Modular Medical, Inc. annual report, FY2013

Business context and reporting period

Filing identity and period mismatch: The supplied filing is Bear Lake Recreation, Inc.’s Form 10-K for the fiscal year ended June 30, 2013, filed September 3, 2013. It does not identify Modular Medical, Inc., and it is not a report for “2012 Q4.” Confirm the issuer and reporting period before relying on this summary.

Bear Lake describes itself as a development-stage shell company with no material business operations since 2002. Its former snowmobile/ATV rental and Net Caddy activities were abandoned. Management is seeking a well-capitalized merger candidate, but reports no identified prospective venture or definitive merger plan as of the filing.

Financial results and position

• At June 30, 2013, total assets and cash were $0. Current liabilities were $108,891: $91,042 payable to a related party and $17,849 accrued imputed interest. Stockholders’ deficit was $108,891.
• The related-party loan is unsecured, stated to bear no contractual interest, and due on demand; the company imputes interest at 10% annually. The stockholder advanced $10,920 for expenses in fiscal 2013, versus $10,091 in fiscal 2012.
• The filing reports no off-balance-sheet arrangements. It reports no cash interest paid in either year.
• No meaningful operating margin can be assessed because the company had no revenue or business operations.

Changes, outlook, risks, and unusual items

• Net loss increased by $3,298 from fiscal 2012, which management attributes to higher imputed interest expense on the related-party loan.
• The independent auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company’s ability to continue as a going concern, citing cumulative operating losses and negative operating cash flows since inception. The statements include no adjustments for the outcome of this uncertainty.
• Management’s stated plan is to evaluate industries and potential businesses and seek funding and/or acquire a going concern. Due-diligence and legal costs for a potential venture are estimated at $5,000–$25,000; funding is not assured. There is no formal revenue or earnings guidance.
• The company identifies itself as a shell company, has no established trading market, and says a viable market may not develop absent an acquisition or merger. It warns that a transaction could require issuing a substantial number of shares—potentially up to 95% of post-transaction voting securities—and that shell-company resale restrictions may constrain securities liquidity.
• The auditor did not attest to internal control over financial reporting. Management concluded controls were effective; the company has no independent directors or audit committee. A stockholder provides office space at no cost.

Important facts for investors to verify

1. Confirm that Bear Lake Recreation, Inc., rather than Modular Medical, Inc., is the intended issuer, and that the relevant period is the year ended June 30, 2013.
2. Verify the $91,042 demand loan and $17,849 accrued imputed interest, including the related-party identity, balance, and repayment terms.
3. Review the going-concern disclosure, the company’s lack of cash and assets, and how it expects to fund reporting and any transaction costs.
4. Check for subsequent acquisition, financing, share issuance, or change-of-control filings; the 10-K reports no definitive merger plan at its filing date.
5. Assess shell-company trading and resale restrictions, potential transaction dilution, and the limited market information; reported OTC bid quotations may not represent actual trades.