MODD US Equity☆

UNITED STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM10-K

(Mark One)

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: March 31, 2022

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

MODULAR MEDICAL, INC.

(Exact name of registrant as specified in its charter)

16772 W. Bernardo Drive, San Diego, California 92127

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (858) 800-3500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 per share MODD The Nasdaq Stock Market, LLC

Securities registered pursuant to

Section 12(g) of the Act:

(Title of class)

Indicate by

check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes oNox

Indicate by

check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes oNox

Indicate by

check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.

Yesx No o

Indicate by

check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period

that the registrant was required to submit and post such files).

Yes oNox

Indicate by

check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o

Non-accelerated Filer x Smaller reporting company x

Emerging growth company x

If an emerging growth company, indicate

by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial

accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

Indicate by

check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes oNox

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, based on the average of the bid and asked price of the common stock on the OTC Pink Open Market of $9.51 per share, was $14,862,263 as of September 30, 2021.

The number of shares of the registrant’s common stock outstanding, par value $0.001 per share, as of June 24, 2022, was 10,911,684.

ANNUAL

REPORT ON FORM 10-K

FOR

THE YEAR ENDED MARCH 31, 2022

TABLE

OF CONTENTS

Part I

Item 1. Business 4

Item 1A. Risk Factors 23

Item 1B. Unresolved Staff Comments 37

Item 2. Properties 37

Item 3. Legal Proceedings 37

Item 4. Mine Safety Disclosures 37

Part II

Item 6. Reserved 39

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 43

Item 8. Financial Statements and Supplementary Data 44

Item 9A. Controls and Procedures 62

Item 9B. Other Information 63

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 63

Part III

Item 10. Directors, Executive Officers and Corporate Governance 64

Item 11. Executive Compensation 71

Item 14. Principal Accountant Fees and Services 76

Part IV

Signatures 79

FORWARD-LOOKING

STATEMENTS

This Annual Report

on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities

Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), that relate to future events or to our future operations or financial performance. Any forward-looking statement involves

known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements

to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking

statement.

Words such as, but

not limited to, “believe,” “expect,” “anticipate,” “estimate,” “forecast,”

“intend,” “may,” “plan,” “potential,” “predict,” “project,” “targets,”

“likely,” “will,” “would,” “could,” “should,” “continue,” “scheduled”

and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements,

although not all forward-looking statements contain these identifying words. Although we believe that we have a reasonable basis for

each forward-looking statement contained in this report, we caution you that these statements are based on our estimates or projections

of the future that are subject to known and unknown risks and uncertainties and other important factors that may cause our actual results,

level of activity, performance, experience or achievements to differ materially from those expressed or implied by any forward-looking

statement. Actual results, level of activity, performance, experience or achievements may differ materially from those expressed or implied

by any forward-looking statement as a result of various important factors, including our critical accounting policies and risks and uncertainties

relating, to:

· our strategies, prospects, plans, expectations, forecasts or objectives;

· our ability to expand, protect and maintain our intellectual property rights;

· our analysis of the target market for our insulin pump;

· regulatory developments in the United States and other countries;

· general economic, business, political and social conditions;

· our ability to generate significant revenues and achieve profitability;

· our ability to manage the growth of our business;

· the success of competing third-party products;

· various other matters, many of which are beyond our control.

PART

I

ITEM

1. BUSINESS

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 2022 refers to the fiscal year ended March 31, 2022). Unless the context requires otherwise,

references to “we,” “us,” “our,” and the “Company” refer to Modular Medical, Inc. and

its consolidated subsidiary.

Overview

We are a development

stage medical device company focused on the design, development, and commercialization of an innovative insulin pump using modernized

technology to increase pump adoption in the diabetes marketplace. Through the creation of a novel two-part patch pump, our MODD1 product

candidate, or MODD1, 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 candidate seeks to serve both the Type 1 and the

rapidly growing especially in terms of device adoption, type 2 diabetes markets.

Differentiation

We believe that there

are a number of shortcomings and issues with currently available insulin pumps that prevent a substantial number of people who require

insulin on a daily basis from choosing an insulin pump to treat their diabetes. We believe, that by tailoring our insulin pump to address

such factors, we can expand the scope and adoption rate of insulin pump usage. We believe that to achieve broader market acceptance,

an insulin pump must be easier to learn to use, be less time consuming to operate, more intuitive to both patients and physicians, and

meet the standards for coverage by insurance providers so that co-payments required from patients are affordable and the hurdles to insurance

coverage are significantly reduced.

