Modular Medical, Inc.

Item 2. 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 20, 2025 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, 2025. 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 2026 refers to the fiscal year ending March 31, 2026). 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 pre-revenue 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 intend to commercialize our Pivot product, and will not commercialize our MODD1 product. We submitted a 510(k) premarket notification to the FDA for our Pivot product on November 13, 2025, when the United States government shutdown ended. We intend to initiate our commercial launch with the Pivot product, when the required regulatory approval from the FDA is received, which we believe may occur by March 31, 2026 or shortly thereafter. We are actively working to i) obtain regulatory clearance and prepare to commence commercialization of our Pivot product, 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.

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, 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 exists. 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 have provided additional disclosure in Note 1 to the condensed consolidated financial statements in Item 1 of this Report and under Liquidity below.

Recent Developments

Financing

As disclosed in Note 4 to the condensed consolidated financial statements in this Report, in December 2025, the Company entered into a firm commitment underwritten offering for net proceeds of approximately $4.8 million.

Compliance with Nasdaq Continued Listing Requirements

On June 30, 2025, we received a letter from the Listing Qualifications Staff of the Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days ending on June 27, 2025, we no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until December 29, 2025, in which to regain compliance.

On December 23, 2025, we submitted a request to Nasdaq for an additional 180-day period (the “Second Compliance Period”) to provide additional time for us to demonstrate compliance with the minimum bid price requirement. In such request, we communicated that we intend to regain compliance during the Second Compliance Period by effecting a reverse stock split. On December 30, 2025, we received written notification from the Listing Qualifications Department of Nasdaq, granting our request for a 180-day extension to regain compliance with the minimum bid price requirement. We now have until June 29, 2026 to meet the requirement. If at any time prior to June 29, 2026, the bid price of our common stock closes at $1 per share or more for a minimum of 10 consecutive business days, we will regain compliance with the minimum bid price requirement. In the event we do not regain compliance with the minimum bid price requirement during the additional 180-day extension, Nasdaq will provide written notification to us that our Common Stock will be delisted. At that time, we may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful. On January 23, 2026, at our annual meeting of shareholders, our shareholders authorized our board of directors to effect a reverse split, as necessary, to regain compliance. We will continue to monitor the closing bid price of our common stock and evaluate available options to regain compliance with the minimum bid price requirement. Nasdaq’s extension notice has no immediate effect on the listing or trading of our common stock, which continues to trade on the Nasdaq Capital Market under the ticker symbol, “MODD.”

Increase in Authorized Shares

On January 23, 2026, we filed a certificate of amendment to our Amended and Restated Articles of Incorporation with the secretary of state of the state of Nevada to increase our number of authorized shares of common stock to 250,000,000.

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 the year ended March 31, 2025. As of December 31, 2025, 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 increased for the three months ended December 31, 2025 compared with the same period of 2024, primarily due to an increase in personnel-related costs of approximately $0.5 million, an increase in consulting and outside services costs of $0.6 million, an increase in shipping and freight costs of approximately $0.2 million, an increase in depreciation expense of approximately $0.1 million and a $0.1 million increase in stock-based compensation expenses.

R&D expenses increased for the nine months ended December 31, 2025 compared with the same period of 2024, primarily due to increased personnel-related costs of approximately $2.4 million, an increase in consulting and outside services costs of $1.2 million, an increase in materials and supplies costs of $0.6 million, an increase in depreciation expense of approximately $0.5 million, and an increase in shipping and freight costs of approximately $0.5 million and increases and a $0.2 million increase in stock-based compensation expenses.

Our full-time R&D employee headcount increased to 58 at December 31, 2025 from 44 at December 31, 2024. R&D expenses included stock-based compensation expenses of approximately $0.4 million and $0.3 million for the three-months ended December 31, 2025 and 2024, respectively, and $1.7 million and $1.5 million for the nine-month periods ended December 31, 2025 and 2024, respectively. We expect research and development expenses to remain flat to decrease in the last quarter of fiscal 2026, as we manage expenses in anticipation of expected FDA clearance and the commercialization of our Pivot pump product.

Selling, General and Administrative

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

SG&A expenses increased for the three months ended December 31, 2025 compared with the same period of 2024, primarily as a result of increases in personnel costs of approximately $0.4 million, increases in consulting expenses of approximately $0.6 million, which was partially offset by a decrease in legal and professional services of $0.2 million.

SG&A expenses increased for the nine months ended December 31, 2025 compared with the same period of 2024, primarily as a result of increases in personnel costs of approximately $1.0 million, increases in consulting expenses of approximately $1.2 million, and a $0.3 million increase in marketing costs, which was partially offset by a $0.1 million decrease in stock-based compensation expenses.

