Document and Entity Information
Document and Entity Information | 6 Months Ended |
Sep. 30, 2018shares | |
Document And Entity Information | |
Entity Registrant Name | Modular Medical, Inc. |
Entity Central Index Key | 1,074,871 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2018 |
Amendment Flag | false |
Current Fiscal Year End Date | --03-31 |
Is Entity's Reporting Status Current? | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | false |
Entity Small Business | true |
Entity Common Stock, Shares Outstanding | 15,983,273 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Mar. 31, 2018 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,687,822 | $ 4,296,676 |
Other current assets | 306 | 16,804 |
TOTAL CURRENT ASSETS | 3,688,128 | 4,313,480 |
Intangible assets, net | 197 | 213 |
Property and equipment, net | 42,823 | 13,259 |
Security deposit | 7,500 | 7,500 |
TOTAL NON-CURRENT ASSETS | 50,520 | 20,972 |
TOTAL ASSETS | 3,738,648 | 4,334,452 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 46,837 | 14,955 |
Payable to related party | 0 | 516 |
TOTAL LIABILITIES | 46,837 | 15,471 |
Commitments and Contingencies | ||
STOCKHOLDERS' EQUITY | ||
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding | 0 | 0 |
Common Stock, $0.001 par value, 50,000,000 shares authorized, 15,983,273 shares issued and outstanding as of September 30, 2018 and March 31, 2018 | 15,983 | 15,983 |
Additional Paid-in Capital | 5,177,831 | 5,011,661 |
Accumulated Deficit | (1,502,003) | (708,663) |
TOTAL STOCKHOLDERS' EQUITY | 3,691,811 | 4,318,981 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 3,738,648 | $ 4,334,452 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Mar. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 15,983,273 | 15,983,273 |
Common stock, shares outstanding | 15,983,273 | 15,983,273 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Net Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
Operating Expenses: | ||||
Professional expenses | 81,883 | 79,939 | 123,593 | 117,131 |
Research and development | 367,550 | 83,408 | 503,340 | 87,754 |
General and Administrative Expenses | 99,565 | 12,639 | 177,255 | 14,426 |
Total Operating Expenses | 548,998 | 175,986 | 804,188 | 219,311 |
Loss From Operations | (548,998) | (175,986) | (804,188) | (219,311) |
Other Income (Expenses): | ||||
Interest income | 5,224 | 784 | 10,848 | 1,020 |
Loss Before Income Taxes | (543,774) | (175,202) | (793,340) | (218,291) |
Provision for Income Taxes | 0 | 800 | 0 | 800 |
Net Loss | $ (543,774) | $ (176,002) | $ (793,340) | $ (219,091) |
Net Loss Per Share: | ||||
Basic and Diluted | $ (.034) | $ (.013) | $ (.050) | $ (.020) |
Weighted average number of shares used in computing basic and diluted net loss per share: | ||||
Basic | 15,983,273 | 13,882,970 | 15,983,273 | 10,749,730 |
Diluted | 15,983,273 | 13,882,970 | 15,983,273 | 10,749,730 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (793,340) | $ (219,091) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 3,206 | 300 |
Stock-based compensation | 182,837 | 0 |
Increase in current assets: | ||
Other assets | 16,497 | (2,603) |
Security deposits | 0 | (7,500) |
Decrease in current liabilities: | ||
Accounts payable and accrued expenses | 14,699 | (103,298) |
Net cash used in operating activities | (576,101) | (332,192) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property, plant and equipment | (32,753) | (2,699) |
Purchase of intangible assets | 0 | (230) |
Net cash provided by investing activities | (32,753) | (2,929) |
Cash Flows from Financing Activities | ||
Proceeds from private placement | 0 | 4,731,872 |
Repayment to related party, net | 0 | (21,256) |
Net cash provided by financing activities | 0 | 4,710,616 |
Net increase (decrease) in cash and cash equivalents | (608,854) | 4,375,495 |
Cash and cash equivalents, at the beginning of the period | 4,296,676 | 392,007 |
Cash and cash equivalents, at the end of the period | 3,687,822 | 4,767,502 |
SUPPLEMENTAL DISCLOSURES: | ||
Cash paid during the year for: Income tax payments | 0 | 800 |
