, an increase in depreciation expense of approximately $0.3 million, an increase in consulting costs of $0.5 million, an increase in materials and supplies costs of $0.7 million, an increase in shipping costs of approximately $0.2 million and increases in other costs of approximately $0.2 million. Our full-time R&D employee headcount increased to 56 at September 30, 2025 from 42 at September 30, 2024. R&D expenses included stock-based compensation expenses of approximately $0.7 million and $0.8 million for the three-months ended September 30, 2025 and 2024, respectively, and $1.2 million for each of the six-month periods ended September 30, 2025 and 2024. We expect research and development expenses to increase in the second half of fiscal 2026, as we have commenced activities in support of commercialization of our Pivot product, which we expect to occur in the first half of calendar year 2026. 16 Selling, General and Administrative September 30, Change 2025 2024 2024 to 2025 (dollar amounts in thousands) Selling, general and administrative – Three months ended $ 2,236 $ 1,294 $ 942 72.8 % Selling, general and administrative – Six months ended $ 3,906 $ 2,309 $ 1,597 69.2 % Selling, general and administrative, or SG&A, expenses consist primarily of personnel and related overhead costs for facilities, finance, human resources, legal, sales, marketing and general management. SG&A expenses increased for the three months ended September 30, 2025 compared with the same period of 2024, primarily as a result of increases in personnel costs of approximately $0.5 million, consulting fees of approximately $0.3 million, and marketing expenses of approximately $0.1 million. SG&A expenses increased for the six months ended September 30, 2025 compared with the same period of 2024, primarily as a result of increases in personnel costs of approximately $0.8 million, increases in consulting expenses of approximately $0.5 million, and increased marketing expenses of approximately $0.3 million. Our full-time SG&A employee headcount increased to 13 at September 30, 2025 from 4 at September 30, 2024. SG&A expenses included stock-based compensation expenses of approximately $0.2 million for each of the three-month periods ended September 30, 2025 and 2024, and $0.3 million and $0.4 million for the six months ended September 30, 2025 and 2024, respectively. We expect SG&A expenses to increase in the second half of fiscal 2026 as compared with fiscal 2025, as we continue to expand our sales and marketing organization and increase our general and administrative headcount to support the commercialization of our Pivot pump product during fiscal 2026. Liquidity and Capital Resources; Changes in Financial Condition We do not currently have revenues to generate cash flows to cover operating expenses. Since our inception, we have incurred operating losses and negative cash flows in each year due to costs incurred in connection with R&D activities and SG&A expenses associated with our operations. For the six months ended September 30, 2025 and year ended March 31, 2025, we incurred net losses of approximately $14.5 million and $18.8 million, respectively. At September 30, 2025, we had a cash balance of $5.3 million and an accumulated deficit of approximately $99.2 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 Item 1 of 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 continued research and development activities, 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 operations. In November 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 (subject to availability on our shelf registration statement) through an “at the market offering” program under which Leerink will act as sales agent or principal. During the six months ended September 30, 2025, we received net proceeds of approximately $0.7 million from sales of common stock under the ATM Agreement. During the six months ended September 30, 2025, we effected a warrant inducement offering of warrants issued in May 2023 and March 2025 for net proceeds of approximately $3.9 million, after deducting servicing agent fees and other offering expenses. Subsequent to September 30, 2025, under the ATM Agreement, we sold 1.8 million shares of common stock for net proceeds of approximately $1.1 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, 2025, we used approximately $10.8 million of cash in operating activities, which primarily resulted from our net loss of approximately $14.5 million, as adjusted for net changes in operating assets and liabilities of approximately $1.4 million, stock-based compensation expenses of approximately $1.5 million and depreciation and amortization expenses of approximately $0.8 million. For the six months ended September 30, 2024, we used approximately $7.3 million of cash in operating activities, which primarily resulted from our net loss of approximately $9.1 million and net changes in operating assets and liabilities of approximately $0.3 million, as adjusted for stock-based compensation expenses of approximately $1.6 million, depreciation and amortization expenses of approximately $0.5 million and other immaterial adjustments. For the six months ended September 30, 2025 and 2024, cash used in investing activities of approximately $1.7 million and $1.0 million, respectively, was for the purchase of property and equipment. Cash provided by financing activities of approximately $4.7 million for the six months ended September 30, 2025 was attributable to $4.0 million of proceeds from a warrant inducement offering completed in September 2025 and $0.7 million of proceeds from sales of common stock under the ATM Agreement. Cash provided by financing activities of approximately $3.0 million for the six months ended September 30, 2024 was attributable to proceeds from the at-the-market sales of stock and exercise of common stock purchase warrants. 17 Purchase Obligations Our primary purchase obligations include purchase orders for machinery and equipment. At September 30, 2025, we had outstanding purchase orders for machinery and equipment and related expenditures of approximately $1.7 million. 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not required.