Among the more

prominent issues are:

Our team has substantial

knowledge of the diabetes industry and experience in developing, obtaining regulatory authorization for, and bringing insulin pumps to

market. Based on this experience, we believe that our innovative insulin pump, using a new and proprietary method of pumping insulin,

can address most or all of these shortcomings. It provides a state-of-the-art insulin pump capable of both basal (steady flow) and bolus

(mealtime dosing) insulin disbursement. It also has been designed considering a natural migration path to multi-chamber/multi-liquid

pumps, potentially offering an exciting array of new therapies to patients with diabetes and other conditions.

Our goal is to become

the leader in expanding access to insulin pump technology to a wider portion of diabetes sufferers and provide not just care for the

super users, but “diabetes care for the rest of us.” We believe there is a substantial opportunity to penetrate the type

2 MDI marketplace, whether through this new insulin pump or further simplification of pumps for the type 2 marketplace.

The MODD1 is a high-precision,

first-line pump that we believe represents the best choice for new pump patients because it is easy to afford, easy to learn, easy to

use, and has a revolutionary design and technology that enable precision with low-cost manufacture and high reproducibility.

Key features include:

· One button interface, easy to learn and use;

· 90-day reusable, 3-day disposable;

· Removable at any time from an adhesive bracket;

· No external controller required, no charging, no battery replacement; and

· Slim profile, lighter weight.

A proprietary survey

of American healthcare payors representing 50 million covered lives (approximately one-third of U.S. covered lives) performed for us

by industry leading survey firm ISA has demonstrated that payors are willing to grant equivalent or preferential coverage for a product

with this feature set at launch in exchange for rebates of approximately 20%. These costs are built into all of our models.

Diabetes

Classifications and Therapies

Diabetes is typically

classified as either type 1 or type 2:

Glucose,

the primary source of energy for cells, must be maintained at certain levels in the blood in order to permit optimal cell function and

health. In people with diabetes, blood glucose levels are not well controlled and frequently become very high, a condition known as hyperglycemia,

and very low, a condition called hypoglycemia. Hyperglycemia can lead to serious long-term complications, including blindness, kidney

disease, nervous system disease, occlusive vascular diseases, lower-limb amputation, stroke, cardiovascular disease, and death. Hypoglycemia

can lead to confusion or loss of consciousness, often requiring a visit to the emergency room or, in certain cases, result in seizures,

coma, and/or death.

All people with type

1 diabetes, which is our primary market, require daily insulin. According to the Seagrove 2021 Diabetes Blue Book, approximately 18%

of people with type 2 diabetes in the United States, or 4.7 million people, require insulin (basal alone represent 3.1 million and basal

plus mealtime represent 1.6 million) to manage their diabetes. In this Report, we refer to people with type 1 diabetes and people with

type 2 diabetes who require mealtime insulin as “insulin-requiring people with diabetes.”

Currently, there are two primary therapies

available for insulin-requiring people with diabetes: multiple daily insulin injections directly into the body through syringes or insulin

pens, referred to as Multiple Daily Injection, or MDI therapy, or the use of an insulin pump to deliver mealtime insulin boluses (single

dose) to help with glucose absorption after carbohydrate consumption and a continuous subcutaneous insulin infusion, or CSII therapy,

into the body. Generally, CSII therapy is considered to provide a number of advantages over MDI therapy, primarily an improvement in

glycemic control, as measured by certain diabetes management tests such as hemoglobin A1c (HbA1c) measure and more recently Time in Range

(TIR) where a continuous glucose measuring device is used to calculate this test. Among other medical benefits, it has been demonstrated

that insulin pump use can decrease glucose variability, reduce the number of hypoglycemia, decrease the daily doses of insulin and reduce

the fear of hypoglycemia.

Notwithstanding

these advantages, the difficulty in use resulting from the complexity and cumbersome design of available insulin pumps as well as high

and often prohibitive costs for both the patient and insurance provider has resulted not only in dissatisfaction among many existing

pump users (fewer than half purchase a new pump after warranty expires per Seagrove Partners (estimate), but also has severely limited

the adoption rate of insulin pumps by a large segment of the MDI diabetes population, who we refer to in this Report as “Almost

Pumpers.”

We define Almost Pumpers

as insulin-requiring people with diabetes who are aware of pumps and their potential benefits but, because of past experience, pump shortcomings,

cost, complexity and time and learning required to adopt and utilize available insulin pumps, continue to receive their daily insulin

through MDI therapy.

Our initial focus for

our insulin pump is the almost pumper segment population located in the United States.

Our research, along

with marketplace data, estimates that 32% of Americans with type 1 diabetes use insulin pump therapy and 28% of Americans with type 1

diabetes (44% of those who currently utilize MDI) can be classified as having an interest in pump adoption and meeting the American Diabetes

Association guidelines of glucose control if their objections to the currently available suite of products can be overcome. They do not

want to closely manage their glucose levels and incur the associated time and effort involved. They are the Almost Pumpers. We have developed

what we believe to be the most technologically advanced delivery system overcome the objections and provided motivation for this market.

