Module files are created by the compiler, and, generally speaking, they aren't human-readable.  The source code for the modules, however, just needs to be stored in Fortran source files ending in .f90 or something else appropriate (.f95 .f03 .f08 for example).

I have made a simple  project with the name moduletest. It contains two files:

moduletest_main.f90:

program moduletest
use testmodule
implicit none
real :: x, y
x=2.0
y=testmodulefunction(x)
write(*,*) x, y
end program moduletest

testmodule.mod:

module testmodule
implicit none
real :: x, y
contains
function testmodulefunction(x) result(y)
y=x**2
end function testmodulefunction
end module testmodule

Build => Build Now! (F6) produces the following log:

==============================================================================
Open Watcom Make Version 1.9 (Built on May 17 2012)
Portions Copyright (c) 1988-2002 Sybase, Inc. All Rights Reserved.
Source code is available under the Sybase Open Watcom Public License.
See http://www.openwatcom.org/ for details.
    "C:\Program Files (x86)\Simply Fortran\mingw-w64\bin\gfortran.exe" -c -o build\moduletest_main.o -g -m32   -Jmodules .\moduletest_main.f90
.\moduletest_main.f90:2.4:

use testmodule
    1
Fatal Error: File 'testmodule.mod' opened at (1) is not a GFORTRAN module file
Error(E42): Last command making (build\moduletest_main.o) returned a bad status
Error(E02): Make execution terminated

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