Modular Medical, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended December 31, 2023 (fiscal 2024 third quarter). Modular Medical is a development-stage medical-device company developing its MODD1 insulin patch pump. It reported no revenue for the periods presented.
Financial results and position
| Metric | Three months ended Dec. 31, 2023 | Nine months ended Dec. 31, 2023 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $3.619 million | $9.204 million |
| General and administrative expense | $1.650 million | $4.006 million |
| Total operating expenses | $5.269 million | $13.210 million |
| Net loss | $5.269 million | $13.189 million |
| Net loss per share, basic and diluted | $0.23 | $0.64 |
- Gross margin and operating margin are not meaningful because the company had no reported revenue.
- At December 31, 2023, cash and cash equivalents were $2.047 million; total assets were $6.199 million; total liabilities were $2.354 million; and stockholders’ equity was $3.845 million. Accumulated deficit was $61.648 million.
- Nine-month operating cash use was $10.449 million; investing cash use was $1.217 million, primarily for property and equipment; financing provided $9.914 million. Cash declined by $1.752 million from March 31, 2023.
- No borrowing debt is shown on the balance sheet. Lease liabilities totaled $1.277 million, including current and long-term portions.
Material changes versus prior comparable periods
- Third-quarter operating expenses rose 56.9% from $3.358 million, and net loss increased from $3.358 million to $5.269 million. R&D expense increased 64.7%, primarily due to employee costs, stock-based compensation and consulting/testing for the FDA submission.
- Nine-month operating expenses rose 28.2% from $10.306 million, while net loss increased from $10.308 million to $13.189 million. R&D expense increased 35.3%; G&A increased 14.4%.
- Operating cash use increased to $10.449 million from $8.184 million for the prior-year nine-month period; capital spending rose to $1.217 million from $0.573 million.
- The company raised $9.733 million net in a May 2023 public offering of shares and warrants. Common shares issued and outstanding were 21.299 million at December 31, versus 10.949 million at March 31, 2023. A further 13.092 million warrants were outstanding at December 31, presenting potential dilution.
Outlook, liquidity, risks and other items
- Management states that operating losses and cash burn raise substantial doubt about the company’s ability to continue as a going concern for at least one year after issuance of the financial statements. Continued operations depend on obtaining additional capital; unavailable or unfavorable financing could require R&D curtailments, headcount reductions or other cost cuts.
- The company submitted its MODD1 pump to the FDA for 510(k) clearance in January 2024 and expects initial FDA feedback during the quarter ending June 30, 2024. Management expects R&D and G&A expenses to decrease during the remainder of fiscal 2024; no quantified forecast was provided.
- An at-the-market agreement permits up to $6.5 million of gross stock sales, subject to a 3% agent fee. No shares had been sold under the agreement by December 31. In January 2024, the company reported $278,000 net proceeds from ATM sales and approximately $550,000 from warrant exercises.
- At December 31, outstanding machinery and equipment purchase orders were approximately $592,000. A December 2023 device-integration agreement entails approximately $575,000 of technology integration and license fees over three years.
- The filing reports no litigation believed to have a material adverse effect and no material changes to the risk factors in the prior annual report. Management identified financing access, inflation and component-cost increases, competition, and development and commercialization execution as risks. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Cash runway and financing needs, including progress under the ATM program and the impact of January 2024 proceeds.
- FDA review timing, feedback, and any further development or testing requirements for MODD1.
- Actual spending relative to management’s expectation of lower R&D and G&A expense in the remainder of fiscal 2024.
- Potential dilution from outstanding warrants, options and future equity financing.
- Timing and cost of equipment commitments and the three-year device-integration agreement.