Cash paid during the year for: Interest payments | $ 0 | $ 0 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Modular Medical, Inc. (the “Company”) was organized under the laws of the State of Nevada on October 22, 1998, to engage in any lawful purpose. In June of 2017, the Company changed its name to Modular Medical, Inc. by filing a Certificate of Amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Through the year ended June 30, 2001, the Company was seeking to rent out snowmobiles and all-terrain vehicles (“ATV”). In June of 2000, the Company also purchased the rights to manufacture, use, market, and sell the Net Caddy, a backpack style bag used to transport fishing gear. The Company abandoned both the snowmobile and ATV plans, as well as the Net Caddy plans. Quasuras, Inc. (“Quauras”) was incorporated in Delaware on April 20, 2015. Quasuras has developed a hardware technology allowing people with diabetes to receive their daily insulin in two ways, through a continuous "basal" delivery allowing a small amount of insulin to be in the blood at all times and a "bolus" delivery to address meal time glucose input and to address when the blood glucose level becomes too high. By addressing the time and effort required to effectively treat their condition, Quasuras believes it can address the less technically savvy, less motivated part of the market. Reorganization On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, the Company and Quasuras, the Company acquired one hundred percent (100%) of the issued and outstanding shares of Quasuras for 7,582,060 shares of the Company, resulting in Quasuras becoming a wholly-owned subsidiary of the Company. Since the major shareholder of Quasuras retained control of both the Company and Quasuras, the share exchange was accounted for as a reverse merger. As such, the Company recognized the assets and liabilities of Quasuras, acquired in the reorganization, at their historical carrying amounts. Pursuant to the reorganization, the Company changed the fiscal year end from June 30 to March 31, to coincide with the year end for Quasuras. The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. The following summarizes the more significant of such policies: Basis of Presentation The accompanying condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on the Form 10-K for the fiscal year ended March 31, 2018. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended March 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019. Principles of Consolidation The consolidated financial statements include the accounts of Modular Medical, Inc. and its wholly-owned subsidiary, Quasuras, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. Use of Estimates The preparation of the accompanying financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reportable Segment The Company has one reportable segment. The Company's activities are interrelated, and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business. Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. Cost of Sales Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping, importation duties and charges, third party royalties and product sampling. Research and Development The Company expenses the cost of research and development, as incurred. Research and development costs charged to operations were approximately $367,550 and $83,408 for the three months ended September 30, 2018 and 2017, respectively. For the six months ended September 30, 2018 and 2017, the costs were approximately $503,340 and $87,754 respectively. General and Administration General and administration expenses consist primarily of payroll and benefit related costs, rent, office expenses, and meetings and travel. Income Taxes The Company utilizes FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than fifty percent (50%) likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. At September 30, 2018 and 2017, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended March 31, 2018 and prior years or in computing its tax provision for 2017. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities for the period ended March 31, 2018 to the present, generally for three years after they are filed. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. Risks and Uncertainties The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets. Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. Cash and Cash Equivalents Cash and cash equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At September 30, 2018 and March 31, 2018, the Company had $3,687,822 and $4,296,676, respectively, in cash. Deposits at the bank are insured up to $250,000 by the Federal Deposit Insurance Corporation. The Company’s uninsured portion of the balances held at the bank aggregated to approximately $3,187,822 and $3,933,002, respectively. No reserve has been made in the financial statements for any possible loss due to any financial institution failure. The Company has not experienced any losses in such accounts and believes we are not exposed to any significant risk on cash and cash equivalents. Property, Plant & Equipment Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to ten years; computer equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and furniture and equipment, one to five years. As of September 30, 2018, and