We believe that there are four addressable hurdles to adoption:

· Usability: the device needs to be easy to learn and to operate;

We believe this conversion

process, engaging people to try and thereby receive the benefits of our technology will substantially increase adoption of insulin pumps

among both those with type 1 diabetes and type 2 diabetes who remain reliant upon multiple daily injections. Diabetes is a disease that

appears throughout the world. Therefore, we cannot segment the market by socioeconomics, education or level of care. We intend to create

an insulin pump that appeals to all Almost Pumpers.

Market

The International Diabetes

Federation, or IDF, estimates that, in 2019, approximately 460 million people were living with diabetes worldwide and, that by 2045,

this number will increase to approximately 700 million people.

An estimated 34 million

people in the United States live with diabetes. Within this group, type 1 diabetes accounts for approximately 1.8 million people (7%

of total) with the remainder being type 2 diabetes. However, of the people with type 2 diabetes about 1.6 million of them require intensive

insulin treatments to manage their diabetes. This represents a large and growing market with the effects of diabetes accounting for roughly

25% of all healthcare dollars spent annually in the United States.

According to

the National Diabetes Health Care Provider Survey conducted by Seagrove Partners, approximately 25% of the 1.6 million highly insulin intensive type 2

diabetes have considered going “on pump.”

Insulin pumps have

been shown to provide a higher level of care for insulin dependent people with diabetes and result in better glycemic control, fewer

comorbidities, fewer trips to the emergency room, and higher overall quality of life. They also result in lower overall costs to the

healthcare system, reducing typical expense per patient year from $27,195 to $16,992.

Despite these

benefits, only 1 in 3 (33%) of the 1.8 million Americans with type 1 diabetes and very few of the 1.6 million type 2 diabetes intensively

treated with insulin currently use an insulin pump, for a total of approximately 670,000 current users, with only a slow increase of

insulin pump use. The remaining 68% of type 1 diabetes’ and virtually all of the type 2 diabetes’ rely on multiple daily

injections (MDI) for glucose control. Decades of advances in technology advances have left these non-pumpers at a significant disadvantage

from a control perspective versus their “pumping” counterparts.

We have identified

a large segment of the market that we refer to as “Almost Pumpers.” Almost Pumpers are those insulin-requiring people with

diabetes (type 1 diabetes and type 2 diabetes) who feel that they would adopt the pump if it were less expensive, less time consuming,

less technically intimidating, and if there was no separate controller. They represent approximately 32% of the type 1 diabetes market

correlating to a $1.9 billion growth opportunity.

Insulin pumps on the

market today require a substantial amount of time to manage the therapy, have high out of pocket costs that place these technologies

out of reach for a large part of the population, and are feature-heavy with complex systems that have hampered adoption and intimidated

many users. The most commonly used insulin pumps today require extensive training and hours of daily management. The average pump user

must go through 42 steps of setup and refill process every 72 hours to “stay on track.”

The

current reluctance to adopt the insulin pump has had serious consequences on the healthcare system. In the United States, people

living with type 1 diabetes have struggled to attain glycemic targets. A 2019 analysis of the large type 1 diabetes Exchange clinical

registry found that only 21% of U.S. adults with type 1 diabetes achieved the ADA A1c goal (<7.0%). Further, according to a

study published in JAMA Internal Medicine, researchers found no significant improvements in diabetes care between 2005 and 2016,

with persistent gaps in care related to socioeconomic status.

The recent introduction

and rapid adoption of Abbott Labs’ Freestyle Libre, or the Libre, has made continuous glucose monitoring, or CGM, easier and more

affordable, expanding the product category, and doubling its size. Now for the first time, there is an easy, less painful (i.e., no more

finger sticks) way for patients to have the data they need to understand more about their glucose levels and their insulin requirements.

Access to such data has motivated patients to ask their diabetes clinician how they can achieve better glycemic control and made them

more comfortable with using technology and wearables to treat their diabetes. Pumps offer a clear pathway to better control and better

overall care. We believe that the insulin pump market is ready for a similar transition as that experienced in the CGM space. We believe our MODD1 pump

represents a new and better offering to assist and induce a wide variety of patients to make the transition and bridge the void to superior

control by becoming a “pumper.”

We believe the present

pump marketplace is approximately a $1.9 billion market, comprising approximately 33% of type 1 diabetes pumpers and a small group of

type 2 diabetes pumpers. Seagrove Partners estimates that 28% of type 1 diabetes patients and 25% of type 2 diabetes patients would adopt

technology that was easier to use, access and pay for. We believe the total addressable market approximates $3 billion, assuming revenue

of $4,128 per patient, per year. We expect to spend approximately 15% of our total revenue on discounts and free samples to encourage

adoption of our pump product.

