Modular Medical, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022; the company’s fiscal year ends March 31, making this fiscal 2023 second quarter. The filing was signed November 14, 2022. Financial statements are unaudited.
Business context
Modular Medical is a development-stage medical device company developing the MODD1 insulin pump, a two-part patch pump intended to simplify insulin delivery and expand pump adoption. The company reported no revenue and remains focused on product development and preparation for FDA submission.
Financial results and liquidity
| Metric | Three months ended September 30 | Six months ended September 30 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development | $2.39 million; up 13.3% year over year | $4.61 million; up 18.3% |
| General and administrative | $1.06 million; down 33.1% | $2.34 million; down 26.3% |
| Total operating expenses | $3.45 million | $6.95 million |
| Net loss | $3.45 million, versus $4.38 million | $6.95 million, versus $9.22 million |
| Operating cash used | Not separately presented | $5.53 million, versus $4.78 million |
Gross margin and operating margin are not meaningful because the company had no revenue. Lower net losses year over year partly reflect the prior-year period’s interest expense and debt-extinguishment loss; operating expenses were also lower in aggregate for the six-month period.
At September 30, cash and cash equivalents were $10.84 million, compared with $9.08 million at March 31. Current assets were $11.01 million and current liabilities were $695,000. Total liabilities were $695,000, comprising accounts payable, accrued expenses and lease liabilities; no borrowing debt was reported on the balance sheet. The company had a $41.53 million accumulated deficit.
Financing provided $7.37 million net in the six months, principally from a May 2022 registered direct offering. Cash increased by $1.76 million over the period after operating and investing outflows. The company ended the period with 10.93 million common shares outstanding and 7.57 million warrants outstanding.
Material changes and management commentary
- R&D costs rose as engineering and operations staffing, prototype and production materials, and stock-based compensation increased. R&D headcount grew to 28 from 15 a year earlier.
- G&A declined, primarily due to lower personnel, stock-based compensation, professional-services and marketing costs.
- Management expects R&D expenses to increase for the remainder of fiscal 2023 as product development continues and manufacturing-process staff are hired; it expects G&A to remain flat.
- The May offering included 449,438 common shares and warrants, including pre-funded warrants for 1,348,314 shares exercisable at $0.01. The filing lists 7,565,588 total warrants outstanding, presenting potential dilution.
Outlook, risks and unusual items
Management states that expected operating losses and cash burn raise substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements. It says the company does not believe its cash and investments are sufficient for the next 12 months, is seeking additional financing, and may need to curtail development or reduce costs if capital is unavailable. Additional financing is not assured and could dilute existing shareholders or be available only on unfavorable terms.
Management reported longer lead times for components needed for initial product quantities for FDA submission; further supply-chain disruption could delay submission. Other cited risks include inflation and higher labor, material and transportation costs, COVID-19-related uncertainty, the Russia-Ukraine conflict, competition, and the need to successfully commercialize the product. The filing reported no material litigation and no material change to the risk factors in the prior annual report. Disclosure controls were assessed as effective, with no material change in internal control reported.
Key facts for investors to verify
- Whether the company secures sufficient additional financing to fund operations and product development, given management’s explicit going-concern doubt.
- Current cash burn and expected runway, and whether subsequent financing or spending changes alter the assessment.
- Progress and timing of MODD1 development, manufacturing readiness and FDA submission, including component supply constraints.
- The potential dilution from outstanding warrants, pre-funded warrants, options and future capital raises.
- Whether the anticipated R&D increases and flat G&A outlook remain consistent with actual spending and cash needs.