March 31, 2018, property, plant and equipment amounted to: September 30, 2018 March 31, 2018 Computer and equipment $ 47,856 $ 15,103 Less: accumulated depreciation (5,033 ) (1,844 ) $ 42,823 $ 13,259 Depreciation expenses for the three months ended September 30, 2018 and 2017 were $1,802 and $154, respectively. For the six months ended September 30, 2018 and 2017 depreciation was approximately $3,189 and $300, respectively. Fair Value of Financial Instrument For certain of the Company's financial instruments, including cash and equivalents, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815. As of September 30, 2018 and June 30, 2018, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value. Earnings Per Share (EPS) Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). The following table sets for the computation of basic and diluted earnings per share for three & six months ended September 30, 2018 and 2017: Three Months Ended Six Months Ended September 30, 2018 September 30, 2018 September 30, 2018 September 30, 2018 Net Loss $ (543,774 ) $ (176,002 ) $ (793,340 ) $ (219,091 ) Net Loss Per Share Basic and Diluted $ (0.034 ) $ (0.013 ) $ (0.050 ) $ (0.020 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 15,983,273 13,882,970 15,983,273 10,749,730 Diluted 15,983,273 13,882,970 15,983,273 10,749,730 Recently Issued Accounting Pronouncements In August of 2017, the FASB issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and modifies the accounting for components excluded from the assessment. Some of the modifications include the ineffectiveness of derivative gain/loss in highly effective cash flow hedge to be recorded in OCI, the change in fair value of derivative to be recorded in the same income statement line as hedged item, and additional disclosures required on the cumulative basis adjustment in fair value hedges and the effect of hedging on financial statement lines for components excluded from the assessment. The amendment also simplifies the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for hedge accounting. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted, and the modified retrospective transition method should be applied. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. Reclassification Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow. |
REORGANIZATION AND PRIVATE PLAC
REORGANIZATION AND PRIVATE PLACEMENT | 6 Months Ended |
Sep. 30, 2018 | |
Reorganization And Private Placement | |
REORGANIZATION AND PRIVATE PLACEMENT | On April 26, 2017, Modular Medical issued 2,900,000 shares (the “Control Block”), of newly issued, restricted common stock, par value, $0.001, per share, for a purchase price of $375,000, resulting in a change in control of Modular Medical. On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, Modular Medical, three Quasuras shareholders and Quasuras (the “Acquisition Agreement”), Modular Medical acquired all 4,400,000 shares of Quasuras’ common stock which represented one hundred percent (100%) of the issued and outstanding shares of Quasuras for 7,582,060 shares of our common stock, resulting in Quasuras becoming our wholly-owned subsidiary (the “Acquisition”). Simultaneously with the closing of the Acquisition and as a condition thereto, we sold in a private placement (the “Private Placement”) an aggregate of 7,233,031 for cash and 568,182 from reissuance of previously canceled shares of our common stock pursuant to one or more exemptions from the registration requirements of the Securities Act, at a purchase price of $0.66 per share resulting in net proceeds to us of approximately $4,731,872. Simultaneously with the Acquisition and Private Placement, the Company cancelled all 2,900,000 Control Block shares it had issued in the Control Block Acquisition (the “Share Cancellation”). In connection with the Private Placement, we paid $41,928 as compensation in connection with sales of our shares therein. Following the Acquisition, the Private Placement and the Share Cancellation, we had issued and outstanding 15,983,273 shares of our common stock. The cash received in the Private Placement was recorded as the cash received in reorganization in the accompanying financial statements. Simultaneously with and as a condition to the closing of the Acquisition and the Private Placement, pursuant to an Intellectual Property Transfer Agreement, dated as of July 24, 2017, by and among Modular Medical, Quasuras and Mr. Paul DiPerna (the “IP Transfer Agreement”), Mr. Paul DiPerna transferred to us all intellectual property rights owned directly and/or indirectly by him related to our proposed business. Separately, we agreed to pay Mr. Paul DiPerna as part of his compensation for services to be performed for us pursuant to a Royalty Agreement (the “Royalty Agreement”) certain fees based upon future sales, if any, of our proposed product subject to a maximum $10,000,000 cap on the aggregate amount of fees that Mr. Paul DiPerna could earn from such arrangement. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 6 Months Ended |