We are dedicated to

helping all people with diabetes gain access to high quality care. We aim to help people with diabetes, especially Almost Pumpers and

the historically underserved communities, gain access to insulin pump technology by making it affordable and easy to use.

Diabetes

Care is at an Inflection Point

We believe that

the insulin pump market stands at a crossroads as a confluence of events makes the timing for a new product introduction ideal.

2020 was a very

difficult year in diabetes. Between COVID-19 and a loss of glycemic control during quarantines and isolation, deaths from diabetes rose

by 17% in 2020 versus the prior year. This was sharpest among the young who saw deaths rise 29% in the 25 to 44 year-old demographic.

This has created a pain point and a desire to find new and better solutions and has raised awareness among patients, caregivers, payors,

and policy makers.

COVID-19 also

encouraged (and required) trial and adoption of telehealth models and a great many people have found them to their liking with a high

proportion of patients and of health care providers, or HCPs, that want to continue to use these technologies. We expect much of this

shift and newfound comfort with distance care models to persist and believes that this can provide a patient acquisition and engagement

model for insulin pumps and diabetes care, especially for pumps optimized for free trial and easy learning.

At the same

time, reimbursement for patch pumps has been increasingly moving to a pharmacy benefits manager, or PBM, model, which simplifies reimbursement

which will further aid in a “frictionless launch.” This represents a fundamental shift in the insulin pump market, making

onboarding rapid and simplifying a previously complex and time-consuming “insurance journey.”

The CGM space

(wearable devices that monitor blood glucose levels) has been experiencing explosive growth largely driven by the Libre. This product

was a more affordable, easier to use version of the popular Dexcom CGM product. Not only is it now a larger (by revenues) product than

Dexcom, but it accomplished this without seeming to slow Dexcom’s growth but rather by growing a new category with a new type of

user.

These users

are increasingly interested in adopting technology and wearables to manage their diabetes. We believe they are a natural market for a

new type of pump if it can meet their needs and address their objections and that the conjunction of the above trends represents a unique

opportunity in the insulin pump market’s history.

Diabetes technology

companies understand that we are at a turning point with new markets. This can be seen with increased discussion around this topic during

recent national diabetes conferences, as well as but also an increase in marketing promotion. For example, Dexcom aired a $5.5 million

30-second commercial during the 2021 Super Bowl.

All these recent changes

support the high proportion of type 1 diabetes and type 2 diabetes intensively treated with insulin that are considered as Almost Pumpers,

number that may grow in the next years and that may be more reachable with adequate marketing strategies.

Our

Insulin Pump

Instead of building

complex, bespoke, and difficult to manufacture and maintain pumping and control systems, we began with the technology and the user in

mind. Using proprietary and patented methods of insulin measurement, we were able to eschew complex mechanisms and instead built a product

candidate using only parts from high volume consumer electronics manufacturing lines, breaking the cost vs functionality curve that has

existed in the insulin pump space and representing the first truly modern insulin pump design. This is a new kind of product for a new

kind of patient.

The pre-production

models of our low-cost insulin pump are now undergoing the testing required to submit to the FDA for clearance to market them in the

United States. We continue to devote, substantial time and resources to better understand the needs and preferences of Almost Pumpers

and the specific patent/provider/payor requirements to motivate change from MDI.

MODD1 has several distinguishing

features:

1 - The pump has a

simple button to press to deliver insulin as the patient requires it. The electronic pump uses a simple motor and rotating cam to motivate

the insulin into the patient along with a low power Bluetooth and near field communication chips to allow the patient to communicate

with their smart phone, tablet, or other mobile computing platform, as appropriate.

2 - The pump snaps

together with a three-day disposable cartridge that is patient filled with insulin for delivery. It includes the power source and a simple

coin cell that allows it to run through the 80-hour life of the cartridge.

3 - There is a set

(not shown) that contains a soft 6 millimeter cannula and an introducer for insertion into the skin and removal of the needle used to

transfer insulin to the body.

4 - MODD1 comes with

a variety of methods for the patient to wear the pump. Options include: a base plate with adhesive (shown) for attaching to the body

that has features for holding the pump to the patient; overwraps to hold the product candidate to the patient; and a velcro strap with

a base plate suitable for wrapping around the arm or leg of the patient.

The system will deliver

a small continuous rate called a basal that will provide approximately 50% of the total daily dose required and the user will use the

on-pump button to administer boluses, typically before and after meals.

