Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 30, 2019 | Aug. 13, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Modular Medical, Inc. | |
Entity Central Index Key | 0001074871 | |
Document Type | 10-Q/A | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | true | |
Amendment Description | Modular Medical, Inc., is filing this Amendment No. 1 on Form 10-Q/A to amend its First Quarter Report on Form 10-Q for the period ended June 30, 2019, filed with the Commission On August 14, 2019. Our financial printer inadvertently named the document modular_1q19 and in actuality is should have been named modular_1q20. This filing reflects the correct name change to the document as modular_1q20. | |
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 | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,870,261 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 5,706,628 | $ 6,553,768 |
Other current assets | 9,500 | 15,590 |
TOTAL CURRENT ASSETS | 5,716,128 | 6,569,358 |
Intangible assets, net | 172 | 180 |
Property and equipment, net | 75,961 | 75,948 |
Security deposit | 7,500 | 7,500 |
TOTAL NON-CURRENT ASSETS | 83,633 | 83,628 |
TOTAL ASSETS | 5,799,761 | 6,652,986 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 253,474 | 178,929 |
TOTAL CURRENT LIABILITIES | 253,474 | 178,929 |
TOTAL LIABILITIES | 253,474 | 178,929 |
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, 17,870,261 shares issued and outstanding as of June 30, 2019 and 17,840,261 as of March 31, 2019 | 17,870 | 17,840 |
Additional paid-in capital | 9,898,776 | 9,684,578 |
Common stock issuable | 0 | 19,800 |
Accumulated deficit | (4,370,359) | (3,248,161) |
TOTAL STOCKHOLDERS' EQUITY | 5,546,287 | 6,474,057 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 5,799,761 | $ 6,652,986 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2019 | Mar. 31, 2019 |
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 | 17,870,261 | 17,840,261 |
Common stock, shares outstanding | 17,870,261 | 17,840,261 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating Expenses: | ||
Professional expenses | $ 287,831 | $ 41,710 |
Research and development | 703,783 | 135,789 |
General and administration expenses | 139,912 | 76,296 |
Depreciation and amortization expense | 6,714 | 1,395 |
Total Operating Expenses | 1,138,240 | 255,190 |
Loss From Operations | (1,138,240) | (255,190) |
Other Income (Expenses): | ||
Interest income | 16,042 | 5,624 |
Loss Before Income Taxes | (1,122,198) | (249,566) |
Provision for income taxes | 0 | 0 |
Net Loss | $ (1,122,198) | $ (249,566) |
Net Loss Per Share: | ||
Basic and Diluted | $ (0.06) | $ (0.02) |
Weighted average number of shares used in computing basic and diluted net loss per share: | ||
Basic | 17,847,740 | 15,983,273 |
Diluted | 17,847,740 | 15,983,273 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (1,122,198) | $ (249,566) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation | 194,428 | 0 |
Depreciation and amortization | 6,714 | 1,395 |
Increase/Decrease in current assets: | ||
Other assets | 6,090 | 10,248 |
Decrease in current liabilities: | ||
Accounts payable and accrued expenses | 74,545 | 1,704 |
Net cash used in operating activities | (840,421) | (236,219) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property, plant and equipment | (6,719) | (6,170) |
Net cash used in investing activities | (6,719) | (6,170) |
Cash Flows from Financing Activities | ||
Repayment to related party | 0 | (516) |
Net cash used in financing activities | 0 | (516) |
Net increase in cash and cash equivalents | (847,140) | (242,905) |
Cash and cash equivalents, at the beginning of the period | 6,553,768 | 4,296,676 |
Cash and cash equivalents, at the end of the period | 5,706,628 | 4,053,771 |
SUPPLEMENTAL DISCLOSURES: | ||
Cash paid during the year for: income tax | 0 | 0 |
Cash paid during the year for: interest | $ 0 | $ 0 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Jun. 30, 2019 | |
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. 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. Quasuras, Inc. (“Quasuras”) was incorporated in Delaware on April 20, 2015. Quasuras has developed a hardware technology allowing people with insulin dependent 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 consolidated 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 preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Principles of Consolidation The consolidated financial statements include the accounts of Modular Medical, Inc. and its wholly-owned subsidiary Quasuras, Inc., and are 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 consolidated 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. Professional Fees The Company expenses the cost of legal, accounting, audit, tax and other professional services. Research and Development The Company expenses the cost of research and development as incurred. Research and development costs charged to operations were approximately $703,783 and $135,789 for the fiscal quarter ended June 30, 2019 and 2018, respectively. General and Administration General and administrative expense consists primarily of payroll and benefit related costs, rent, office expenses, equipment supplies and meetings and travel. Income Taxes The Company utilizes Financial Accounting Standards Board (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 consolidated 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 accounts for uncertain tax positions in accordance with 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 consolidated 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 50 percent 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 consolidated 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 consolidated statements of income. At June 30, 2019 and 2018, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended June 30, 2019 and prior years or in computing its tax provision for 2019. 