Sep. 30, 2018 | |
Accrued Liabilities [Abstract] | |
ACCRUED EXPENSES | As of September 30, 2018 and March 31, 2018, accrued expenses amounted to $46,837 and $14,955, respectively. Accrued expenses comprised of credit card transactions, rent and stock compensation as of September 30, 2018 and March 31, 2018. |
PAYABLE TO RELATED PARTY
PAYABLE TO RELATED PARTY | 6 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
PAYABLE TO RELATED PARTY | Payable to related party comprises of the amounts paid by the major shareholder on behalf of the Company. The payable is unsecured, non-interest bearing and due on demand. As of September 30, 2018 and March 31, 2018, respectively, the payable to related party amounted to $0 and $516, respectively. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Sep. 30, 2018 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | Common stock On July 24, 2017, pursuant to the Acquisition Agreement, the Company acquired one hundred percent (100%) of the issued and outstanding shares of Quasuras for 7,582,060 shares of the Company, resulting in Quasuras becoming a wholly-owned subsidiary of the Company. The historical equity for Quasuras was restated pursuant to the reorganization. The Company has 50,000,000 shares of common stock authorized. The par value of the shares is $0.001. As of September 30, 2018, 15,983,273 shares of common stock of the Company were issued and outstanding. Preferred Stock The Company has 5,000,000 shares of preferred stock authorized. The par value of the shares is $0.001. As of September 30, 2018, none of the shares of preferred stock of the Company were issued. Stock Options On October 19, 2017, the Board of Directors approved an Employee Stock Option Program (“ESOP”) that reserves 3,000,000 shares of common stock of the Company to be issued. Under the Company’s ESOP, eligible employees, directors and consultants are granted options to purchase shares of common stock of the Company. The ESOP is administered by the Company’s Board of Directors or, in the alternative, if necessary, a committee designated by the Board of Directors, and has the sole power over the exercise of the ESOP. The Board of Directors determines whether the ESOP will allow for the issuance of shares of common stock or an option to purchase shares of common stock, such option designated as either an incentive stock option or a non-qualified stock option. The exercise or purchase price shall be calculated as follows: (i) In the case of an incentive stock option, (A) granted to employees, directors and consultants who, at the time of the grant of such incentive stock option own stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company, the per share exercise price shall be not less than one hundred ten percent (110%) of the fair market value per share on the date of grant; or (B) granted to employees, directors and consultants other than to employees, directors and consultants described in the preceding clause, the per share exercise price shall be not less than one hundred percent (100%) of the fair market value per share on the date of grant; (ii) In the case of a non-qualified stock option, the per share exercise price shall be not less than one hundred percent (100%) of the fair market value per share on the date of grant unless otherwise determined by the Board of Directors; and (iii) In the case of other grants, such price as is determined by the Board of Directors. The Board of Directors are responsible for determining the consideration to be paid for the shares of common stock to be issued upon exercise or purchase. The ESOP generally doesn’t allow for the transfer of the options, and the Board of Directors may amend, suspend or terminate the ESOP at any time. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Sep. 30, 2018 | |
Share-based Compensation [Abstract] | |
