| 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. 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 nine months ended December 31, 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 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 $504,787 and $171,045 for the
three months ended December 31, 2018 and 2017, respectively. For the nine months ended December 31, 2018 and 2017, the costs were
approximately $1,008,127 and $258,799 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 December 31, 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 December 31, 2018 and March 31, 2018, the Company had $7,137,876 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 $6,707,805 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 December 31, 2018, and March 31, 2018, property, plant and
equipment amounted to:
December 31, 2018 March 31, 2018
Computer and equipment $ 70,161 $ 15,103
Less: accumulated depreciation (10,458 ) (1,844 )
$ 59,703 $ 13,259 Depreciation expenses for the three months ended
December 31, 2018 and 2017 were $5,426 and $458, respectively. For the nine months ended December 31, 2018 and 2017, depreciation
was approximately $8,614 and $758, 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 December 31, 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 & nine months ended December 31, 2018 and 2017:
Three Months Ended Nine Months Ended
December 31, 2018 December 31, 2018 December 31, 2018 December 31, 2018
Net Loss $ (739,205 ) $ (258,772 ) $ (1,532,545 ) $ (477,863 )
Net Loss Per Share
Basic and Diluted $ (0.044 ) $ (0.016 ) $ (0.094 ) $ (0.038 )
Weighted average number of shares used in computing basic and diluted net loss per share:
Basic 16,848,236 15,983,273 16,272,642 12,500,588
Diluted 16,848,236 15,983,273 16,272,642 12,500,588 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. |