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, 2017 to the present, generally for three years after they are filed. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at financial institutions within the United States, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to limits of approximately $250,000. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. 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 consolidated 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 consolidated 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 June 30, 2019 and March 31, 2019, the Company had $5,706,628 and $6,553,768, 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 $5,421,940 and $6,269,116 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 equipment& software developed or acquired for internal use, three to ten years; office equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and machinery and equipment, one to five years. As of June 30, 2019 and March 31, 2019, property, plant and equipment amounted to: June 30, 2019 (UNAUDITED) March 31, 2019 Computer equipment and software $ 25,028 $ 20,565 Office equipment 49,724 49,724 Machinery and equipment 24,194 21,937 Less: accumulated depreciation (22,985 ) (16,278 ) $ 75,961 $ 75,948 Depreciation expenses for the quarter ended June 30, 2019 and March 31, 2019 was $6,707 and $1,387 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 consolidated 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. Due to their short-term nature, the carrying values of cash and equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of the notes payable approximates fair value. Earnings Per Share (“EPS”) Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. During the fiscal quarter ended June 30, 2019 and 2018 we incurred losses. Therefore, the effects of any common stock equivalent were anti-dilutive during those periods. The following table sets for the computation of basic and diluted earnings per share for the fiscal quarters ended June 30, 2019 and June 30, 2018: June 30, 2019 (UNAUDITED) June 30, 2018 (UNAUDITED) Net Loss $ (1,122,198 ) $ (249,566 ) Net Loss Per Share Basic and Diluted: $ (0.06 ) $ (0.02 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 17,847,740 15,983,273 Diluted 17,847,740 15,983,273 Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, The FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825) In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on our financial position or statement of operations. In August 2018, 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 other comprehensive income, 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. In February 2016, FASB issued ASU No. 2016-02, Leases (“Topic 842”). Topic 842 requires an entity to recognize right-of -use assets and lease liability on its balance sheet and disclosure key information about leasing arrangements. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We have evaluated this ASU and believe this guidance will not have a material impact on our financial position and statement of operations. 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 | 3 Months Ended |
Jun. 30, 2019 | |
Reorganization And Private Placement | |
REORGANIZATION AND PRIVATE PLACEMENT | On April 26, 2017, Modular Medical, Inc. issued 2,900,000 shares (the “Control Block”), of new, 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, Inc. On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, Modular Medical, Inc., 3 Quasuras Shareholders and Quasuras (the “Acquisition Agreement”), the Company 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 (the “2017 Private Placement”), in a 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 2017 Private Placement, we paid $41,928 as compensation in connection with sales of our shares therein. Following the Acquisition, the 2017 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 consolidated financial statements. Simultaneously with and as a condition to the closing of the Acquisition and the 2017 Private Placement, pursuant to an Intellectual Property Transfer Agreement, dated as of July 24, 2018, by and among us, Quasuras and Mr. DiPerna (the “IP Transfer Agreement”), Mr. 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. 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. DiPerna could earn from such arrangement. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 3 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES | As of June 30, 2019 and March 31, 2019, accrued expenses amounted to $253,474 and $178,929 respectively. Accrued expenses comprised of accrued legal and professional, consultant services as of June 30, 2019 and March 31, 2019. |
PAYABLE TO RELATED PARTY
PAYABLE TO RELATED PARTY | 3 Months Ended |
Jun. 30, 2019 | |
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 June 30, 2019 and March 31, 2019, respectively, there were no amounts payable to related party. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Jun. 30, 2019 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | Common stock On July 24, 2017, pursuant to a Reorganization and Share Exchange Agreement, by and among, the Company and Quasuras Inc., 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. In April 2019 the Company issued 30,000 shares for services bringing the outstanding balance to 17,870,261 shares of common stock. Preferred Stock The Company has 5,000,000 shares of preferred stock authorized. The par value of the shares is $0.001. As of June 30, 2019, 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. On April 15, 2019, the Company granted 4,778 options to a consultant, these options are fully vested on the grant date. The 4,778 options will expire on April 14, 2029. The fair value of the options 4,778 shares is determined to be $8,173, was accrued in professional expenses for the quarter ended June 30, 2019. The following assumptions were used in the fair value method calculation: · Volatility: 101.85% · Risk free rate of return: 