Modular Medical, Inc. — Form 10-Q Summary
Reporting period: Quarter ended December 31, 2022, the company’s fiscal third quarter of fiscal 2023. The filing was signed February 13, 2023. Modular Medical is a development-stage medical-device company developing its MODD1 insulin pump; it reported no revenue.
Financial performance and position
| Metric | Three months ended Dec. 31, 2022 | Nine months ended Dec. 31, 2022 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $2.20 million | $6.80 million |
| General and administrative expense | $1.16 million | $3.50 million |
| Total operating expenses / operating loss | $3.36 million | $10.31 million |
| Net loss | $3.36 million | $10.31 million |
| Basic and diluted loss per share | $0.31 | $0.95 |
| Operating cash used | $8.18 million for the nine months | |
| Investing cash used | $0.57 million for the nine months | |
| Financing cash provided | $7.37 million for the nine months |
Gross profit and operating margins are not applicable because the company had no revenue. Cash and cash equivalents were $7.69 million at December 31, 2022, down from $9.08 million at March 31, 2022. Total assets were $8.74 million; total liabilities were $0.72 million, including $0.08 million of current lease liabilities and no reported funded debt. Stockholders’ equity was $8.02 million, and accumulated deficit was $44.89 million.
Changes versus prior comparable periods
- Quarterly net loss improved to $3.36 million from $4.84 million in the prior-year quarter; nine-month net loss improved to $10.31 million from $14.06 million.
- Quarterly R&D expense rose 18.8% to $2.20 million; nine-month R&D rose 18.5% to $6.80 million, reflecting increased personnel, prototypes, production components and stock-based compensation.
- Quarterly G&A expense fell 41.4% to $1.16 million; nine-month G&A fell 32.1% to $3.50 million. The company attributed the declines principally to lower stock compensation, personnel costs and prior-year public-offering and listing expenses.
- Operating cash use increased to $8.18 million from $7.13 million for the nine-month period. Investing cash use increased to $0.57 million from $0.02 million, principally due to equipment purchases.
- Financing cash came primarily from a May 2022 registered offering, which generated approximately $7.37 million net. The offering included 449,438 common shares and warrants, including 1,348,314 pre-funded warrants and 1,438,202 additional warrants.
Outlook, risks and notable items
- Going concern: Management states that operating losses and cash outflows 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 raising additional capital; availability and acceptable terms are not assured. Without financing, the company may need to curtail R&D and reduce costs.
- Management outlook: R&D expense was expected to remain comparable and G&A expense flat for the remainder of fiscal 2023. Capital expenditures were expected to increase. The filing provides no revenue or profitability guidance.
- Product and supply risks: The company said it was preparing product for FDA submission and believed it could build an adequate supply, but longer component lead times, supply-chain disruption, inflation and other unpredictable events could delay submission. Commercialization, FDA timing and market adoption remain uncertain.
- Equipment commitments: At December 31, 2022, outstanding non-cancelable machinery and equipment purchase orders were approximately $735,000, expected to be received and paid over the following six months.
- Subsequent lease: On January 5, 2023, the company agreed to lease approximately 24,000 square feet in San Diego for 48 months, beginning around February 1. Base rent is $36,000 monthly for the first year, plus approximately $10,700 monthly for common-area charges, subject to adjustment; base rent increases 4% annually.
- Potential dilution: At December 31, 2022, 7,565,588 common-stock warrants and 2,174,198 options were outstanding. In January 2023, stockholders approved adding 2,000,000 shares to the equity incentive plan.
- The company reported no material litigation, no material changes to previously disclosed risk factors, and effective disclosure controls as of December 31, 2022. COVID-19, geopolitical disruption, inflation, financing access and competition remain cited risks.
Most important facts for investors to verify
- Cash runway under current spending plans, and whether additional financing is available on acceptable terms.
- FDA submission readiness, expected timing, component availability and progress toward manufacturing the MODD1 pump.
- Actual capital spending and payment timing for the $735,000 equipment commitments, plus the cost impact of the new headquarters lease.
- Potential dilution from outstanding warrants and options, and any further equity or debt financing.
- Whether management’s expense expectations and product-development plans remain current; the filing gives no formal revenue or commercialization timetable.