STOCK-BASED COMPENSATION | During the three months ended September 30, 2018, we granted options for a total of $1,351,515 shares with a weighted average grant date fair value of $0.55 per option. No options were granted during the prior quarters. The fair values of options at the grant date were estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for the three months ended September 30, 2018: (i) dividend yield on our common stock of 0 percent, (ii) expected stock price volatility of 88 percent, (iii) a risk-free interest rate of 3.2 percent, and (iv) and expected option term of 9 years. General and administrative expense for the three months ended September 30, 2018 included stock-based compensation expense of $8,334. Research and development expenses also included stock-based compensation expenses of $174,504 for the three months ended September 30, 2018. No such expenses were recognized in the prior quarters. As of September 30, 2018, the unrecognized stock-based compensation expenses related to non-vested stock options was approximately $562,000, which will be amortized over an estimated weighted average period of approximately 9 months. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Based on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at, September 30, 2018 and March 31, 2018 will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at September 30, 2018 and March 31, 2018. At September 30, 2018 and March 31, 2018, the Company had federal net operating loss carry-forwards of approximately $380,500 and $182,500, respectively, expiring beginning in 2037. Deferred tax assets consist of the following components: September 30, 2018 March 31, 2018 Net loss carryforward $ 380,500 $ 182,500 Valuation allowance (380,500 ) (182,500 ) Total deferred tax assets $ — $ — |
ROYALTY AGREEMENT
ROYALTY AGREEMENT | 6 Months Ended |
Sep. 30, 2018 | |
Royalty Agreement | |
ROYALTY AGREEMENT | On July 12, 2017, the Company entered into a royalty agreement with the founder and major shareholder. Pursuant to the agreement, the founder and major shareholder is assigning and transferring all of his rights in the intellectual property in return for royalty payments. The Company shall pay royalty to the founder on any sales of the royalty product sold or otherwise commercialized by the Company, equal to (a) US$0.75 on each sale of a royalty product, or (b) five percent (5%) of the gross sale price of the royalty product, whichever is less. The royalty payments shall cease, and this agreement shall terminate, at such time as the total sum of royalty payments actually paid to the founder, pursuant to this agreement, reaches $10,000,000. The Company shall have the option to terminate this agreement at any time upon payment, to the founder, of the difference between total royalty payments actually made to him to date and the sum of $10,000,000. All payments of the royalties, if due, for the preceding quarter, shall be made by the Company within thirty days after the calendar quarter. |
LEASE AGREEMENT
LEASE AGREEMENT | 6 Months Ended |
Sep. 30, 2018 | |
Leases [Abstract] | |
LEASE AGREEMENT | On August 21, 2017, the Company entered into a sublease agreement to rent office space. The term of the lease commences on September 1, 2017 and expires on December 14, 2019. The monthly rent for the lease is $3,000. The Company paid a deposit of $7,500 upon execution of the lease which has been recorded as a security deposit in the accompanying financial statements. The amounts of minimum lease payments and periods during which they become due are as follows: Year March 31, 2019 $ 18,000 2020 25,500 Total minimum lease payment $ 43,500 |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reorganization | On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, the Company and Quasuras, the Company acquired one hundred percent (100%) of the issued and outstanding shares of Quasuras for 7,582,060 shares of the Company, resulting in Quasuras becoming a wholly-owned subsidiary of the Company. Since the major shareholder of Quasuras retained control of both the Company and Quasuras, the share exchange was accounted for as a reverse merger. As such, the Company recognized the assets and liabilities of Quasuras, acquired in the reorganization, at their historical carrying amounts. Pursuant to the reorganization, the Company changed the fiscal year end from June 30 to March 31, to coincide with the year end for Quasuras. The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. The following summarizes the more significant of such policies: |
Basis of Presentation | The accompanying condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. GAAP rules and regulations for presentation of interim financial information. Therefore, the unaudited condensed interim consolidated financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on the Form 10-K for the fiscal year ended March 31, 2018. Current and future financial statements may not be directly comparable to the Company’s historical financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended March 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019. |