The objective is to

make the product candidate simple to acquire and take home, simple to learn and most importantly, simple to use to expand the pump market,

drive adoption and ultimately better clinical outcomes.

Technological

Advantages

The adoption of new

ultra-high volume technologies will result in far easier manufacturing scale up as parts sourcing and assembly processes are far easier.

The MODD1 was designed from the beginning for mass manufacturing processes and “lights out” or near lights out production

assembly lines. This advantage is compounded by the high availability and already optimized cost reduction in its components. This has

resulted in a cost of goods, estimated on the competitors’ announced margins and sales, 50% lower than our closest patch pump competitor.

The adoption of modern,

miniaturized technologies has led to numerous other advantages as well. The MODD1 pump is smaller in overall volume than Insulet’s

popular Omnipod product, or the Omnipod, and has a lower profile to the skin. Despite this, it holds a full 3mL (300 units) of insulin

in line with full sized pumps such as Tandem and Medtronic, 50% more than the 2mL reservoir in the Omnipod. We believe that this volume

advantage over other patch pumps will be significant as 24% of type 1 and over 50% of the rapidly growing type 2 market require more

than 2mL of insulin every three days (the expected wear time of patch pumps).

In addition, our new

and patented pumping modality will provide what we believe is the most even (and thus closest to the function of a healthy pancreas)

delivery of basal insulin in the industry. Basal rate can be delivered almost continuously while other pumps are delivering micro-boluses

every 5 minutes for the Omnipod and Tandem and Medtronic pumps. We plan to demonstrate the impact of our system on glycemic control in

a future clinical study.

The technology allows

the patient to simply add insulin and operate. The battery is included in each cartridge and the device is operated without a controller.

Nothing needs charging. MODD1 has been made push button simple to appeal to a wider audience of users.

This new technology

has also made the MODD1 lighter than existing offerings. Compared to the Omnipod, MODD1 weighs 20 grams (vs. 26 grams) empty and 23 grams

(vs. 28 grams) fully filled (despite carrying 50% more insulin), a reduction of 23% and 18%, respectively. Also, unlike existing patch

pumps, the MODD1 can be removed from the needle and taken off and replaced later if the user desires. This avoids loss of insulin in

a pump due to accidental dislodging of the soft canula, an issue that users have expressed considerable dissatisfaction with on other

patch pumps.

This technology is

also uniquely suited to dual (or more) chamber pumps. We believe that such pumps will be integral to the realization of high time in

range artificial pancreas solutions that require no human intervention, the next step forward from the cumbersome and awkward solutions

today that require the user to announce meals, count and input carbs, and adjust delivery for exercise and sleep. The advantages of cost

and miniaturization are multiplied in a multi-chamber setup and we expect to be able to reach price points, ease of use, and form factor

unlike anything seen in the industry thus far. We believe that a prefilled, multi-hormone peel and stick patch pump able to function

in a fully autonomous closed loop system with CGM’s represents the next generation of diabetes care. We believe that we have demonstrated

our technology and are securing intellectual property protection on our approach.

We believe this technology,

especially in dual chamber, will open up numerous applications outside of diabetes where medication compliance of complex therapy regimes

is difficult addressing such spaces as weight loss, fertility, and simplifying complex delivery of multi-drug cocktails, especially those

with diverse and challenging dosing schedules.

Our

Solution

Our proposed pump is

being designed and developed to address the aforementioned shortcomings of the existing pump market and to appeal to: (i) the substantial

group of “Almost-Pumpers” who are currently interested in using an insulin pump, but have not done so because of the complexity,

cost or cumbersome nature of existing products, and (ii) people who are using one of the currently available insulin pumps but are dissatisfied

with such products. We believe that, owing to our new proprietary technology, our proposed insulin pump will be the simplest and least

expensive product on the market and the easiest for providers to prescribe.

Our current pump prototype

of our proposed pump has been built to test what we believe to be our novel approach to insulin pumps. By providing a pump that we believe

will establish industry standards in terms of technology, simplicity to understand, ease of use and price, we believe our proposed pump

will offer the vast majority of benefits afforded by more expensive and complex pumps but remain accessible to a substantially greater

percentage of diabetes sufferers requiring daily insulin therapy.

We believe people generally

will not use technology that intimidates them and physicians are hesitant to prescribe such technology. We believe mass market products,

such as is intended for our proposed pump, must be “user friendly” and affordable. We believe this approach is fundamentally

different from that applied to the existing pump market today where most pumps are continuously adding complex features and are “user

friendly” to only the most technically astute.

Our current goal is

to successfully design, develop and obtain all required regulatory approvals for our proposed insulin pump, and, thereafter, commercialize

the finished product. Our long-term goal is to become a leading provider of insulin pump therapy by focusing on both consumer and clinical

needs.