2.41% · Expected term: 5 years On April 15 th th th th The following assumptions were used in the fair value method calculation: · Volatility: 97 – 102% · Risk free rate of return: 2.15 – 2.37% · Expected term: 5 years On April 15 th th The following assumptions were used in the fair value method calculation: · Volatility: 101.85% · Risk free rate of return: 2.41% · Expected term: 6.0 years On July 25, 2018, the Company granted 1,280,000 options to certain consultants, these options are fully vested one year from the date granted. The 1,280,000 options will expire on August 31, 2019. The fair value of the options 1,280,000 shares is determined to be $682,240, was accrued monthly in research and development expenses for the fiscal quarter ended June 30, 2019. The following assumptions were used in the fair value method calculation: · Volatility: 110% · Risk free rate of return: 2.82% · Expected term: 5.27 years On January 16, 2019, the Company granted 185,221 options to certain consultants, these options will be fully vested three years from the date granted. The 185,221 options will expire on January 15, 2029. The fair value of the options 185,221 shares is determined to be $336,732, was accrued monthly in general and administrative expenses for the fiscal quarter ended June 30, 2019. The following assumptions were used in the fair value method calculation: · Volatility: 104% · Risk free rate of return: 2.54% · Expected term: 5.88 years The relative fair value of each of the granted options set forth above has been calculated using the Black-Scholes-Merton pricing model, which, for each such option, is based on the granted strike price, the three month average trading volatility of three comparable companies (e.g., PODD, TNDM, VLRX), the five year, risk-free treasury bond interest rate on the applicable grant date and a weighted average term using the simplified method calculation. It outlines calculation methods for sbc. The following is a rollforward of the options outstanding and exercisable for the fiscal quarter ended June 30, 2019: Options Weighted Average Exercise Price Average Remaining Life Outstanding and exercisable – March 31, 2019 918,020 0.68 9.43 Vested 280,352 0.74 Expired — — — Outstanding and exercisable – June 30, 2019 1,198,372 $ 0.69 5.13 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Jun. 30, 2019 | |
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, June 30, 2019 and March 31, 2019, will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at June 30, 2019 and March 31, 2019. At June 30, 2019 and March 31, 2019, the Company had federal net operating loss carryforwards of approximately $1,098,000 and $817,000 respectively, expiring beginning in 2037. Deferred tax assets consist of the following components: June 30, 2019 March 31, 2019 Net loss carryforward $ 1,098,000 $ 817,000 Valuation allowance (1,098,000 ) (817,000 ) Total deferred tax assets $ — $ — |
ROYALTY AGREEMENT
ROYALTY AGREEMENT | 3 Months Ended |
Jun. 30, 2019 | |
Shareholder | |
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. |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Jun. 30, 2019 | |
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 consolidated 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 preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. |
Principles of Consolidation | The consolidated financial statements include the accounts of Modular Medical, Inc. and its wholly-owned subsidiary Quasuras, Inc., and are 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 consolidated 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. |
Professional Fees | The Company expenses the cost of legal, accounting, audit, tax and other professional services. |
Research and Development | The Company expenses the cost of research and development as incurred. Research and development costs charged to operations were approximately $703,783 and $135,789 for the fiscal quarter ended June 30, 2019 and 2018, respectively. |
General and Administration | General and administrative expense consists primarily of payroll and benefit related costs, rent, office expenses, equipment supplies and meetings and travel. |
Income Taxes | The Company utilizes Financial Accounting Standards Board (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 consolidated 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 accounts for uncertain tax positions in accordance with 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 consolidated 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 50 percent 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 consolidated 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 consolidated statements of income. At June 30, 2019 and 2018, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended June 30, 2019 and prior years or in computing its tax provision for 2019. 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, 2017 to the present, generally for three years after they are filed. |
Concentration of Credit Risk | Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash balances at financial institutions within the United States, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to limits of approximately $250,000. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. |
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 consolidated 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 consolidated 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 June 30, 2019 and March 31, 2019, the Company had $5,706,628 and $6,553,768, 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 $5,421,940 and $6,269,116 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 equipment& software developed or acquired for internal use, three to ten years; office equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and machinery and equipment, one to five years. As of June 30, 2019 and March 31, 2019, property, plant and equipment amounted to: June 30, 2019 (UNAUDITED) March 31, 2019 Computer equipment and software $ 25,028 $ 20,565 Office equipment 49,724 49,724 Machinery and equipment 24,194 21,937 Less: accumulated depreciation (22,985 ) (16,278 ) $ 75,961 $ 75,948 Depreciation expenses for the quarter ended June 30, 2019 and March 31, 2019 was $6,707 and $1,387 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 consolidated 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. Due to their short-term nature, the carrying values of cash and equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of the notes payable approximates fair value. |
