Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (this Report). This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance and capital raising efforts, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on June 29, 2026 and in other reports that we file from time to time with the Securities and Exchange Commission. Any statements about our business, financial results, financial condition and operations contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "expects," "intends," "plans," "projects," or similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described under Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2026. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors including, without limitation, inflationary risks, including the risk of increasing costs for certain of the Company's components and related issues that may arise therefrom. Many of those factors are outside of our control and could cause actual results to differ materially from those expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

Our fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Report, refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 2027 refers to the fiscal year ending March 31, 2027). Unless the context requires otherwise, references to "we," "us," "our," and the "Company" refer to Modular Medical, Inc. and its consolidated subsidiary.

Company Overview

We are a commercial-stage medical device company focused on the design, development and commercialization of innovative insulin pumps using modernized technology to increase pump adoption in the diabetes marketplace. Through the creation of a novel two part patch pump, we seek to fundamentally alter the trade-offs between cost and complexity and access to the higher standards of care that presently-available insulin pumps provide. By simplifying and streamlining the user experience from introduction, prescription, reimbursement, training and day-to-day use, we seek to expand the wearable insulin delivery device market beyond the highly motivated "super users" and expand the category into the mass market. The product seeks to serve both the type 1 and the rapidly growing, especially in terms of device adoption, type 2 diabetes markets. In January 2024, we submitted a 510(k) premarket notification to the United States Food and Drug Administration (the "FDA") for our initial product, our MODD1, and, in September 2024, we received FDA clearance to market and sell our MODD1 pump in the United States. In August 2025, we announced the first human use of our MODD1 pump delivering insulin to a human patient. In addition, in August 2025, we announced our next-generation patch pump, branded as Pivot. We submitted a 510(k) premarket notification to the FDA for our Pivot product on November 13, 2025, and we received regulatory approval on April 9, 2026. In June 2026, we announced commercial availability of our Pivot product and commenced initial shipments. We are actively working to i) expand commercial activities for our Pivot product across certain metropolitan markets, ii) obtain regulatory clearance to market and sell our Pivot product in foreign jurisdictions, iii) improve the manufacturability and usability of our Pivot product and iv) develop new pump products.

In April 2026, we completed a registered direct offering (the "April 2026 Offering") of 750,000 shares of our common stock. The gross proceeds to us from the April 2026 Offering were approximately $3.375 million, before deducting offering expenses.

Historically, we have financed our operations principally through private placements and public offerings of our common stock and warrants and sales of convertible promissory notes. Based on our current operating plan, there is substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included in Item 1 of this Report are issued. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities, to support our future operations. If we are unable to secure additional capital, we will be required to curtail our research and development initiatives and take additional measures to reduce costs. We do not currently have revenues to generate cash flows to cover operating expenses. Since our inception, we have incurred operating losses and negative cash flows in each year due to operating expenses and capital expenditures incurred to conduct our operations. For the three months ended June 30, 2026 and year ended March 31, 2026, we incurred net losses of approximately $6.5 million and $28.2 million, respectively, and we had an accumulated deficit of approximately $119.4 million as of June 30, 2026. These and prior year losses have resulted in significant negative cash flows and have necessitated that we raise substantial amounts of additional capital during this period. This raises substantial doubt about our ability to continue as a going concern, which was also expressed by our independent registered public accounting firm in its report on our consolidated financial statements for fiscal 2026. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities to support our future operations.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. On an ongoing basis, we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances. Actual results may differ from these estimates and reported results could differ under different assumptions or conditions. Our significant accounting policies and estimates are disclosed in Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal 2026. As of June 30, 2026, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

Research and Development

Our research and development, or R&D, expenses include personnel, consulting, testing, materials and supplies, depreciation and amortization and other non-capitalizable operational costs associated with the production of our insulin pump product. We expense R&D costs as they are incurred.

R&D expenses decreased for the three months ended June 30, 2026 compared with the same period of 2025, primarily due to decreases in personnel costs of approximately $0.3 million, stock-based compensation expenses of approximately $0.2 million, consulting costs of approximately $0.2 million, and material costs of approximately $0.2 million, as partially offset by an increase in depreciation expense of approximately $0.1 million.