To achieve our above

stated immediate and current goals, we intend to pursue the following business strategies:

· Use of innovative proprietary technology.

Based upon the substantial

experience of Paul DiPerna, our president, chief financial officer, treasurer and chairman of our board of directors, in engineering

design and innovative technology in the medical device industry and, in particular, with insulin pumps, we have generated proprietary

technology that has been incorporated into our proposed insulin pump. Generally, this technology is involved in the delivery of insulin

to the user at the appropriate and necessary times. We believe this technology will greatly assist us in creating a simpler, user-friendly

pump. We believe the proposed design, engineering and technology being incorporated into our proposed pump will make it substantially

simpler and more affordable than those currently available. These features, together with the safety and reliability of our proposed

pump, are designed to create the next generation of insulin pumps that will feature important and well-differentiated attributes compared

to those currently available and make it available to consumers across mostly all socioeconomic groups in the United States and around

the world.

· Keep costs low during our design and development process.

To attempt to ensure

that we have sufficient funds to design, develop, and obtain all required regulatory approvals for our proposed insulin pump without

having to sacrifice quality and efficiency, we intend to maintain a tight budget and limit expenditures where possible. We believe this

will be possible because of the extensive knowledge and experience of Mr. DiPerna, not only in the diabetes industry and more specifically

in the insulin pump device market, but also his experience in designing and developing insulin pumps and other medical devices and his

ability to manage a small, focused development team. We currently expect that various other expenses, such as product scale up, and sales

and marketing costs, will not be incurred until such time as development work is completed and regulatory approvals obtained.

To attempt to ensure

our proposed insulin pump is “state of the art,” functional, and efficient, as well as to conserve funds, substantially all

of our employees will initially be hand-picked engineers under the leadership of Mr. DiPerna. We believe that there is a strong pool

of engineers with significant applicable experience and knowledge who we will be able to initially employ on a contract and/or outsource

basis to help us design and develop our proposed insulin pump. We believe by hiring such persons on an out-source basis, we will save

substantial resources and by having Mr. DiPerna lead and focus the team on technological and mechanical aspects of our proposed insulin

pump, we believe our team will be well guided, focused, cost efficient, and able to efficiently design and develop our product candidate

that we believe can eventually be a competitive and popular choice for people with insulin requiring diabetes.

Commercialization

Strategy: Overcoming the Insurance Hurdles

Our goal is to establish

MODD1 as the best option for new pump patients as we expand the market into the Almost Pumpers (Type 1 and Type 2) and the newly motivated

CGM users. We seek to grow the market by providing first-line insulin pump therapy that is well suited to meet the needs of both diabetes

patients requiring insulin and their clinicians.

· 20% discount vs Insulet will drive preferred status;

· Designed to use PBM codes as a disposable;

· No new code needed to be reimbursed at launch; and

· Saves provider an estimated $1,062/patient/year vs the Omnipod.

Europe represents

another large potential market for MODD1. Approximately 60 million people in Europe live with diabetes, and approximately $161

billion is spent annually in diabetes healthcare costs in Europe. At present, cost containment is restricting pump uptake across

Europe. Current pump usage hovers between 10% and 20% in many markets. Single payor healthcare systems across the Europe traditionally

attempt to contain costs in the short term and seek low price technologies with moderate medical benefits. MODD1 will offer a

rebalance of this risk/reward strategy in that payors will incur only minor incremental short-term costs with the benefit of longer

-term cost savings associated with reliable pump use. We intend to employ a partnership strategy across Europe following in-house

managed regulatory and pricing activities in the major markets (e.g., the United Kingdom) and more cost receptive markets (e.g.,

the Nordic countries). We are targeting European and United Kingdom approval towards early 2023. Our initial target market for

our insulin pump is the Almost Pumper population located in the United States followed quickly by an effort to obtain Conformitè

Europëenne, or CE, mark approval for distribution throughout Europe.

Marketing

MODD1 tackles the most

significant barriers to pump use-access and affordability-and makes it easier for clinicians, caregivers and individuals to manage diabetes

care. Our commercialization plan will drive adoption and is designed to expand the market and is intended to do the following:

· Facilitate patient trials. To facilitate patient trials, we intend to:

We believe

that MODD1 will be the only insulin pump that patients can take home immediately from the doctor’s office.

· Designed to use existing PBM codes as a disposable

· No new code: Reimbursed at launch

Tie-in

with the massive movement to telehealth.