Principles of Consolidation | The consolidated financial statements include the accounts of Modular Medical, Inc. and its wholly-owned subsidiary, Quasuras, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. |
Use of Estimates | The preparation of the accompanying financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reportable Segment | The Company has one reportable segment. The Company's activities are interrelated, and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business. |
Revenue Recognition | Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. |
Cost of Sales | Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping, importation duties and charges, third party royalties and product sampling. |
Research and Development | The Company expenses the cost of research and development, as incurred. Research and development costs charged to operations were approximately $367,550 and $83,408 for the three months ended September 30, 2018 and 2017, respectively. For the six months ended September 30, 2018 and 2017, the costs were approximately $503,340 and $87,754 respectively. |
General and Administration | General and administration expenses consist primarily of payroll and benefit related costs, rent, office expenses, and meetings and travel. |
Income Taxes | The Company utilizes FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than fifty percent (50%) likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. At September 30, 2018 and 2017, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended March 31, 2018 and prior years or in computing its tax provision for 2017. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities for the period ended March 31, 2018 to the present, generally for three years after they are filed. |
Concentration of Credit Risk | Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. |
Risks and Uncertainties | The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets. |
Contingencies | Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. |
Cash and Cash Equivalents | Cash and cash equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At September 30, 2018 and March 31, 2018, the Company had $3,687,822 and $4,296,676, respectively, in cash. Deposits at the bank are insured up to $250,000 by the Federal Deposit Insurance Corporation. The Company’s uninsured portion of the balances held at the bank aggregated to approximately $3,187,822 and $3,933,002, respectively. No reserve has been made in the financial statements for any possible loss due to any financial institution failure. The Company has not experienced any losses in such accounts and believes we are not exposed to any significant risk on cash and cash equivalents. |
Property, Plant & Equipment | Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to ten years; computer equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and furniture and equipment, one to five years. As of September 30, 2018, and March 31, 2018, property, plant and equipment amounted to: September 30, 2018 March 31, 2018 Computer and equipment $ 47,856 $ 15,103 Less: accumulated depreciation (5,033 ) (1,844 ) $ 42,823 $ 13,259 Depreciation expenses for the three months ended September 30, 2018 and 2017 were $1,802 and $154, respectively. For the six months ended September 30, 2018 and 2017 depreciation was approximately $3,189 and $300, respectively. |
Fair Value of Financial Instrument | For certain of the Company's financial instruments, including cash and equivalents, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815. As of September 30, 2018 and June 30, 2018, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value. |
Earnings Per Share (EPS) | Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). The following table sets for the computation of basic and diluted earnings per share for three & six months ended September 30, 2018 and 2017: Three Months Ended Six Months Ended September 30, 2018 September 30, 2018 September 30, 2018 September 30, 2018 Net Loss $ (543,774 ) $ (176,002 ) $ (793,340 ) $ (219,091 ) Net Loss Per Share Basic and Diluted $ (0.034 ) $ (0.013 ) $ (0.050 ) $ (0.020 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 15,983,273 13,882,970 15,983,273 10,749,730 Diluted 15,983,273 13,882,970 15,983,273 10,749,730 |