Our full-time R&D employee headcount decreased to 42 at June 30, 2026 from 54 at June 30, 2025, primarily as a result of a reduction of force effected in March 2026. R&D expenses included stock-based compensation expenses of approximately $0.4 million and $0.6 million for the three-month periods ended June 30, 2026 and June 30, 2025, respectively. We expect research and development expenses to remain consistent for the remainder of fiscal 2027.

Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources, legal, and general management.

SG&A expenses increased for the three months ended June 30, 2026 compared with the same period of 2025, primarily as a result of increases in sales and marketing expenses of approximately $0.3 million, professional services and investor relations fees of approximately $0.3 million and personnel costs of approximately $0.1 million, as partially offset by decreases in stock-based compensation expenses of approximately $0.1 million and other miscellaneous decreases of approximately $0.1 million.

Our full-time SG&A employee headcount decreased to 9 at June 30, 2026 from 12 at June 30, 2025. SG&A expenses included stock-based compensation expenses of approximately $0.1 million for each of the three-month periods ended June 30, 2026 and June 30, 2025, respectively. We expect SG&A expenses to increase in fiscal 2027 as compared with fiscal 2026, as we continue to expand our sales and marketing organization and increase our general and administrative headcount to support the commercialization of our pump product during fiscal 2027.

Liquidity and Capital Resources; Changes in Financial Condition

We do not currently have revenues to generate cash flows to cover operating expenses. Since our inception, we have incurred operating losses and negative cash flows in each year due to costs incurred in connection with our operations. For the three months ended June 30, 2026 and year ended March 31, 2026, we incurred net losses of approximately $6.5 million and $28.2 million, respectively. At June 30, 2026, we had a cash balance of $3.9 million and an accumulated deficit of approximately $119 million. When considered with our current operating plan, these conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included in Item 1 of this Report are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our operating needs include the planned costs to operate our business, including amounts required to fund continued research and development activities, working capital and capital expenditures. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities to support our future operations. In April 2026, we completed a registered direct offering of our common stock for net proceeds of approximately $3.0 million. In addition, in June 2026, we received proceeds of approximately $0.7 million from sales under our at-the-market offering program. Subsequent to June 30, 2026, we received proceeds of approximately $5.1 million from sales under our at-the-market offering program. Our future capital requirements and the adequacy of our available funds will depend on many factors, including, without limitation, our ability to successfully commercialize our product, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product offerings. If we are unable to secure additional capital timely, we may be required to curtail R&D initiatives, further reduce headcount and take additional measures to reduce costs in order to conserve our cash.

For the three months ended June 30, 2026, we used approximately $6.0 million of cash in operating activities, which primarily resulted from our net loss of approximately $6.5 million and net changes in operating assets and liabilities of approximately $0.4 million, as adjusted for stock-based compensation expenses of approximately $0.4 million, depreciation and amortization expenses of approximately $0.5 million and other immaterial adjustments. For the three months ended June 30, 2025, we used approximately $5.4 million of cash in operating activities, which primarily resulted from our net loss of approximately $6.7 million as adjusted for net changes in operating assets and liabilities of approximately $0.2 million, stock-based compensation expenses of approximately $0.7 million and depreciation and amortization expenses of approximately $0.4 million and other immaterial adjustments.

For the three months ended June 30, 2026 and 2025, cash used in investing activities of approximately $0.7 million and $0.9 million, respectively, was for the purchase of property and equipment.

Cash provided by financing activities of approximately $3.6 million for the three months ended June 30, 2026 was primarily attributable to approximately $3.0 million of net proceeds from a registered direct offering of our common stock and $0.7 million of sales of common stock under our at-the-market offering program, as partially offset by immaterial payments. Cash provided by financing activities of $0.7 million for the three months ended June 30, 2025 was attributable to proceeds from the sale of common stock under our at-the-market offering program.

Purchase Obligations

Our primary purchase obligations include purchase orders for machinery and equipment. At June 30, 2026, we had outstanding purchase orders for machinery and equipment and related expenditures of approximately $0.8 million. At June 30, 2026, we had outstanding purchase orders for supplies and inventory components of approximately $0.2 million.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are detailed in Note 1 in the Notes to the Condensed Consolidated Financial Statements included in Item 1 of this Report.