2020 saw personal telehealth

go from beta test to mainstream. Customers and providers have become comfortable with it. There are only 4,000 patient-facing endocrinologists

in the United States. The treatment of diabetes will be significantly enhanced with telehealth to drive more volume and clinical enhancements

through their practices. Telemedicine is a force multiplier for a small group of doctors to better serve a large market. MODD1 was designed

to be affordable enough for free sampling and trial, and simple enough for self-guided user training. We believe that by combining telehealth

support with MODD1, we will decrease the burden of diabetes care and improve the lives of people with diabetes.

Pre-Launch/Trial

We intend to initiate

a “soft launch” following FDA clearance of the MODD1 device. Our plan is to select a group of clinicians who are well trained,

experienced and have the support infrastructure to take on initial patients and monitor them carefully to provide clinical feedback on

our performance to further refine our product candidate and support infrastructure prior to full commercial launch. Many of these clinicians

will have been those who assisted in the development of the MODD1 offering.

We intend to continue

to modify, refine and finalize our system to best meet:

Manufacturing

Manufacturing requires

the production of pumps, cartridges, and baseplates as well as assembly with sets. In connection therewith:

The pumps will be built

and tested in our San Diego facility while we build volume and expertise. When the production methodology has matured and the volumes

have risen, we will consider a transition to outside and offshore manufacturing, as appropriate.

FDA

Clearance

The FDA requires us

to meet all applicable regulations for insulin pumps, a subcategory of infusion pumps, which are generally considered Class 2 devices.

The design of the MODD1 pump has been completed, units have been built and testing is underway to verify that the design meets all FDA

requirements. There are 17 specific tests required to submit for 510(k) clearance. We break these required tests into four testing categories:

wetted surface, electrical safety, usability and internal. Appropriate design control and standard operating procedures have been implemented

to allow us, when testing is completed, to submit for clearance under the premarket notification (or 510(k)) process. To achieve this,

we will continue to work closely with our regulatory consultants to complete, finalize and file our submission to the FDA for 510(k)

clearance and all other documentation necessary to obtain marketing authorization of our insulin pump.

Commercialization

Steps

While we have substantially

completed the general engineering and mechanical aspects of our insulin pump prototype, prior to commercializing, we still must successfully

complete a number of material steps including:

· Continue to modify, refine and finalize our prototype so that it meets:

As with any medical

device attempting to enter and successfully compete with existing products in an established and competitive marketplace, we will face

significant hurdles to accomplish the above steps to commercialization including:

Looking

Forward

Going forward, we expect

to continue to evolve the MODD1 pumps and their capabilities and functionality, both in response to patient needs and as part of our

current platform roadmap.

· Additionally, adds AID control functionality via an ACE designation

· Any approved algorithm controller can drive insulin delivery in “auto” mode

Government

Regulation

Our operations are

subject to comprehensive federal, state, and local laws and regulations in the jurisdictions in which we or our research and development

partners do business. The laws and regulations governing our business and interpretations of those laws and regulations and are subject

to frequent change. Our ability to operate profitably will depend in part upon our ability, and that of our research and development

partners and affiliates, to operate in compliance with applicable laws and regulations. The laws and regulations relating to medical

products and healthcare services that apply to our business and that of our partners and affiliates continue to evolve, and we must,

therefore, devote significant resources to monitoring developments in legislation, enforcement, and regulation in such areas. As the

applicable laws and regulations change, we are likely to make conforming modifications in our business processes from time to time. We

cannot provide assurance that a review of our business by courts or regulatory authorities will not result in determinations that could

adversely affect our operations or that the regulatory environment will not change in a way that restricts our operations.

FDA

Regulation

In the United States,

medical devices are strictly regulated by the FDA. Under the FDCA, a medical device is defined as “an instrument, apparatus, implement,

machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component, part or accessory which

is, among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention

of disease, in man or other animals; or intended to affect the structure or any function of the body of man or other animals, and which

does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not

dependent upon being metabolized for the achievement of any of its primary intended purposes.” This definition provides a clear

distinction between a medical device and other FDA regulated products such as drugs. If the primary intended use of a medical product

is achieved through chemical action or by being metabolized by the body, the product is usually a drug or biologic. If not, it is generally

a medical device.

We are currently developing

an insulin pump delivery system, which is regulated by the FDA as a medical device under the FDCA, as implemented and enforced by the

FDA. The FDA regulates the development, testing, manufacturing, labeling, packaging, storage, installation, servicing, advertising, promotion,

marketing, distribution, import, export, and market surveillance of our medical devices.

Device

Premarket Regulatory Requirements

Before being introduced

into the U.S. market, each medical device must obtain marketing clearance or approval from the FDA through the premarket notification

(or 510(k)) process, the de novo classification process, or the

premarket approval, or PMA, process, unless they are determined to be Class I devices or to otherwise qualify for an exemption from one

of these available forms of premarket review and authorization by the FDA. Under the FDCA, medical devices are classified into one of

three classes - Class I, Class II or Class III - depending on the degree of risk associated with each medical device and the extent of

control needed to provide reasonable assurance of safety and effectiveness. Classification of a device is important because the class

to which a device is assigned determines, among other things, the necessity and type of FDA review required prior to marketing the device.