Our full-time SG&A employee headcount increased to 11 at December 31, 2025 from 4 at December 31, 2024. SG&A expenses included stock-based compensation expenses of approximately $0.1 million for the three-month periods ended December 31, 2025 and 2024, and $0.4 million and $0.5 million for the nine months ended December 31, 2025 and 2024, respectively. We expect SG&A expenses to remain flat to decrease in the last quarter of fiscal 2026, as we manage expenses in anticipation of expected FDA clearance and the commercialization of our Pivot pump product.

Liquidity and Capital Resources; Changes in Financial Condition 

Cash Flows

For the nine months ended December 31, 2025, we used approximately $17.9 million of cash in operating activities, which primarily resulted from our net loss of approximately $21.9 million, as adjusted for net changes in operating assets and liabilities of approximately $0.5 million, stock-based compensation expenses of approximately $2.1 million, an approximately $0.1 million change in fair value of warrant liabilities and depreciation and amortization expenses of approximately $1.2 million. For the nine months ended December 31, 2024, we used approximately $11.4 million of cash in operating activities, which primarily resulted from our net loss of approximately $13.9 million and net changes in operating assets and liabilities of approximately $0.3 million, as adjusted for stock-based compensation expenses of approximately $2.0 million, depreciation and amortization expenses of approximately $0.7 million and other immaterial adjustments.

For the nine months ended December 31, 2025 and 2024, cash used in investing activities of approximately $2.9 million and $1.5 million, respectively, was for the purchase of property and equipment.

Cash provided by financing activities of approximately $10.7 million for the nine months ended December 31, 2025 was attributable to $4.8 million of net proceeds from a public offering of our common stock and warrants completed in December 2025, $4.0 million of net proceeds from a warrant inducement offering completed in September 2025 and $1.9 million of net proceeds from sales of common stock under the ATM Agreement. Cash provided by financing activities of approximately $10.7 million for the nine months ended December 31, 2024 was attributable to $7.3 million of net proceeds from the issuance of common stock in a public offering, $2.1 million of net proceeds from sales of our common stock under the ATM Agreement and $1.3 million of proceeds from exercises of common stock purchase warrants.

Purchase Obligations

Our primary purchase obligations include purchase orders for machinery and equipment. At December 31, 2025, we had outstanding purchase orders for machinery and equipment and related expenditures of approximately $2.0 million.

Going Concern - Working Capital

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 R&D activities and SG&A expenses associated with our operations. For the nine months ended December 31, 2025 and year ended March 31, 2025, we incurred net losses of approximately $21.9 million and $18.8 million, respectively. At December 31, 2025, we had a cash balance of $2.9 million and an accumulated deficit of $106.6 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. We currently lack sufficient liquidity to fund our operations for the next 30 days. If we do not obtain additional financing, we will be unable to meet our upcoming obligations, including employee compensation and vendor payments. In addition, our independent registered public accounting firm, in its report on our consolidated financial statements for the year ended March 31, 2025, expressed substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements presented in Part I, Item 1 of this Report have been prepared assuming that we will continue as a going concern, and do not include any adjustments that might result from the outcome of this uncertainty.  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. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us. We are currently seeking additional financing in order to meet our cash requirements for the foreseeable future. If we are unable to obtain adequate capital to fund our operations, we would not be able to continue to operate our business pursuant to our current business plan, which would require us to modify our operations to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments in our product, including but not limited to research and development and other activities, which would have a material impact on our operations or force us to discontinue our operations entirely. 

In November 2023, we entered into a Sales Agreement (the “ATM Agreement”) with Leerink Partners LLC (“Leerink”) under which we may offer and sell, from time to time at our sole discretion, shares of our common stock (subject to availability on our shelf registration statement) through an “at the market offering” program under which Leerink will act as sales agent or principal. During the nine months ended December 31, 2025, we received net proceeds of approximately $1.9 million from sales of common stock under the ATM Agreement. In December 2025, we completed a public offering of our common stock and warrants for net proceeds of approximately $4.8 million.

If we were to raise additional capital through sales of our equity securities, our shareholders would suffer dilution of their equity ownership. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios, any of which could harm our business, operating results and financial condition. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

Our failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our existing operations.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements or obligations that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources.

Indemnifications

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. We have also entered into indemnification agreements with our officers and directors. No material amounts related to these indemnifications are reflected in our condensed consolidated financial statements for the three and nine months ended December 31, 2025.

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.