Recently Issued Accounting Pronouncements | In August of 2017, the FASB issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and modifies the accounting for components excluded from the assessment. Some of the modifications include the ineffectiveness of derivative gain/loss in highly effective cash flow hedge to be recorded in OCI, the change in fair value of derivative to be recorded in the same income statement line as hedged item, and additional disclosures required on the cumulative basis adjustment in fair value hedges and the effect of hedging on financial statement lines for components excluded from the assessment. The amendment also simplifies the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for hedge accounting. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted, and the modified retrospective transition method should be applied. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Reclassification | Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow. |
ORGANIZATION AND SUMMARY OF S_3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of property, plant and equipment | September 30, 2018 March 31, 2018 Computer and equipment $ 47,856 $ 15,103 Less: accumulated depreciation (5,033 ) (1,844 ) $ 42,823 $ 13,259 |
Schedule of earnings per share | Three Months Ended Six Months Ended September 30, 2018 September 30, 2018 September 30, 2018 September 30, 2018 Net Loss $ (543,774 ) $ (176,002 ) $ (793,340 ) $ (219,091 ) Net Loss Per Share Basic and Diluted $ (0.034 ) $ (0.013 ) $ (0.050 ) $ (0.020 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 15,983,273 13,882,970 15,983,273 10,749,730 Diluted 15,983,273 13,882,970 15,983,273 10,749,730 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Summary of deferred tax assets | September 30, 2018 March 31, 2018 Net loss carryforward $ 380,500 $ 182,500 Valuation allowance (380,500 ) (182,500 ) Total deferred tax assets $ — $ — |
LEASE AGREEMENT (Tables)
LEASE AGREEMENT (Tables) | 6 Months Ended |
Sep. 30, 2018 | |
Leases [Abstract] | |
Schedule of future minimum lease payments | Year March 31, 2019 $ 18,000 2020 25,500 Total minimum lease payment $ 43,500 |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Sep. 30, 2018 | Mar. 31, 2018 |
Property and equipment, net | $ 42,823 | $ 13,259 |
Computers and equipment | ||
Property and equipment, gross | 47,856 | 15,103 |
Accumulated depreciation | (5,033) | (1,844) |
Property and equipment, net | $ 42,823 | $ 13,259 |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Net Loss | $ (543,774) | $ (176,002) | $ (793,340) | $ (219,091) |
Net Loss Per Share: | ||||
Basic and Diluted | $ (.034) | $ (.013) | $ (.050) | $ (.020) |
Weighted average number of shares used in computing basic and diluted net loss per share: | ||||
Basic | 15,983,273 | 13,882,970 | 15,983,273 | 10,749,730 |
Diluted | 15,983,273 | 13,882,970 | 15,983,273 | 10,749,730 |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Research and development | $ 367,550 | $ 83,408 | $ 503,340 | $ 87,754 | ||
Cash and cash equivalents | 3,687,822 | 4,767,502 | 3,687,822 | 4,767,502 | $ 4,296,676 | $ 392,007 |
Uninsured cash and cash equivalents | 3,187,822 | 3,187,822 | $ 3,933,002 | |||
Depreciation expenses | $ 1,802 | $ 154 | $ 3,189 | $ 300 | ||
Computer software developed or acquired for internal use | Minimum | ||||||
Estimated useful life | 3 years | |||||
Computer software developed or acquired for internal use | Maximum | ||||||
Estimated useful life | 10 years | |||||
Computers and equipment | Minimum | ||||||
Estimated useful life | 2 years | |||||
Computers and equipment | Maximum | ||||||
Estimated useful life | 3 years | |||||
Buildings and improvements | Minimum | ||||||
Estimated useful life | 5 years | |||||
Buildings and improvements | Maximum | ||||||
Estimated useful life | 15 years | |||||
Leasehold improvements | Minimum | ||||||
Estimated useful life | 2 years | |||||
Leasehold improvements | Maximum | ||||||
Estimated useful life | 10 years | |||||
Furniture and equipment | Minimum | ||||||
Estimated useful life | 1 year | |||||
Furniture and equipment | Maximum | ||||||
Estimated useful life | 5 years |
ACCRUED EXPENSES (Details Narra
ACCRUED EXPENSES (Details Narrative) - USD ($) | Sep. 30, 2018 | Mar. 31, 2018 |
Accrued Liabilities [Abstract] | ||
Accrued expenses | $ 46,837 | $ 14,955 |
PAYABLE TO RELATED PARTY (Detai
PAYABLE TO RELATED PARTY (Details Narrative) - USD ($) | Sep. 30, 2018 | Mar. 31, 2018 |
Related Party Transactions [Abstract] | ||
Payable to related party | $ 0 | $ 516 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Sep. 30, 2018 | Mar. 31, 2018 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 15,983,273 | 15,983,273 |
Common stock, shares outstanding | 15,983,273 | 15,983,273 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Sep. 30, 2018 | Mar. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net loss carryforward | $ 380,500 | $ 182,500 |
Valuation allowance | (380,500) | (182,500) |
Total deferred tax assets | $ 0 | $ 0 |
LEASE AGREEMENT (Details)
LEASE AGREEMENT (Details) | Sep. 30, 2018USD ($) |
Leases [Abstract] | |
2,019 | $ 18,000 |
2,020 | 25,500 |
Total minimum lease payment | $ 43,500 |