Earnings Per Share ("EPS") | Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. During the fiscal quarter ended June 30, 2019 and 2018 we incurred losses. Therefore, the effects of any common stock equivalent were anti-dilutive during those periods. The following table sets for the computation of basic and diluted earnings per share for the fiscal quarters ended June 30, 2019 and June 30, 2018: June 30, 2019 (UNAUDITED) June 30, 2018 (UNAUDITED) Net Loss $ (1,122,198 ) $ (249,566 ) Net Loss Per Share Basic and Diluted: $ (0.06 ) $ (0.02 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 17,847,740 15,983,273 Diluted 17,847,740 15,983,273 |
Recently Issued Accounting Pronouncements | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, The FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825) In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on our financial position or statement of operations. In August 2018, 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 other comprehensive income, 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. In February 2016, FASB issued ASU No. 2016-02, Leases (“Topic 842”). Topic 842 requires an entity to recognize right-of -use assets and lease liability on its balance sheet and disclosure key information about leasing arrangements. For public companies, Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We have evaluated this ASU and believe this guidance will not have a material impact on our financial position and statement of operations. 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) | 3 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of property, plant and equipment | June 30, 2019 (UNAUDITED) March 31, 2019 Computer equipment and software $ 25,028 $ 20,565 Office equipment 49,724 49,724 Machinery and equipment 24,194 21,937 Less: accumulated depreciation (22,985 ) (16,278 ) $ 75,961 $ 75,948 |
Schedule of earnings per share | June 30, 2019 (UNAUDITED) June 30, 2018 (UNAUDITED) Net Loss $ (1,122,198 ) $ (249,566 ) Net Loss Per Share Basic and Diluted: $ (0.06 ) $ (0.02 ) Weighted average number of shares used in computing basic and diluted net loss per share: Basic 17,847,740 15,983,273 Diluted 17,847,740 15,983,273 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Jun. 30, 2019 | |
STOCKHOLDERS' EQUITY | |
Stock option activity | Options Weighted Average Exercise Price Average Remaining Life Outstanding and exercisable – March 31, 2019 918,020 0.68 9.43 Vested 280,352 0.74 Expired — — — Outstanding and exercisable – June 30, 2019 1,198,372 $ 0.69 5.13 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Summary of deferred tax assets | June 30, 2019 March 31, 2019 Net loss carryforward $ 1,098,000 $ 817,000 Valuation allowance (1,098,000 ) (817,000 ) Total deferred tax assets $ — $ — |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
Accumulated depreciation | $ (22,985) | $ (16,278) |
Property and equipment, net | 75,961 | 75,948 |
Computers and equipment | ||
Property and equipment, gross | 25,028 | 20,565 |
Office equipment | ||
Property and equipment, gross | 49,724 | 49,724 |
Machinery and equipment | ||
Property and equipment, gross | $ 24,194 | $ 21,937 |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net Loss | $ (1,122,198) | $ (249,566) |
Net Loss Per Share: | ||
Basic and Diluted | $ (0.06) | $ (0.02) |
Weighted average number of shares used in computing basic and diluted net loss per share: | ||
Basic | 17,847,740 | 15,983,273 |
Diluted | 17,847,740 | 15,983,273 |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Research and development | $ 703,783 | $ 135,789 | ||
Cash and cash equivalents | 5,706,628 | 4,053,771 | $ 6,553,768 | $ 4,296,676 |
Uninsured cash and cash equivalents | 5,421,940 | $ 6,269 | ||
Depreciation expenses | $ 6,714 | $ 1,395 | ||
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 ($) | Jun. 30, 2019 | Mar. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued expenses | $ 253,474 | $ 178,929 |
PAYABLE TO RELATED PARTY (Detai
PAYABLE TO RELATED PARTY (Details Narrative) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
Related Party Transactions [Abstract] | ||
Payable to related party | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | 3 Months Ended |
Jun. 30, 2019$ / sharesshares | |
STOCKHOLDERS' EQUITY | |
Options outstanding and exercisable, beginning | shares | 918,020 |
Options vested | shares | 280,352 |
Options expired | shares | 0 |
Options outstanding and exercisable, ending | shares | 1,198,372 |
Weighted average exercise price outstanding and exercisable, beginning | $ / shares | $ .68 |
Weighted average exercise price vested | $ / shares | .74 |
Weighted average exercise price expired | $ / shares | .00 |
Weighted average exercise price outstanding and exercisable, ending | $ / shares | $ .69 |
Average remaining life outstanding and exercisable, beginning | 9 years 5 months 5 days |
Average remaining life outstanding and exercisable, ending | 5 years 1 month 17 days |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Jun. 30, 2019 | Mar. 31, 2019 |
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 | 17,870,261 | 17,840,261 |
Common stock, shares outstanding | 17,870,261 | 17,840,261 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Net loss carryforward | $ 1,098,000 | $ 817,000 |
Valuation allowance | (1,098,000) | (817,000) |
Total deferred tax assets | $ 0 | $ 0 |