Modular Medical, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2023, the first quarter of the company’s fiscal year ending March 31, 2024. The financial statements are unaudited. Modular Medical is a development-stage medical-device company developing its MODD1 insulin patch pump; it reported no revenue.
Key financial metrics
| Metric | Q1 FY2024 | Comparable period |
|---|---|---|
| Operating expenses | $3.751 million | $3.499 million |
| Research and development | $2.604 million | $2.222 million |
| General and administrative | $1.147 million | $1.277 million |
| Net loss | $3.737 million | $3.499 million |
| Basic and diluted loss per share | $0.22 | $0.30 |
| Cash used in operating activities | $3.207 million | $2.675 million |
| Cash used in investing activities | $0.373 million | $0.076 million |
At June 30, 2023, cash and cash equivalents were $9.952 million, versus $3.799 million at March 31, 2023. Total assets were $13.666 million and total liabilities were $2.110 million, including $1.439 million in operating lease liabilities. The filing reports no material borrowing debt. Accumulated deficit was $52.196 million. Gross margin is not applicable because the company had no revenue.
Changes versus the prior comparable period
- Net loss increased by $0.238 million, while loss per share declined from $0.30 to $0.22, reflecting a higher weighted-average share count.
- R&D expense rose 17.2% to $2.604 million. Management attributed the increase mainly to employee-related and materials costs, partly offset by lower consulting costs; R&D headcount rose to 34 from 23.
- G&A expense fell 10.2% to $1.147 million, primarily due to lower stock-based compensation and consulting and professional-service costs, partly offset by higher facility and employee costs.
- Cash used in operations increased to $3.207 million from $2.675 million. Property and equipment purchases increased to $0.373 million from $0.076 million.
- A May 2023 public offering generated $9.733 million in net proceeds. The company issued 10.139 million common shares during the quarter in the offering and related over-allotment. At June 30, 13.345 million warrants were outstanding.
Outlook, risks and other notable items
- Management expects R&D and G&A expenses to remain consistent for the rest of fiscal 2024. No revenue, earnings or commercialization timetable guidance is provided.
- The company expects continued operating losses and cash outflows. The financial-statement notes state that these conditions raise substantial doubt about its ability to continue as a going concern within one year after issuance. MD&A says the current operating plan supports at least 12 months of cash, while also describing the need for additional capital; future financing is not assured.
- If it cannot raise capital, the company may curtail R&D, reduce headcount or take other cost-saving measures. Risks include commercialization and market adoption, competition, financing access, inflation and component costs, and possible economic and supply-chain disruptions.
- Outstanding machinery and equipment purchase orders and related expenditures totaled approximately $566,000. The filing reports no litigation believed to have a material adverse effect and no material changes to the risk factors in the March 31, 2023 Form 10-K.
- Management concluded disclosure controls and procedures were effective as of June 30, 2023 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the $9.952 million cash balance and spending trajectory support the stated operating plan, given the disclosed going-concern uncertainty.
- MODD1 development, clinical, regulatory, manufacturing and commercialization milestones, which are not detailed as specific guidance in this filing.
- Potential dilution from outstanding warrants and options, including 13.345 million warrants and 2.824 million options at quarter-end.
- Planned capital needs and the timing and terms of any future financing; the filing cautions that financing may be unavailable or dilutive.
- Execution and cash requirements related to facility leases and the $566,000 in outstanding equipment-related purchase obligations.