Class I devices are those for which reasonable assurance of safety and effectiveness can be maintained through adherence to general controls

which include compliance with the applicable portions of the FDA’s Quality System Regulation, or the QSR, as well as regulations

requiring facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading

labeling, advertising, and promotional materials. The Class I designation also applies to devices for which there is insufficient information

to determine that general controls are sufficient to provide reasonable assurance of the safety and effectiveness of the device or to

establish special controls to provide such assurance, but that are not life-supporting or life-sustaining or for a use which is of substantial

importance in preventing impairment of human health, and that do not present a potential, unreasonable risk of illness or injury.

Class II devices are

those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient

information to establish “special controls.” These special controls can include performance standards, post-market surveillance

requirements, patient registries and FDA guidance documents describing device-specific special controls. While most Class I devices are

exempt from the premarket notification requirement, most Class II devices require a premarket notification prior to commercialization

in the United States; however, the FDA has the authority to exempt Class II devices from the premarket notification requirement under

certain circumstances. As a result, manufacturers of most Class II devices must submit premarket notifications to the FDA under Section

510(k) of the FDCA (21 U.S.C. § 360(k)) in order to obtain the necessary clearance to market or commercially distribute such devices.

To obtain 510(k) clearance, manufacturers must submit to the FDA adequate information demonstrating that the proposed device is “substantially

equivalent” to a “predicate device” that is already on the market. A predicate device is a legally marketed device

that is not subject to PMA, meaning, (i) a device that was legally marketed prior to May 28, 1976 (“pre-amendments device”)

and for which a PMA is not required, (ii) a device that has been reclassified from Class III to Class II or I or (iii) a device that

was found substantially equivalent through the 510(k) process. If the FDA agrees that the device is substantially equivalent to the predicate

device identified by the applicant in a premarket notification submission, the agency will grant 510(k) clearance for the new device,

permitting the applicant to commercialize the device. Premarket notifications are subject to user fees, unless a specific exemption applies.

If there is no adequate

predicate to which a manufacturer can compare its proposed device, the proposed device is automatically classified as a Class III device.

In such cases, a device manufacturer must then fulfill the more rigorous PMA requirements or can request a risk-based classification

determination for its device in accordance with the de novo classification process.

Devices that are intended

to be life sustaining or life supporting, devices that are implantable, devices that present a potential unreasonable risk of harm or

are of substantial importance in preventing impairment of health, and devices that are not substantially equivalent to a predicate device

and for which safety and effectiveness cannot be assured solely by the general controls and special controls are placed in Class III.

Such devices generally require FDA approval through the PMA process, unless the device is a pre-amendments device not yet subject to

a regulation requiring premarket approval. The PMA process is more demanding than the 510(k) process. For a PMA, the manufacturer must

demonstrate through extensive data, including data from preclinical studies and one or more clinical trials, that the device is safe

and effective for its proposed indication. The PMA must also contain a full description of the device and its components, a full description

of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA submission, the FDA

determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review,

it has 180 days under the FDCA to complete its review and determine whether the proposed device can be approved for commercialization,

although in practice, PMA reviews often take significantly longer, and it can take up to several years for the FDA to issue a final decision.

Before approving a PMA, the FDA generally also performs an on-site inspection of manufacturing facilities for the product to ensure compliance

with the QSR.

The de

novo classification process allows a manufacturer whose novel device is automatically classified into Class III to request

down-classification of its device to Class I or Class II, on the basis that the device presents low or moderate risk, as an alternative

to following the typical Class III device pathway requiring the submission and approval of a PMA application. Under the Food and Drug

Administration Safety and Innovation Act of 2012, the FDA is required to classify a device within 120 days following receipt of the de

novo classification request from an applicant; however, the most recent FDA premarket review goals state that in fiscal year

2021, FDA will attempt to issue a decision within 150 days of receipt on 65% of all de

novo classification requests received during the year and on 70% of de

novo requests received during fiscal year 2022. If the manufacturer seeks reclassification into Class II, the classification

request must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness

of the medical device. The FDA may reject the classification request if it identifies a legally marketed predicate device that would

be appropriate for a 510(k) notification or determines that the device is not low to moderate risk or that general controls would be

inadequate to control the risks and special controls cannot be developed.

Clinical trials are

almost always required to support PMAs and are sometimes required to support 510(k) and de novo classification submissions. All clinical

investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational