UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

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FORM 10-K

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

For the fiscal year endedMarch 31 2019, 2022

OR

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

 

For the transition period from _________ to _________

 

Commission File Number 001-38355

NEMAURA MEDICAL INC.

(Exact name of registrant as specified in its charter)

Nevada46-5027260NEMAURA MEDICAL INC.
(Exact name of registrant as specified in its charter)

Nevada46-5027260
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

Advanced Technology Innovation Centre,

Loughborough University Science and Enterprise Parks

5 Oakwood Drive,

Loughborough, Leicestershire

LE11 3QF

United Kingdom57 West 57th Street
New York, NY10019


(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:+ 44 1509 2229121 646-416-8000

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

 

Title of Each Class Name of each exchange on which registered Trading Symbol
Common Stock $0.0001 par value NASDAQ CapitalThe Nasdaq Stock Market LLC  NMRD

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ☒.

Indicate by check mark whether 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. Yes No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No ☐.

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 Accelerated filer 
Non-accelerated filer ☐ (Do not check if a smaller reporting company)Smaller reporting company 
Emerging growth company  

 

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.

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒.

The aggregate market value of the registrant’s common stock held by non-affiliates computed based onby reference to the closing sales price as of such stock on Septemberthe last business day of the registrant’s most recently completed second fiscal quarter (September 30, 20182021) was $151,532,841.approximately $68.2 million.

 

The number of shares outstanding of the registrant's common stock as of June 9, 201929, 2022, was 207,989,304.24,102,866.

 

 
 

Documents Incorporated by Reference:

 

None

  

NEMAURA MEDICAL INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

 PagePage
PART I   
   
Item 1. Business.  34 
Item 1A. Risk Factors.  1617 
Item 1B. Unresolved Staff Comments.  2927 
Item 2. Properties.  2927 
Item 3. Legal Proceedings.  2927 
Item 4. Mine Safety DisclosuresDisclosures.27
   29
   
PART II   
   
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.  3028 
Item 6. Selected Financial Data.[Reserved]  3128 
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.  3128 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.  3732 
Item 8. Financial Statements and Supplementary Data.  37F-1 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.  3833 
Item 9A. Controls and Procedures.  3833 
Item 9B. Other Information.34
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.34
   40 
   
PART III   
   
Item 10. Directors, Executive Officers and Corporate Governance.  4035 
Item 11. Executive Compensation.  4438 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.  4540 
Item 13. Certain Relationships and Related Transactions, and Director Independence.  4640 
Item 14. Principal Accountant Fees and Services.41
   46
   
PART IV   
   
Item 15. Exhibits and Financial Statement Schedules.  4247
Item 16.Form 10-K Summary.42 

 

 


 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which may cause actual results, performance, or achievements to differ materially from those expressed or implied. Any forward-looking statement speaks only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made.

 

The words "believe," "anticipate," "design," "estimate," "plan," "predict," "seek," "expect," "intend," "may," "could," "should," "potential," "likely," "projects," "continue," "will," and "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are not guarantees of the future as there are a number of meaningful factors that could cause Nemaura Medical Inc.’s (“Nemaura Medical”) actual results to vary materially from those indicated by such forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors Nemaura Medical believes are appropriate in the circumstances. Factors which could cause actual results to differ from expectations, many of which are beyond Nemaura Medical’s control, include, but are not limited to, obtaining regulatory approval for our sugarBEATsugarBEAT® device, conducting successful clinical trials, executing agreements required to successfully advance the Company's objectives; retaining the management and scientific team to advance the product; overcoming adverse changes in market conditions and the regulatory environment; obtaining and enforcing intellectual property rights; obtaining adequate financing in the future through product licensing, public or private equity or debt financing or otherwise; dealing with general business conditions and competition; and other factors referenced herein in “Risk Factors.” Except as required by law, we do not assume any obligation to update any forward-looking statement. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 


PART I

ITEM 1. BUSINESS.

Business Overview

We are a medical technology company developingthat has developed sugarBEAT®, a non-invasive, affordable and flexible, continuous glucose monitoring system, for adjunctive use by persons with diabetes. SugarBEATdiabetes, and any person wishing to determine factors influencing their blood glucose profiles. SugarBEAT® consists of a disposable adhesive skin-patch containing a sensor, which is connected to a rechargeable wireless transmitter that displaystransmitter. The sensor takes a measurement of the glucose readings at regular five minute intervals viareading every 5 minutes and sends the data by low energy blue tooth to a smart device such as mobile app. SugarBEATphone (both android and iOS). An app on the smart device uses a proprietary algorithm to display true glucose values, after the data is calibrated using a minimum of one finger stick calibration. SugarBEAT® works by extracting glucose from the skin into a chamber in the patch that is in direct contact with an electrode-based sensor. The transmitter sendsdata is recorded on the rawapplication and can be viewed in real time as well as storing all historic data to a mobile app where it is processedfor later evaluation as desired. We believe sugarBEAT® may be utilized by an algorithm and displayed as a glucose reading, with the ability to track and trend the data over days, weeks and months.  While sugarBEAT requires once per day calibration by the patient using a blood sample obtained by a finger stick, we believe sugarBEAT will be adopted by non-insulin dependent personsany person with diabetes, alongside insulin-injectingwhether Type 1 or Type 2 and also by any persons with diabetes who all perform multiple daily finger stickswishing to managedetermine factors affecting their disease. blood glucose profiles, and therefore their state of metabolic health in terms of insulin resistance.

We announced onOn May 29, 2019, we announced that we had been awarded CE approval to allow sugarBEATsugarBEAT® to be legally sold in the European Union. CE approval is disclosed by the use of the CE Mark,mark, a manufacturers' declaration that the product meets the requirements of the applicable European laws. The European clinical trial program for sugarBEATsugarBEAT® evaluated 525 patient days across 75 Type 1 and Type 2 diabetic patients and was completed in December 2017. CE approval is the process to achieve a mandatory conformity marking for the sugarBEATsugarBEAT® device to allow it to be legally sold in the European Union. It is a manufacturers' declaration that the product meets the requirements of the applicable European laws. This approval is subject to an annual review of the underlying ISO 13485 accredited Quality Management System. The accreditation was successfully renewed in November 2021.

We also completed studies requiredsubmitted a PMA (Premarket Approval) application to supportthe U.S. Food and Drug Administration (the “FDA”) with the same label claim as achieved for CE approval, an adjunct device for glucose trending for persons with diabetes. The PMA is currently under review.

In July 2020, we filed a USPMA application with the FDA submissionto use sugarBEAT® as an adjunct to finger prick testing for blood glucose trending. We, along with other applicants, were then informed by the FDA that the approval of sugarBEATprocess was subject to delays as a medical device,result of the FDA’s Center for Devices and Radiological Health (“CDRH”) being actively engaged in responding to the COVID-19 pandemic, which resulted in staff being reallocated to other approval requests associated with COVID-19. In April 2021 the FDA confirmed that it was recommencing its review of the PMA application, and in December 2021, the FDA’s Bio-monitoring research division conducted an audit of the clinical program submitted in support of the PMA application. A single 483 observation was raised, and the Company submitted a full response in January 2022. The FDA subsequently scheduled a pre-market inspection for the second calendar quarter of 2022, intended to cover the FDA’s Quality System/Current Good Manufacturing Practice regulations for Medical Devices (21 CFR Part 820).

In addition to this, Nemaura established that proBEATTM, which is based on the sugarBEAT® platform, can be classified under the Wellness guidance when it is used according to the FDA Wellness guidance notes, to provide prompts and educate users on factors affecting their blood sugar profiles. Nemaura launched proBEAT™ in the U.S. in December 2020, as part of a diabetes prevention and reversal program branded BEATdiabetes.life, having licensed a clinically validated weight loss program for the management of diabetes from Healthimation, LLC, which was originally developed at the Joslin Diabetes Center, an affiliate of Harvard Medical School. This program, together with proBEATTM, forms the BEATdiabetes.life program that is currently being developed for commercialization in the U.S. Key opinion leader (“KOL”) studies are ongoing and are currentlyintended to provide additional validation of and marketing support for the program in the process of compiling the applicationpreparation for submission.a broader U.S.-wide roll-out. We previously developed a wristwatch-based version of sugarBEAT for which we obtained CE approval in February 2016. Since then we have developed sugarBEAT using the underlying technology of the wristwatch.

continue to monitor and respond to feedback received from these user-groups.

We believe there are additional applications for sugarBEATsugarBEAT® and the underlying BEAT technology platform, which may include:

·a web-server accessible by physicians and diabetes professionals to track the condition remotely, thereby reducing healthcare costs and managing the condition more effectively;

·a complete virtual doctor that monitors a person's vital signs and transmits results via the web; and

·other patches using the BEAT technology platform to measure alternative analytes, including lactate, uric acid, lithium and drugs. This would be a step-change in the monitoring of conditions, particularly in the hospital setting. Lactate monitoring is currently used to determine the relative fitness of professional athletes and we completed preliminary studies demonstrating the application of the BEAT technology for continuous lactate monitoring.monitoring;
·a continuous temperature monitoring system which could have various applications, including use for individuals to monitor their temperature in connection with diagnosis and monitoring of symptoms of novel coronavirus (COVID-19);
·monitoring disease progression in COVID-19 patients using continuous lactate monitoring (CLM).

 

Our Business Strategy

We intend to lead in the discovery, development and commercialization of innovative and targeted diagnostic medical devices, and data-driven digital platforms, that improve disease monitoring, management and overall patient care. Specifically, we intend to focus on the monitoring of molecules that can be drawn out through the skin non-invasively using our technology platform. In addition to glucose, such molecules may include lactic acid monitoring and the monitoring of prescription drugs and blood biomarkers that may help in the diagnosis, prevention, or management of diseases, such as diabetes. We plan to take the following steps to implement our broad business strategy. Our key commercial strategies post-approval will first be implemented in Europe and then in parts of the Middle East and Asia, and then the U.S., as follows:

-Commercialize sugarBEAT® in the United Kingdom and Republic of Ireland. sugarBEATWe intend to commercialize sugarBEAT® in the United Kingdom, and Republic of Irelandwith MySugarWatch Limited (previously known as Dallas Burston Pharma (Jersey) Limited,Ethitronix Limited) (“MSW”), with whom we have an exclusive marketing rights agreement for these two countries. We have also signed a full commercial agreement with MySugarWatch (Europe) Limited (previously known as Dallas Burston Ethitronix (Europe) Limited) in May 2018 for all other European territories as part of an equal joint venture agreement. The joint venture intends to seek sub-license rights opportunities to one or more leading companies in the diabetes monitoring space, to leverage their network, infrastructure and resources.

We have also signed a full commercial agreement with Dallas Burston Ethitronix (Europe) Limited in May 2018 for all other European territories as part of an equal joint venture agreement. The joint venture intends to seek sub-license rights opportunities to one or more leading companies in the diabetes monitoring space, to leverage their network, infrastructure and resources.

Dallas Burston (Jersey) Limited was founded by Dr. Dallas Burston, MBBS, an entrepreneur who has founded and sold several companies specializing in marketing pharmaceuticals. For example, in 1999, he sold 49% of Ashbourne Pharmaceuticals to HSBC Private Equity for £32 million and Bartholomew-Rhodes to Galen Ltd. for £19.8 million. More recently, in 2015, he sold DB Ashbourne Limited, a provider of off-patent branded pharmaceuticals for the UK market, to Ethypharm. At the time of the sale, DB Ashbourne Limited was estimated to have revenue of approximately £90 million.   


-Establish licensing or joint venture agreements with other parties to market sugarBEAT® in other geographies. We are in detailed discussions and negotiations with several other parties worldwide for licensing or joint venture agreements for the sale of the sugarBEATsugarBEAT® device and have signed commercial agreements with TP MENA for the GCC (Gulf Region),Gulf Cooperation Council, and Al-Danah Medical for Qatar.

��

-SubmitSeek FDA application forPMA approval of sugarBEAT®. The PMA application is currently in progress and expected to be submitted in Q2 2019.review by the FDA.

-Expand the indications for which thesugarBEATsugarBEAT® device may be used. We believe that the sugarBEATsugarBEAT® device may offer significant benefitsas compared to those found in the non-acute setting for the monitoring of other diseases. This includes monitoring of lactic acid for performance athletics, and the monitoring of drugs. We have completed initial proof of concept for Lactatelactate monitoring and now plan to explore the route to commercialization for well-being applications in athletic performance training, and plan to undertake further clinical programs to support clinical use of the device for lactate monitoring,monitoring.

-Expand our product pipeline through our proprietary platform technologies, acquisitions and strategic licensing arrangements. We intend to leverage our proprietary platform technologies to grow our portfolio of product candidates for the diagnosis of diabetes and other diseases. This includes digital platforms driven by data gathered by our sensors within the medical and wellbeing markets, such as for metabolic health monitoring. In addition, we intend to license our product and acquire products and technologies that are consistent with our research and development and business focus and strategies. This may include drug delivery products for the improved management of diabetes, for example improved insulin injector systems, and/or combination drug products for diabetes related drugs.

Product Development

Management has extensive experience in regulatory and clinical development of diagnostic medical devices. We intend to take advantage of this experience in the field of diagnostic medical devices in an attempt to increase the probability of product approval. The overall regulatory process for diagnostic medical devices for diabetes is currently similar to those governing other diagnostic devices. The timelines are shorter than, for example, when new drugs or completely invasive diagnostic devices aretrialed in clinics. We have successfully tested and evaluated the device for its clinical output, in this case the accuracy and safety with which it can trend blood glucose levels, based on which CE approval was granted by the Notified body BSI, and we are currently in the process of preparing a submissionBody BSI. A PMA (pre-market approval) application was also submitted to the US FDA. As weFDA and is currently under review. We continue to raise funds for marketing the device in some European Union territories, we also intend to seek collaborations with future licensees and marketing partners to achieve our product development and meet our projectedcommercial growth milestones.

The table below provides our current estimate of our timeline:

Product Development Timelines

MilestoneTarget Start DateTarget Completion Date
Completion of clinical studies in Type 1 and Type 2 diabetic subjects to define final device claims and for submission for CE Mark approval with final device claims.July 2017Completed

Scale up of commercial sensor/patch manufacturing

(Scale up means we have started looking at larger scales - sufficient for product launch in the UK. It refers to the manufacturing process for sensors.)

January 2017Completed
Scale up of device (transmitter) manufacturingJanuary 2017Ongoing
CE Mark for body worn transmitter deviceAugust 2018Completed
Commercial launch in the UK, followed by major territories in EuropeQ3 2019Staggered launch
US FDA SubmissionQ2 2019Q2 2019

Market Opportunity for the Company's Products

According to the International Diabetes Federation Atlas 10th Edition 2021 (the "IDF"), there are approximately 425537 million adults living with diabetes, representing 10.5% of the world’s population in this age group. This number is predicted to rise to 643 million (11.3%) by 2030 and to 783 million (12.2%) by 2045. Additionally an estimated 240 million people inare living with undiagnosed diabetes worldwide, meaning almost one-in-two adults with diabetes are unaware they have the world who had diabetes as of December 2017.condition. The IDF is predictingidentifies that by 2035 this will rise to 592 million people.  The numberalmost 90% of people with Type 2 diabetes is increasing in every country and currently eighty percent (80%) of people withundiagnosed diabetes live in low- and middle-incomelow-and-middle income countries.  The greatest number of people with diabetes is between 40 and 59 years of age.


Statistics published by the IDF reportevidence the fact that diabetes is a huge and growing problem, and that whilst the costs to society are already high, and escalating.they continue to escalate. In addition, the IDF also notes that Europe has the highest prevalence of children and adolescents with Type 1 diabetes. diabetes, as well as the highest incidence annually. Europe is also reported as having the second highest average cost per person with diabetes ($3,086), with only North America and the Caribbean being higher ($8,208).

 

Statistical Data for Diabetes in EuropeGlobally

   
 20132035

Adult population

(20-79 years, millions)

659669
Diabetes (20 – 79 years)
Regional prevalence (%)8.510.3
Comparative prevalence (%)6.87.1

Number of people with diabetes

(millions)

56.368.9
Impaired Glucose Tolerance (20 – 79 years)
Regional prevalence (%)9.211.0
Comparative prevalence (%)8.18.9
Number of people with IGT (millions)60.673.7
Type 1 diabetes (0 – 14 years)

Number of children with Type 1

diabetes (thousands)

129.4-
Number of newly diagnosed cases per year (thousands)20.0-
    
 202120302045
Total world population7.9 billion8.6 billion9.5 billion
Adult population (20-79 years)5.1 billion5.7 billion6.4 billion
 Diabetes (20 – 79 years)
Prevalence (%)10.5%11.3%12.2%
Number of people with diabetes536.6 million642.7 million783.2 million
Total health expenditure due to diabetes (2021 $)$966 billion$1,028 billion$1,054 billion
 Impaired Glucose Tolerance “IGT” (20 – 79 years)
Prevalence (%)10.6%11.0%11.4%
Number of people with IGT541.0 million622.7 million730.3 million
 Type 1 diabetes (0 – 19 years)
Number of children / adolescents with Type 1 diabetes1.2 million--
Number of newly diagnosed cases per year184,100--

 

Each year approximately 600,000 people die from diabetes in Europe.

Deaths From Diabetes

 

Europe has the highest incidence of children with Type 1 diabetes according to data supplied from IDF.org. The top five countries for the number of people afflicted with diabetes in Europe are listed in the table below.

Top 5 Countries In Europe For People Afflicted With Diabetes 20-79 Years (2013)

Countries/TerritoriesMillions
Russian Federation10.9
Germany7.6
Turkey7.0
Spain3.8
Italy3.6

Type 1 diabetes, once known as juvenile diabetes or insulin-dependent diabetes, is a chronic condition in which the pancreas produces little or no insulin, a hormone needed to allow sugar (glucose) to enter cells to produce energy. The far more common Type 2 diabetes occurs when the body becomes resistant to the effects of insulin or doesn't make enough insulin.

Various factors may contribute to Type 1 diabetes including genetics and exposure to certain viruses. Although Type 1 diabetes typically appears during childhood or adolescence, it also can develop in adults.

Despite active research, Type 1 diabetes has no cure, although it can be managed. With proper treatment, people who have Type 1 diabetes can expect to live longer, healthier lives than they did in the past. Type 1 diabetes includes autoimmune Type 1 diabetes (Type 1a) which is characterized by having positive autoantibodies, as well as idiopathic Type 1 diabetes (Type 1b) where autoantibodies are negative, and c-peptide is low. Patients with Type 1 diabetes (insulin dependent) require long term treatment with exogenous insulin and these patients perform self-monitoring of blood glucose (SMBG) to calculate the appropriate dose of insulin. SMBG is done by using blood samples obtained by finger sticks but frequent SMBG does not detect all the significant deviations in blood glucose, specifically in patients who have rapidly fluctuating glucose levels.


Type 2 diabetes, once known as adult-onset or non-insulin-dependent diabetes, is a chronic condition that affects the way your body metabolizes sugar (glucose), your body's main source of fuel. With Type 2 diabetes, your body either resists the effects of insulin, a hormone that regulates the movement of sugar into your cells or doesn't produce enough insulin to maintain a normal glucose level. Untreated, Type 2 diabetes can be life-threatening.

More common in adults, Type 2 diabetes increasingly affects children as childhood obesity increases. There'sWhilst there is currently no acknowledged cure for Type 2 diabetes, butthere is increasing evidence to suggest that it can be effectively managed by eating well, exercising and maintaining a healthy weight. If diet and exercise don't control the blood sugar, diabetes medications or insulin therapy may be required.

Each year, millions of patients undergo diabetes testing in the European Union and in the U.S. The main reason for this testing is to detect and evaluate diabetes in patients with symptoms of diabetes. These studies provide clinical benefit in the initial evaluation of patients with suspected but unproven diabetes, and in those patients in whom a diagnosis of diabetes has been established and information on prognosis or risk is required.

We believe that our market opportunity is a direct function of the number of persons tested, diagnosed and treated for either Type 1 or Type 2 diabetes. The IDF indicates that the total world market opportunity for a continuous glucose monitoring device is in the billions of dollars and is projected to grow annually through the year 2035.

as incidences of diabetes continue to grow.

We do not believe it is possible to estimate the number of diabetes patients that undergo finger pricks or other types of invasive glucose monitoring. However, we are unaware of any product currently on the market that may allow for non-invasive continuous glucose monitoring. We believe the sugarBEATsugarBEAT® device may be readily adopted by the medical community for the assessment of a patient continuously.

We believe our non-invasive sugarBEATsugarBEAT® device possesses many significant advantages and may represent an ideal device for the detection of discordances in an individual's blood sugar levels. If approved for commercialization, weWe believe the sugarBEATCE approved sugarBEAT® device may represent a best in classbest-in-class non-invasive continuous glucose monitoring device to reach those afflicted with diabetes. While we cannot estimate the market share that our sugarBEATsugarBEAT® device may capture, we believe that the sugarBEATsugarBEAT® device will capture a significant share of the non-invasive continuous glucose monitoring market, in-particular the market that has been established by the Abbott Freestyle Libre device for glucose trending, as well as be adopted by non-insulin dependent diabetics who have not historically used continuous glucose monitoring devices due to their invasiveness.

Commercialization Plan

Throughout the fiscal year ended March 31, 2022, we have continued to work with our UK Licensee, MSW, to provide support in the development of their go-to-market strategy which incorporates the utilization of our sugarBEAT® device into their own branded product offering. While COVID-19 did result in some short delays to MSW’s user assessment program, the overall feedback was positive, albeit the anticipated timetable for purchase orders to be placed by MSW was extended out, with the first order for 5,000 sugarBEAT® transmitters and 200,000 sugarBEAT® sensors not being placed until April 2021. Our focus continues to be to support and optimize MSW’s launch program, in line with which, we took the following actions during the fiscal year ended March 31, 2022: 

·Entered into a new leased facility to provide additional capacity for commercial assembly to commence.
·Increased headcount of production operatives to facilitate product manufacture.
·Placed forward orders for raw materials to support scale-up and secure inventory of those items that are currently in short supply globally i.e. semi-conductors etc.
·Appointed Benchmark Electronics Inc.as our CMO partner to facilitate future volume scale up of transmitter production via its FDA approved facility in Thailand.
·Signed a new global agreement for the provision of our sugarBEAT® device with MySugarWatch DuoPack Limited (“MSW-DP”). Under the terms of the agreement, our CGM and sensors will be provided as Duo-Packs with prescription only medicines that are widely prescribed for people with Type 2 diabetes. The initial Duo-Pack presentation will be launched as the first of these medicines loses its patent protection in the fourth calendar quarter of 2022.
·Commenced phased delivery of transmitters against the purchase order received from MSW in December 2021.

We intendalso advanced our plans to develop our products through the completion of FDA approvals, to verify the claims that the device may be used as an adjunct to a finger-stick measurement, and/or a glucose trending device such as those claims made by the Abbott Freestyle Libre device. We will seek to partner with organizations that may facilitate the further development and distribution of our products at all stages of development. We also intend to seek strategic partners earlygo-to-market capabilities in the research and development cycle for programs that may fall outside of our core competencies.

Competitive Landscape

We expect to compete with several medical device manufacturing companies including Dexcom, Abbott, and Senseonics. Our competitors may:

U.S., which included:

·Development of a US based standalone team is ongoing and this activity will continue for the foreseeable future. 
·In July 2020, we submitted a PMA application to the FDA for the sugarBEAT® device for glucose profiling as an adjunct to a finger-stick measurement. We, along with other applicants, were then informed by the FDA that the approval process was subject to delays as a result of the CDRH being actively engaged in responding to the pandemic caused by COVID-19 which resulted in staff being reallocated to other approval requests associated with COVID-19. In April 2021, the FDA confirmed that it would recommence its review of the PMA application and this is now ongoing and in-progress.
·In December 2021, the FDA’s Bio-monitoring research division conducted an audit of the clinical program submitted in support of the PMA application. A single 483 observation was raised, and the Company submitted a full response in January 2022.
·The FDA subsequently conducted a pre-market inspection for during the second calendar quarter of 2022, covering the FDA’s Quality System / Current Good Manufacturing Practice regulations for Medical Devices (21 CFR Part 820). Once again a single 483 observation was made, and this was responded to within the mandated time frame. The company continues its dialogue with the FDA with respect to the PMA submission and plans to provide further material updates as they arise in due course.

In addition to this, we continue to explore commercialization opportunities in other key geographic markets, which includes engaging with the German regulatory authority (GBA) to establish how best to proceed with achieving reimbursement for sugarBEAT® in Germany, as well as continuing to engage in dialogue with additional potential licensees / distributors in other geographical territories. 

Competitive Landscape

To the best of our knowledge, there are currently no other competing devices on the market that offer continuous glucose monitoring and profiling, non-invasively, with a single day sensor wear. We believe this positions us uniquely in a market where we can target persons with diabetes as well as those that are pre-diabetic. Additionally, we believe that this can also be used to improve outcomes in weight management and wellbeing markets. There are companies, such as Dexcom and Abbott, that currently offer Continuous Glucose Monitoring (CGM) sensors with 10 and 14 continuous day wear, respectively. These companies could be deemed future competitors were they to:

develop and market products that are less expensive or more effective than our current and/or future product;products;
commercialize competing products before we or our partners can launch any products developed by us;
operate larger research and development programs or have substantially greater financial resources than we do;
initiate or withstand substantial price competition more successfully than we can;
have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;
more effectively negotiate third-party licenses and strategic relationships; and
take advantage of acquisition or other opportunities more readily than we can.

We willmay compete for market share against large pharmaceuticalthese companies and biotechnology companies, smaller companies that are collaborating with larger pharmaceutical companies, new companies, academic institutions, government agencies and other public and private research organizations. Many of thesepotential newcomers in this general field. These potential competitors, either alone or together with their partners, may develop new products that will compete with ours, and these competitors may, and in certain cases do, operate larger research and development programs, or have substantially greater financial resources than we do.

We anticipate that we will have competition from specific companies.  AlthoughAs noted, while it is difficult to analyze our major competitors since currently there are no non-invasive diagnostic medical devices to continuously monitor blood glucose levels, we anticipate that specific companies may compete with us in the future.


Information relating to our competitors is listed in the table below.

 FreeStyle Libre™(1)Platinum G6®(2)Platinum G5®(3)Eversense™(4)SugarBEAT®
ManufacturerAbbottDexcomDexcomSenseonicsNemaura Medical
TechnologyInserted SensorInserted SensorInserted SensorImplanted SensorNon-invasive Sensor
Reliability (Overall MARD)11.4%9.8%9.0%11.4%<12%*
Reliability (Clarke Error Grid A+B zone)99%Not available97.0%99.1%>95.0%
Patients Studied723249744>75
Patient Days Studies14109901 to 4
Warm-up Time1 hour2 hours2 hoursNA30-60 min
Daily CalibrationNoneNone2x2x1x
Glucose Display FrequencyOn manual activation of sensorEvery 5 minEvery 5 minEvery 5 minEvery 5 min
Patch/Senor Life14 days10 days7 days90 days1 day
Regulatory ApprovalsEUUSWorldwideEUEU
Basis for reimbursementFinger stickNot availableCGMCGMFinger stick
Daily Avg. Reimbursement Cost$2.50 (Germany)Not available$9 (US)Not available$2.50**
Daily Retail Cost UK (exc. VAT)

£3.50 (Patch)

£50 (Reader)

Not available

£7.30 (Patch)

£475 (Hardware)

Not available

£2** (Daily Patch)

£30** (Transmitter)

Sources: (1) Diabetes Technology & Therapeutics, Timothy Bailey, MD, et al., Nov. 2015; (2) Dexcom’s press release, Mar. 2018; Dexcom G6 user’s guide (3) Dexcom’s press release, Aug. 2015; Dexcom G5 user’s guide; (4) SenseonicsHoldings’ 8-K, Dec. 2015. * based on summary data released in August 2018; **Estimated

Regulatory Requirements

Our device has been electricallyundergone the applicable electrical safety tested,testing and all biocompatibility conformance alsohas been demonstrated against the relevant European Medical Device Directives. WhenDirectives, Regulations and Standards. If and when new materials are introduced, thesethey will undergo a biocompatibility risk assessment, and further testing where necessary. Batches of the device and patches were manufactured for human clinical studies that took place between November 2014 and December 2015. This was a functional watch device with a wire connection to a skin adhered sensor and electrode. Subsequent to studies conducted in India the device received a CE mark approval in February 2016. The device has since been upgraded to reduce it in size, include an enhanced sensor system and allow wireless communication from a body worn/adhered transmitter and also to reduce the device size, and with an enhanced sensor system.worn transmitter. This miniaturisedminiaturized wireless device achieved CE approval in May 2019, and a PMA was submitted to the U.S. FDA submissionin July 2020 and is plannedcurrently in Q2 2019.review. An application for CE mark approval requires the Company to have aan ISO13485 Quality Management System, covering the design, development and manufacture of a medical device. Nemaura Medical does not have this accreditation, and instead under the terms of a service contract dated 4th April 4, 2018, with Nemaura Pharma Limited (“Pharma”), Nemaura Medical has outsourced the CE approval registration process to Nemaura Pharma. Pharma, a related company, is controlled by our Chief Executive Officer, President, Chairman of the Board and majority shareholder, Dr D.F.H. Chowdhury. Under the terms of the service contract Nemaura Pharma has undertaken all required activities to register the product for CE approval under a fee for service arrangement, whilstwhile Nemaura Medical will retain full title and beneficial ownership of the CE mark, and all related intellectual property without any further payments or royalties becoming due other than the fee for service.

Prior to launching commercial sales of our product, we must complete key material points:

Prepare the body worn transmitter, and sensor-electrode system for manufacturing for commercial sales, i.e., in large volumes. The patches (containing the sensors) and the device have been manufactured in small batches sufficient for clinical studies and laboratory testing. The scale up of the processes have commenced and are being conducted in stages to reflect the market demand based on a staggered launch. This is a continuous process of development, to mass-produce the sensors and patches and the devices in a scale that allows large volume batches to be produced cost effectively. This is necessary to ensure that the manufacturing costs of our products are minimized in order to effectively meet market demands.  

Intellectual Property

We believe that clear and extensive intellectual property relating to our technologies is central to long-term success and we intend to invest accordingly. This applies to both domestic and international patent coverage, and trade secrets, and trademarks.

The SugarBEATsugarBEAT® technology is protected by our portfolio of intellectual property comprised of issued and pending patents and trade secrets covering a range of claims, including the methods and apparatus for measuring glucose extracted from human skin in a non-invasive manner, devices for extracting glucose from the formulaskin is a stable manner, devices for reducing background noise signals, algorithm for converting raw data in to glucose values to calibrate the cumulative measurement of an analyte,device, and the formulation and process for preparation of the enzyme solution used in the sensor.


On May 8, 2014, NDM Technologies Limited, a related company, assigned the UK patent application 1208950.4 and International (PCT) patent application PCT/GB2013/051322 entitled "Cumulative Measurement of an Analyte" to Dermal Diagnostics Limited (“DDL”) for a nominal consideration.

Two furtheradditional patents were filed in 2018 that will not be published in the public domain for some months, relating to the sensor and device application, providingwhich are expected to provide further strength to the intellectual property position. FurtherAdditional patents are intended to be filed in the coming monthsfuture relating to the device and sensor, providing new intellectual property protection, someprotection. Some of which willthe recently filed patents and future patents may supersede previous intellectual property.

Additionally, we retain substantial trade secrets relating to aspects of the sensor manufacture process and the sensor formulation, which have taken over five years to develop, and will prove very difficultchallenging to reverse engineer as it consists of formulation components in addition to processing methods in complex combinations that are unique to the final functional sensor. Patents will not be filed on this aspect of the technology to avoid any public dissemination of the know-how.

These patents and know-how cover aspects of the technology platform. Furthermore, the trademark BEATtrademarks BEAT® and sugarBEAT hassugarBEAT® have been registered in all major territories globally.multiple key global territories. Accordingly, all intellectual property essential to the sugarBEATsugarBEAT® product is owned by us, and not subject to royalty payments. We intend to take the lead in the preservation and/or prosecution of these patents and patent applications going forward as required. We intend to file additional patents as the development progresses, where deemed to be of value to protecting the technology platform and future modifications and improvements. Where patents cannot be secured, the intellectual property will be limited to know-how and trade secrets, and these will be diligently guarded.

Trade Secrets, Trademarks, and Patents Filed, Granted and Pending

 

IP: Patent (Core Claim), Know-how, TrademarkExpiration Date Expiration DateJurisdictions in which Granted/Granted / Issued Jurisdictions in which Pending
Pending
Ongoing Royalty or Milestone Payments
Patent: Cumulative Measurement of an Analyte*.May 20, 2032Analyte (1) May 20, 2033Australia, France, Germany, Italy, Poland, Spain, Netherlands, UK, China, Japan, USA, Canada, UAE Brazil, Canada, China, India, Japan, Qatar United Arab Emirates, U.S.NoneNone. Internal development
Skin Prep Patch (2)December 2, 2039N/AUK, Europe, USANone. Internal development
Know-how: Sensor Formulation and manufacture processesN/ATrade SecretN/ANone. Internal development

Patent: Patches for Reverse Iontophoresis**Trademark:

July 1, 2029

BEAT

 Australia, Germany, France, UK, Italy, Netherlands, Switzerland, China, Hong Kong, Japan.NoneNone
Know-how: Sensor FormulationN/ATrade SecretN/AN/A
Two Patents: Sensor and device application.Filed 2018First filed in UKAllNone
Trademark: BEATRenewal due in 2026 UK, Canada, China, EU, India, Japan, Norway, Russia, Singapore CanadaMalaysia, Brazil, Mexico, Switzerland, TurkeyNoneNone. Internal development
Trademark: sugarBEATRenewal due in 2025 UK, Canada, Australia, Switzerland, China, Egypt, EU, Israel, India, Iran, Japan, North Korea, Morocco, Mexico, Norway, New Zealand, Russia, Singapore, Tunisia, Turkey, USA CanadaN/ANoneNone. Internal development

Sensors for metabolic health (3)

December 7, 2041N/AUKNone. Internal development

 

*(1) This patent provides a formula for calculating the amount of glucose extracted over a defined period of time by deducting the difference between two readings to allow rapid sensing without needing to deplete the analyte being measured.

**(2) This patent providesdescribes a reverse iontophoresis patch with meansdevice and method for releasing a conductive medium ontopreparing the skin during use and means for transporting analyteextraction of glucose.

(3) This patent has two sets of claims relating to a separate location for analysis.

the sensor.


Clinical Trials

Our clinical testing is conducted by contract clinical research organizations in various centers around the world to cover a wide demographic – including Asia and Europe – and is managed by our in-house management team.

We have had 2 pre-submission meetings with the FDA in June 2016, to define the clinical roadmap. As a result, a detailed clinical plan was developed and approved internally and a clinical site in Europe was been selected and audited and approved for commencement of clinical studies using the body worn transmitter device version of the sugarBEAT.sugarBEAT®. The study was completed, and a PMA application submitted to the FDA submission is in preparation.July 2020.

In August 2017, we commenced a European three-stage 75 patient clinical study, consisting of 80% Type 1 and 20% Type 2 diabetics. The studydata from these studies was designedalso submitted as a single center open-label, single arm, within-subject comparison of sugarBEAT, with blood samples drawn from a venous catheter at corresponding time points, with glucose concentration measured using a laboratory blood glucose analyser, ARCHITECT C8000. The European clinical trial program consisted of a total of 525 patient days, with each patient continuously wearing sugarBEAT for 14 hours on seven consecutive days in a combination of home and clinic settings. Threepart of the seven days were in-clinic where venous blood samples were taken at 15 minute intervals over a continuous 12 hour period.  The clinical studyCE approval in Europe was completedreceived in December 2017.  An interim analysis of the data has thus far indicated a precision of 1.07 and accuracy as determined by the Mean Absolute Relative Deviation (MARD) of less than 14%, with no serious or major adverse events. The precision and accuracy of sugarBEAT observed in the study was similar to other CE Mark approved continuous glucose monitors. Data from the clinical study was published on the Nemaura Medical Website, Publications section, in August 2018.May 2019.

Research and development

We spent $2,296,668$1,556,988 and $993,833$1,554,603 during the fiscal years ended March 31, 20192022 and 2018,2021, respectively, on research and development. We anticipatedevelopment; management currently anticipated that for the year ending March 2020, research and development expendituresspend in this area will increase to further develop the device for commercial launchremain reasonably consistent in the UK and Europe.coming fiscal year.

Development and clinical test costs in support of our current product, as well as costs to file patents and revise and update previous filings on our technologies, will continue to be substantial as we assess the next steps to advance the product. 

Manufacturing

The manufacture and sale of CE certified medical devices are controlled and governed by guidelines stipulated in the International Organization for Standardization (ISO), more specifically ISO13485; sugarBEATsugarBEAT® will be manufactured and marketed according to ISO13485 quality standards.

In preparation for our anticipatedsupport of commercial launchsales of sugarBEATsugarBEAT® in the UK during the second half of 2019and EU we have worked with our manufacturing partner Nemaura Pharma, to initiate scale-up manufacturing of the various sugarBEATsugarBEAT® components alongside facilities for final assembly and packaging. As part of this process, we are expandinghave expanded our manufacturing and assembly capabilities by occupying additional space within our existing headquarters site at Loughborough University Science and Enterprise Park (LUSEP) in the UK.

Manufacturers of key components required for our device are:

Sensors - Parlex (a division of Johnson Electrics), based in the Isle of White, UK
Patches - Polarseal Limited, located in Surrey, UK
Electronics- Datalink Limited located in Loughborough, UK

We expect to enterhave entered into the following types of agreements during 2019:with various manufacturing partners:

Manufacturing agreements for the sensor manufacture
Manufacturing agreements for the patch manufacture
Manufacturing agreements for the CGM watchtransmitter device and transmitter devicere-charging station manufacture


 

Sales and Marketing

An Exclusive Marketing Rights agreement for the UK and Republic of Ireland was signed on March 31, 2014 with Dallas Burston Pharma, a Jersey (Channel Island) based company (“DB Pharma”) (subsequently updated in 2018 and again in 2021 to include a change in the company name to MySugarWatch Limited “MSW”), who has pharmaceutical product marketing operations in the UK and has demonstrated a very successful model for the marketing of prescription medical products directly to general practitioners. We received a non-refundable upfront payment of $1.67£1 million ($1.67 million at the then exchange rate) in return for providing DB PharmaMSW with the exclusive right to sell the sugarBEATsugarBEAT® device in the UK and Republic of Ireland, both direct to consumer and through prescriptions by general practitioners. Subsequently, on April 4, 2014, a Letter of Intent was entered into outlining the basic terms of the cost at which the patches and watch will be supplied and minimum order quantities in the first two (2) years. The key terms of the Exclusive Marketing Rights Agreement were concluded in a Commercial Agreement signed in August 2015.

This agreement was updated and re-issued in October 2019 to cover new IP / improvements to the technology.

In addition, a joint venture agreement was entered into with MySugar Watch (Europe) Limited (previously known as Dallas Burston Ethitronix (Europe) Limited) in May 2018, whereby we will share equally the costs and net profits of the sales of our sugarBEATsugarBEAT® system in all territories in Europe, with the exception of the United Kingdom, which is the subject of a separate agreement with DB Pharma.MSW. This agreement was updated and re-issued in October 2019 to cover new IP/ improvements to the technology. Commercial agreements were signed in 2018 with TPMENA and Al-Danah Medical, for the Gulf Region (GCC) and Qatar respectively.

Regulatory matters

Government Regulation

Our business is subject to extensive federal, state, local and foreign laws and regulations, including those relating to the protection of the environment, and health and safety. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations. In addition, these laws and their interpretations are subject to change, or new laws may be enacted.

Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. We believe that we have structured our business operations to comply with all applicable legal requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. We discuss below the statutes and regulations that are most relevant to our business.

United Kingdom and Wales and the European Union regulations

Government authorities in the United Kingdom and Wales and the European Union as well as other foreign countries extensively regulate, among other things, the research, development, testing, manufacture, labelling, promotion, advertising, distribution, sampling, marketing and import and export of medical devices, including patches and other pharmaceutical products. Our body worn transmitter devices in the United Kingdom and Wales will be subject to strict regulation and require regulatory approval prior to commercial distribution. The process of obtaining governmental approvals and complying with ongoing regulatory requirements requires the expenditure of substantial time and financial resources. In addition, statutes, rules, regulations and policies may change and new legislation or regulations may be issued that could delay such approvals. If we fail to comply with applicable regulatory requirements at any time during the product development process, approval process, or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include the authority's refusal to approve pending applications, withdrawals of approvals, clinical holds, warning letters, product recalls, product seizures, total or partial suspension of our operations, injunctions, fines, civil penalties or criminal prosecution. Any agency enforcement action could have a material adverse effect on us.

The European Commission on Public Health (the "ECPH") provides the regulation for the development and commercialization of new medical diagnostic devices. Any medical device placed on the European market must comply with the relevant legislation, notably with Directive 93/42/EEC for medical devices, with the active implantable devices Directive 90/(90/385/EECEEC) or with the in vitro devices Directive 98/(98/79/EC. WeEC). From 26th May 2021, all newly approved medical devices must first determinecomply with the Medical Device Regulation (2017/745). Before manufacture / import, it must be determined whether the device we intend to manufacture or importin question falls under any of these directives.Directives. All medical devices must fulfil the essential requirements set out in the above-mentioned directives. Where available, relevant standards may be used to demonstrate compliance with the essential requirements defined in the devices Directives.

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Manufacturers also need to determine the appropriate conformity assessment route. For devices falling under Directive 93/42/EEC / Regulation 2017/745, other than custom-made devices and devices intended for clinical investigation, the conformity assessment route depends on the class of the device, to be determined in accordance with certain rules set forth in the directives.directives / regulations. Once the applicable class or list has been determined, manufacturers need to follow the appropriate conformity assessment procedure. Subject to the type of the device, this may require manufacturers to have their quality systems and technical documentation reviewed by a Notified Body before they can place their products on the market. A Notified Body is a third-party body that can carry out a conformity assessment recognized by the European Union. The Notified Body will need to assure itself that relevant requirements have been met before issuing relevant certification. Manufacturers can then place the CE marking on their products to demonstrate compliance with the requirements.

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The CE approval is the process of achieving a mandatory conformity marking for the sugarBEATsugarBEAT® device to allow it to be legally sold in the European Union. It is a manufacturers' declaration that the product meets the requirements of the applicable European laws. The process for the sugarBEATsugarBEAT® device CE submission and approval involved the following:

1. The device is classified depending on certain categories described by the European Directive with Class I products being low risk (e.g., band aid plasters), throughwith Class III devices being the highest risk. The classes are Class I, IIa, IIb and III. Risk is based upon the potential harm to the patient should a problem arise with a product or its use. The sugarBEATsugarBEAT® device is classified as a IIb device.

 

2. A 'technical file' containing all of the information required to demonstrate that the product meets the essential requirements of the European directive will be prepared. This includes information relating to performance and safety of the device such as product specifications, labelling, instructions for use, risk analysis and specific test information/clinical evidence relating to the product that support the claims being made for the product.

 

3. Clinical evidence included in the technical file is expected to demonstrate that the device is safe and meets defined performance requirements. This clinical evidence can be in the form of literature data where substantial published data exists that utilizes the same technique for glucose extraction and measurement (albeit in a different device format), or data from actual clinical studies performed using the sugarBEATsugarBEAT® device. The first CE mark submission was based on literature evaluation of 3rd3rd party published clinical data available in the public domain. The final CE mark submission has claims based on the clinical performance of the device, based on clinical studies described earlier herein. The clinical data showed that the sugarBEATsugarBEAT® device can trend blood glucose levels in a human subject by taking measurements every 5 minutes. The clinical trial data demonstrates the sugarBEATsugarBEAT® device blood glucose trend can be used to supplement normal finger prick measurements.

 

4. The technical file has been assessed by an independent inspector (the Notified Body), regulated by the competent authority, (Medicines and Healthcare products Regulatory Agency, MHRA in the United Kingdom). The Notified Body (an organization in the European Union that has been accredited by a member state to determine whether a medical device complies with the European medical device directives), will then notify The European Commission on Public Health (the "ECPH") of the approval and a certificate will be issued to the Company by the notified body and we will then be able to apply the CE mark to the device, and legally offer the product for sale in the European Economic Area (EEA). The CE mark has been issued as of May 2019 and the company is now able to offer the device for commercial sale in the EU.

5. The review of the technical file commenced in August 2018, and the final review and sign off was received in May 2019. Since the CE mark was approved, we have undergone routine inspections of our ISO 13485 Quality Management System in order to maintain our CE mark accreditation. An addendum was also submitted to the notified body and approval obtained, to include within the approved CE marked device, the iOS version of the smart device app that the transmitter connects to.

U.S. Food and Drug Administration regulation of medical devices.devices

The FDCAUS Food, Drug, and Cosmetic Act (the “FDCA”) and FDA regulations establish a comprehensive system for the regulation of medical devices intended for human use. sugarBeatsugarBEAT® is a medical device that is subject to these, as well as other federal, state, local and foreign, laws and regulations. The FDA is responsible for enforcing the laws and regulations governing medical devices in the United States.

The FDA classifies medical devices into one of three classes (Class I, Class II, or Class III) depending on their level of risk and the types of controls that are necessary to ensure device safety and effectiveness. The class assignment is a factor in determining the type of premarketing submission or application, if any, that will be required before marketing in the United States. SugarBeatSugarBEAT® falls under Class III.

Class I devices present a low risk and are not life-sustaining or life-supporting. The majority of Class I devices are subject only to "general controls" (e.g., prohibition against adulteration and misbranding, registration and listing, good manufacturing practices, labeling,labelling, and adverse event reporting. General controls are baseline requirements that apply to all classes of medical devices.)

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Class II devices present a moderate risk and are devices for which general controls alone are not sufficient to provide a reasonable assurance of safety and effectiveness. Devices in Class II are subject to both general controls and "special controls" (e.g., special labeling,labelling, compliance with performance standards, and post market surveillance. Unless exempted, Class II devices typically require FDA clearance before marketing, through the premarket notification (510(k)) process.)

Class III devices present the highest risk. These devices generally are life-sustaining, life-supporting, or for a use that is of substantial importance in preventing impairment of human health or present a potential unreasonable risk of illness or injury. Class III devices are devices for which general controls, by themselves, are insufficient and for which there is insufficient information to determine that application of special controls would provide a reasonable assurance of safety and effectiveness. Class III devices are subject to general controls and typically require FDA approval of a premarket approval ("PMA")PMA application before marketing.

Unless it is exempt from premarket review requirements, a medical device must receive marketing authorization from the FDA prior to being commercially marketed, distributed or sold in the United States. The most common pathways for obtaining marketing authorization are 510(k) clearance and PMA. After preliminary discussions with the FDA in June 2016 as part of a pre-submission meeting it was determined that the pathway for sugarBeatsugarBEAT® would be a PMA approval.

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Premarket approval pathway

The PMA approval process requires an independent demonstration of the safety and effectiveness of a device. PMA is the most stringent type of device marketing application required by the FDA. PMA approval is based on a determination by the FDA that the PMA contains sufficient valid scientific evidence to ensure that the device is safe and effective for its intended use(s). A PMA application generally includes extensive information about the device including the results of clinical testing conducted on the device and a detailed description of the manufacturing process.

After a PMA application is accepted for review, the FDA begins an in-depth review of the submitted information. FDA regulations provide 180 days to review the PMA and make a determination; however, in reality, the review time is normally longer (e.g., 1-3 years). During this review period, the FDA may request additional information or clarification of information already provided. Also, during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the data supporting the application and provide recommendations to the FDA as to whether the data provideprovides a reasonable assurance that the device is safe and effective for its intended use. In addition, the FDA generally will conduct a preapproval inspection of the manufacturing facility to ensure compliance with Quality System Regulation, which imposes comprehensive development, testing, control, documentation and other quality assurance requirements for the design and manufacturing of a medical device.

Based on its review, the FDA may (i) issue an order approving the PMA, (ii) issue a letter stating the PMA is "approvable" (e.g., minor additional information is needed), (iii) issue a letter stating the PMA is "not approvable," or (iv) issue an order denying PMA. A company may not market a device subject to PMA review until the FDA issues an order approving the PMA. As part of a PMA approval, the FDA may impose post-approval conditions intended to ensure the continued safety and effectiveness of the device including, among other things, restrictions on labeling,labelling, promotion, sale and distribution, and requiring the collection of additional clinical data. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including withdrawal of the approval.

Most modifications to a PMA approved device, including changes to the design, labeling,labelling, or manufacturing process, require prior approval before being implemented. Prior approval is obtained through submission of a PMA supplement. The type of information required to support a PMA supplement and the FDA's time for review of a PMA supplement vary depending on the nature of the modification.

In February 2020 Nemaura announced that following discussions with the FDA, it was established that Nemaura may sell its CGM product with a digital service offering in the U.S. without FDA approval as a non-medical wellbeing application. Nemaura further announced that it intended to launch this product under the brand proBEATÔin the U.S. in October to December 2020. The recent De-Novo and subsequent 510(k) by Dexcom provide evidence that current FDA thinking on invasiveproduct enables users to wear the CGM devices for non-adjunctive use are suitable for Class II classification. The non-invasive nature of sugarBEAT®, as an adjunctive CGM, provides a low level of risk as compareddevice from which data will be sent to invasive CGMs. Moreover,Nemaura’s servers in the risks to health are understood, and appropriate general and special controls have been applied through the ISO 13485:2016 design controlscloud, from where data will be processed to provide evidence of assurance of safetyusers with educational material and effectiveness. Nemaura is exploringinsights into factors that can affect their sugar levels and tips for healthy lifestyle and diet, with a view to helping pre-diabetics and diabetics alike live healthier lives. A limited product launch commenced in the possibility of submission ofU.S. in December 2020 to enabled potential customers to register their interest utilizing proBEATÔ in conjunction with a De-Novo application in place of a PMA.digital program for weight loss targeted at persons with diabetes, under the brand BEATdiabetes.life.

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Clinical trials

Clinical trials of medical devices in the United StatesU.S. are governed by the FDA's Investigational Device Exemption ("IDE") regulation. This regulation places significant responsibility on the sponsor of the clinical study including, but not limited to, choosing qualified investigators, monitoring the trial, submitting required reports, maintaining required records, and assuring investigators obtain informed consent, comply with the study protocol, control the disposition of the investigational device, submit required reports, etc.

Clinical trials of significant risk devices (e.g., implants, devices used in supporting or sustaining human life, devices of substantial importance in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health) require FDA and Institutional Review Board ("IRB") approval prior to starting the trial. FDA approval is obtained through submission of an IDE application. Clinical trials of non-significant risk ("NSR"), devices (i.e., devices that do not meet the regulatory definition of a significant risk device) only require IRB approval before starting. The clinical trial sponsor is responsible for making the initial determination of whether a clinical study is significant risk or NSR; however, a reviewing IRB and/or FDA may review this decision and disagree with the determination.

An IDE application must be supported by appropriate data, such as performance data, animal and laboratory testing results, showing that it is safe to evaluate the device in humans and that the clinical study protocol is scientifically sound. There is no assurance that submission of an IDE will result in the ability to commence clinical trials. Additionally, after a trial begins, the FDA may place it on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to an unacceptable health risk.

As noted above, the FDA may require a company to collect clinical data on a device in the post-market setting.

The collection of such data may be required as a condition of PMA approval. The FDA also has the authority to order, via a letter, a post-market surveillance study for certain devices at any time after they have been cleared or approved.

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Pervasive and continuing FDA regulation

After a device is placed on the market, regardless of its classification or premarket pathway, numerous additional FDA requirements generally apply. These include, but are not limited to:

Establishment registration and device listing requirements;

 

Quality System Regulation ("QSR"), which governs the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labelling, storage, installation, and servicing of finished devices;

 

Labelling requirements, which mandate the inclusion of certain content in device labels and labelling, and generally require the label and package of medical devices to include a unique device identifier ("UDI"), and which also prohibit the promotion of products for uncleared or unapproved, i.e., "off-label," uses;

 

Medical Device Reporting ("MDR") regulation, which requires that manufacturers and importers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and

 

Reports of Corrections and Removals regulation, which requires that manufacturers and importers report to the FDA recalls (i.e., corrections or removals) if undertaken to reduce a risk to health posed by the device or to remedy a violation of the Federal Food, Drug and Cosmetic Act that may present a risk to health; manufacturers and importers must keep records of recalls that they determine to be not reportable.non-reportable.

 

The FDA enforces these requirements by inspection and market surveillance. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include, but is not limited to, the following sanctions:

Untitled letters or warning letters;

 

Fines, injunctions and civil penalties;

 

Recall or seizure of our products;

 

Operating restrictions, partial suspension or total shutdown of production;

 

Refusing oura request for 510(k) clearance or premarket approval of new products;

 

Withdrawing 510(k) clearance or premarket approvals that are already granted; and

 

Criminal prosecution.

We would be subject to unannounced device inspections by the FDA, as well as other regulatory agencies overseeing the implementation of and compliance with applicable state public health regulations. These inspections may include our suppliers' facilities.

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Other Regulation in the United Kingdom and Wales and the EU

Healthcare Reimbursement

Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, and managed-care arrangements, are continuing in many countries where we do business, including the United Kingdom and Wales. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective medical products. Government programs, private healthcare insurance and managed-care plans have attempted to control costs by limiting the amount of reimbursement they will pay for particular procedures or treatments. This has created an increasing level of price sensitivity among customers for products. Some third-party payers must also approve coverage for new or innovative devices or therapies before they will reimburse healthcare providers who use the medical devices or therapies. Even though a new medical product may have been cleared for commercial distribution, we may find limited demand for the product until reimbursement approval has been obtained from governmental and private third-party payers.

Environmental Regulation

We are also subject to various environmental laws and regulations both within and outside the United Kingdom and Wales. Like many other medical device companies, our operations involve the use of substances, including hazardous wastes, which are regulated under environmental laws, primarily manufacturing and sterilization processes. We do not expect that compliance with environmental protection laws will have a material impact on our consolidated results of operations, financial position or cash flow. These laws and regulations are all subject to change, however, and we cannot predict what impact, if any, such changes might have on our business, financial condition or results of operations.

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Foreign Regulation

Whether or not we obtain regulatory approval for a product, we must obtain approval from the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for EC approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement also vary greatly from country to country.

Under European Union regulatory systems, we may submit marketing authorization applications under a decentralized procedure. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval. This procedure is referred to as the mutual recognition procedure, or called the MRP.

In addition, regulatory approval of prices is required in most countries other than the United States. We face the risk that the prices which result from the regulatory approval process would be insufficient to generate an acceptable return to us or our collaborators.

EU General Data Protection Regulation

The EU General Data Protection Regulation (the “GDPR”) came into force in all EU Member States from May 25, 2018 and replaced previous EU data privacy laws. Although a number of basic existing principles will remain the same, the GDPR introduces new obligations on data controllers and rights for data subjects, including, among others:

accountability and transparency requirements, which will require data controllers to demonstrate and record compliance with the GDPR and to provide more detailed information to data subjects regarding processing;
enhanced data consent requirements, which includes “explicit” consent in relation to the processing of sensitive data;

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obligations to consider data privacy as any new products or services are developed and limit the amount of information collected, processed, stored and its accessibility;
constraints on using data to profile data subjects;
providing data subjects with personal data in a useable format on request and erasing personal data in certain circumstances; and
reporting of breaches without undue delay (72 hours where feasible).

The GDPR also introducesintroduced new fines and penalties for a breach of requirements, including fines for serious breaches of up to the higher of 4% of annual worldwide revenue or €20m and fines of up to the higher of 2% of annual worldwide revenue or €10m (whichever is highest) for other specified infringements. The GDPR identifies a list of points to consider when imposing fines (including the nature, gravity and duration of the infringement).

The Company has assessed the implications of the GDPR on all personal data it holds and has implemented measures to ensure that personal data shall be:

-Processed lawfully, fairly and in a transparent manner in relation to the data subject.
-Collected for a specified, explicit and legitimate purpose and not further processed in a manner that is incompatible with those purposes.
-Adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed.
-Kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data areis processed.
-Processed in a manner that ensures appropriate security of the personal data, including protection against unauthorised or unlawful processing and against accidental loss, destruction or damage, using appropriate technical or organisational measures.
-Maintained accurately and up to date and that every reasonable step is taken to ensure that personal data that areis inaccurate, having regard to the purposes for which they are processed, are erased or rectified without delay.

At the current stage of the Company’s development and, with being pre-revenue at this stage, the scope of data held, and consequently the impact of GDPR, is limited. Increased application of GDPR will be assessed and implemented prior to further Company developments that warrant additional GDPR measures. As the Company progresses with product commercialization, the extent to which GDPR will affect the Company will increase, which will require additional changes to the Company’s procedures and policies which could adversely impact operational and compliance costs. Further, there is a risk that the measures will not be implemented correctly or that individuals within the business will not be fully compliant with the new procedures. If there are breaches of these measures, the Company could face significant administrative and monetary sanctions as well as reputational damage which may have a material adverse effect on its operations, financial condition, and prospects.

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Corporate Information

Our principal executive offices are located at The Advanced Technology Centre, Oakwood Drive, Loughborough, Leicestershire, LE11 3QF, UK.57 West 57th Street New York, NY 10019. Our website is located at www.nemauramedical.com and our telephone number is +44 1509 222912.+ 1 646-416-7912. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report, and you should not consider it part of the Annual Report.

Employees

Human Capital Management

We currentlybelieve that a diverse workforce is important to our success. We will continue to focus on the hiring, retention and advancement of women and underrepresented populations, and to cultivate an inclusive and diverse corporate culture. In the future, we intend to continue to evaluate our use of human capital measures or objectives in managing our business such as the factors we employ 8 personnel.or seek to employ in the development, attraction and retention of personnel and maintenance of diversity in our workforce.

The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety, and wellness of our employees. We provide our employees with access to a variety of flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

We also provide robust compensation and benefits programs to help meet the needs of our employees. We believe our relationshipsthat we maintain a satisfactory working relationship with our employees and contractors are good. have not experienced any labor disputes. As of March 31, 2022, we had 37 personnel employed on our payroll, which equates to approximately 32 full-time equivalents.

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Corporate History and Restructuring

We are a holding corporation that owns one hundred percent (100%)100% of a diagnostic medical device company specializing in discovering, developing, and commercializing specialty medical devices. We were organized on December 24, 2013, under the laws of the State of Nevada. We own one hundred percent (100%)100% of Region Green Limited, a British Virgin Islands corporation formed on December 12, 2013. Region Green Limited owns one hundred percent (100%) of the stock in Dermal Diagnostic (Holdings) Limited, an England and Wales corporation formed on December 11, 2013. Dermal Diagnostics (Holdings) Limited owns one hundred percent (100%)100% of the stock in Dermal Diagnostics Limited (“DDL”), an England and Wales corporation formed on January 20, 2009, and one hundred percent (100%)100% of the stock in Trial Clinic Limited (“TCL”), an England and Wales corporation formed on January 12, 2011.

The following diagram illustrates Nemaura’s corporate structure as of March 31, 2022:

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During the fiscal year ended March 31, 2021, the Board of Directors assessed the adequacy of the group’s organizational structure and concluded that an intermediary holding company, Region Green Limited, was no longer required as the entity had been effectively dormant since inception and no longer represented a requirement to be maintained. It was therefore determined that Region Green Limited should be unwound, with the assets held by Region Green Limited being transferred up to Nemaura Medical Inc. following which Region Green Limited would be dissolved.

The transfer of assets took place on March 5, 2021 and Region Green Limited was formally dissolved as of April 23, 2021.

In December 2013, we restructured the Company and re-domiciled as a domestic corporation in the United States. The corporate re-organization was accomplished to preserve the tax advantages under the laws of the England and Wales tax laws for the benefit of the shareholders of both Dermal Diagnostics Limited (“DDL”) and Trial Clinic Limited (“TCL”).

Limited.

DDL is a diagnostic medical device company headquartered in Loughborough, Leicestershire, England. DDL was founded on January 20, 2009, to engage in the discovery, development and commercialization of diagnostic medical devices. The Company’s initial focus has been on the development of a novel continuous glucose monitoring (CGM)CGM device.

RECENT DEVELOPMENT

ATM Offering

On March 27, 2019, we filed a newJuly 23, 2021, Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Agent”) pursuant to which the Company may offer and sell from time to time to or through the Agent shares of the Company’s common stock.

The offer and sale of shares of common stock through the Agent will be made pursuant to the Registration Statement on Form S-3 (Reg.(File No. 333-230535), registering up to $250,000,000 of our common stock, preferred stock, warrants, debt securities and units (the “Form S-3”). The Form S-3which was declared effective by the Securities and Exchange Commission (the “SEC”) on April 8, 2019. We2019, and a related prospectus supplement pursuant to which the Company offered shares of its common stock having an aggregate offering price of up to $100,000,000.

Under the ATM Agreement, the Company may offer and sell upshares of common stock through the Agent by any method deemed to $250,000,000be an “at the market offering” as defined in the aggregateRule 415 of the securities identified from time to time in oneSecurities Act of 1933, as amended, including sales made directly on or more offerings.through The securities may be sold directly by us, through dealers, or agents, designated from time to time,Nasdaq Capital Market, sales made to or through underwriters,a market maker other than on an exchange or throughotherwise, directly to the Agent as principal, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or in any other method permitted by law. If the Company elects to utilize the ATM Agreement, the Agent would be obligated to use commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell such shares in accordance with the Company’s instructions (including as to price, time or size limit or other parameters or conditions the Company may impose). The Company will pay the Agent a combinationcommission of these methods as set forth in3.0% of the “Plangross sales price of Distribution” included therein. Each time we offer securitiesany shares of common stock sold under the prospectus that is part ofATM Agreement. The Company has also provided the Form S-3, we will provideAgent with customary indemnification rights and has agreed to reimburse the specific terms of the securities being offered, including the offering price in a prospectus supplement.

CE Approval

On May 29, 2019 Nemaura Medical announced it had received confirmation of approval of the European ConformityAgent for sugarBEAT which now allows Nemaura to commence commercialization of the product in to the European Union. The EU currently has in excess of 58 million1 diabetics which represents an enormous market opportunity that has yet to be fully exploited by other CGM’s due primarily to the cost of competitor products whereby a single sensor costs $10’s of dollars as each sensor has to be applied continuously forcertain specified expenses up to 14 days, whereas with sugarBEAT$20,000 plus up to $2,500 per quarter while the sensor is a daily disposable, and therefore the cost of use is limited to a daily cost, and gives the user flexibility over how many days of the month they wear the CGM, to extract very powerful glucose trending data that finger prick testing quite simply cannot provide.ATM Agreement remains in effect.

Nemaura has initiated plans to launch the product into the UK market in Q3 of 2019, followed by Germany and other markets. In the UK, Nemaura is working with its licensee DBP (Jersey) Ltd., to launch the product in the UK, and is in discussions with major distributors in Germany through its Joint venture with DB Ethitronix to commence registration and commercial launch into the German market which represents the single largest market in Europe.

The Company ordered 12,500 sugarBEAT devices in July 2018 in anticipation of CE approval, and these devices are currently being assembled and programmed with the updated software for the planned launch in Germanyis not obligated to sell, and the UK, and theyAgent is not obligated to buy or sell, any shares of common stock under the ATM Agreement. The Company or the Agent may terminate the ATM Agreement by providing notice to the other party. The Company intends to use the net proceeds from any ATM offering for general corporate purposes, which include, but are in discussions with their UK licensee with regardsnot limited to, taking orders for additional quantities to support productthe targeted launch forof sugarBEAT® into other European markets outside of the next 12 months.

Nemaura also plans to commence activities with respect to registering the CGM product based on the CE Mark in the GCC countries with their respective licensees in that region, Al-Danah Medical and TPMena in the coming weeks.

1.https://www.idf.org/aboutdiabetes/what-is-diabetes/facts-figures.html

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Management Team Hire

Nemaura plans to further strengthen its operational and management team with the hire of Chris Avery, Vice President Business Operations. Chris has an impeccable track record of over 32 years in the diabetes industry including 9 years at Hypoguard, 5 years at Lifescan and 15 years at Nipro Diagnostics where he served as the UK Managing Director from 2010-14, and most recently was Senior VP Global Business Development at DB Ethitronix., where over a period of 2 years he was appointed to overseeUK; the development of sugarBEATthe subscription-based service for the U.S. under the Wellness category that was launched in December 2020; establishing a business-to-consumer offering for a metabolic health program; research and its commercialization strategy. Chris is expected to oversee the global operational management, handle investor updates on the technical and commercial development of our BEAT platform for other, non, CGM purposes, such as Lactate monitoring, as well as help broadenpotential acquisition of other companies, products or technologies that are complementary to the global market reachdelivery of our mission. Accordingly, our management will have broad discretion as to the use of the product through the implementation of novel strategies based on the opportunities sugarBEAT presents that no other CGM is currently able to offer to date, due to its flexible wear time of sugarBEAT.net proceeds from any ATM offering under this agreement.

 

Advisory Board

Nemaura plans to further strengthen its advisory board through the appointment of Jafar Hamid who is a Private banking professional with over 25 years in the Investment Banking Industry, including with UBS, Credit Suisse and Citibank, and most recently J P Morgan. His expertise includes advising ultra High Net Worth individuals and family offices in the Healthcare and Pharmaceuticals areas. Mr. Hamid is expected to act as an adviser to the board.

ITEM 1A. — RISK FACTORS

If anyInvesting in our securities is highly speculative and involves a high degree of risk. You should carefully consider the following risks and other information in this Annual Report on Form 10-K and our other SEC filings before deciding to invest. Additional risks and uncertainties that we are unaware of may become relevant to us. Any of the following risks actually occur, they could materially and adversely affect our business, results of operations or financial condition or operating results.condition. In that case,event, the trading price of our common stock and warrants may decline, and you could decline.lose all or part of your investment.

We will need to raise additional funds in order to finance the anticipated commercialization of our product by incurring indebtedness, through collaboration and licensing arrangements, or by issuing securities which may cause dilution to existing stockholders, or require us to relinquish rights to our technologies and our product.

Developing our product, conducting clinical trials, establishing manufacturing facilities and developing marketing and distribution capabilities is expensive. We will need to finance future cash needs through additional public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product or grant licenses on terms that are not favorable to us.

We have a limited operating history, and you should not rely on our historical financial data as an indicator of our future financial performance.

We have a limited operating history in the medical device industry. You should consider our business and prospects in light of the risks and difficulties we face with our limited operating history and should not rely on our past results as an indication of our future performance. In particular, we may face challenges in planning our growth strategy and forecasting market demand accurately as a result of our limited historical data and limited experience in implementing and evaluating our business strategies. If we are unable to successfully address these risks, difficulties and challenges as a result of our limited operating history, our ability to implement our strategic initiatives could be adversely affected, which may in turn have a material adverse effect on our business, financial condition, results of operations and prospects.

We have a history of losses and may not achieve or maintain profitability.

We have incurred net losses every year since our inception in 2009 and have not generated revenue from the period of our inception from product sales or licenses to date. As of March 31, 2022, we had an accumulated deficit of approximately $37.7 million. We expect to incur losses until our product is successfully launched and cannot be certain that we will ever achieve profitability. As a result, our business is subject to all of the risks inherent in the development of a new business enterprise, such as the risk that we may not obtain substantial additional capital needed to support the expenses of developing our technology and commercializing our potential products; develop a market for our potential products; successfully transition from a company with a research focus to a company capable of either manufacturing and selling potential products or profitably licensing our potential products to others; and/or attract and retain qualified management, technical and scientific staff.

Revenue generation from product sales has only commenced in the current fiscal year and may never become profitable.

To date, we have generated revenue for the first time in the current fiscal period for product sales. Our ability to generate and grow revenue depends on several factors, including our ability to support the market launch of our UK Licensee, successfully obtain regulatory approval in all key markets identified to commercialize our product pipeline. Even then, we will need to establish and maintain sales, marketing, distribution and to the extent we do not outsource manufacturing, manufacturing capabilities. We plan to rely on one or more strategic collaborators to help generate revenues in markets outside of Great Britain however, we cannot be sure that our collaborators, if any, will be successful. Our ability to generate revenue will also be impacted by certain challenges, risks and uncertainties frequently encountered in the establishment of new technologies and products in emerging markets and evolving industries. These challenges include our ability to:

execute our business model;
create brand recognition;
manage growth in our operations;
create a customer base cost-effectively;
retain customers;
access additional capital when required; and
attract and retain key personnel.

 

We cannot be certain that our business model will be successful or that it will successfully address these and other challenges, risks, and uncertainties. If we are unable to generate significant revenue, we may not become profitable, and we may be unable to continue our operations. Even if we are able to commercialize the sugarBEAT® device, we may not achieve profitability for at least several years, if at all, after generating material revenue.

Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness. Our indebtedness could have other important consequences to you as a stockholder. For example, it could:

make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the senior secured credit facility and the senior subordinated note;
make is more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse change in government regulation;
require us to dedicate a substantial portion of our cashflow from operations to payments on our indebtedness, thereby reducing the availability of our cashflows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
place us at a competitive disadvantage compared to our competitors that have less debt; and
limit our ability to borrow amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes.

Risks Related to Our Product Candidate and OperationOperations

We are largely dependent on the success of our sole product candidate, the sugarBEAT® device, and we may not be able to successfully commercialize this potential product.

We have incurred and will continue to incur significant costs relating to the development and marketing of our sole product candidate, the sugarBEATsugarBEAT® device. We have obtained approval to market this product in the EU, but it is not guaranteed that we will achieve this in any jurisdiction and we may never be able to obtain approval or, if approvals are obtained, to commercialize this product successfully in other territories.

If we fail to successfully commercialize our product(s) in multiple territories, we may be unable to generate sufficient revenue to sustain and grow our business, and our business, financial condition and results of operations will be adversely affected affected.

If we fail to obtain regulatory approval of the sugarBEAT® device or any of our other future products, we will be unable to commercialize these potential products.

The development, testing, manufacturing and marketing of our product is subject to extensive regulation by governmental authorities in Great Britain and the European Union. In particular, the process of obtaining CE approval by a Notified Body, a third party that can carry out a conformity assessment recognized by the European Union, is costly and time consuming, and the time required for such approval is uncertain. Our product must undergo rigorous preclinical and clinical testing and an extensive regulatory approval process mandated for the CE. Such regulatory review includes the determination of manufacturing capability and product performance. We have received CE approval on sugarBEAT wireless body worn devicewas granted by the European Notified Body BSI in May 2019.

2019, allowing the product to be made available for commercial sale. This approval is subject to an annual review of the underlying ISO 13485 accredited Quality Management System. The accreditation was successfully renewed in November 2021.

There can be no assurance that all necessary approvals will be granted for future products or that CE review or actions will not involve delays caused by requests for additional information or testing that could adversely affect the time to market for and sale of our product. Further failure to comply with applicable regulatory requirements can, among other things;things, result in the suspension of regulatory approval as well as possible civil and criminal sanctions.

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Failure to enroll patients in our clinical trials may cause delays in developing the sugarBEAT® device or any of our future products.

We may encounter delays in the development and commercialization, or fail to obtain marketing approval, of the sugarBEATsugarBEAT® device or any other future products if we are unable to enroll enough patients to complete clinical trials. Our ability to enroll sufficient numbers of patients in our clinical trials depends on many factors, including the severity of illness of the population, the size of the patient population, the nature of the clinical protocol, the proximity of patients to clinical sites, and the eligibility criteria for the trial and competing clinical trials. Delays in any possible future patient enrolment,enrollment, based on request by local regulatory agencies to conduct studies in their territory, may result in increased costs and harm our ability to complete our clinical trials and obtain regulatory approval.

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Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.

Significant delays in clinical testing could materially, adversely impact our product development costs. We do not know whether planned clinical trials will begin on time, will need to be restructured or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence and continue a study, delays in reaching agreement on acceptable clinical study terms with prospective sites, delays in obtaining institutional review board approval to conduct a study at a prospective site and delays in recruiting patients to participate in a study.

Significant delays in testing or regulatory approvals for any of our current or future products, including the sugarBEATsugarBEAT® device, could prevent or cause delays in the commercialization of such product candidates, reduce potential revenues from the sale of such product candidates and cause our costs to increase.

Our clinical trials for any of our current or future products may produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing for these products or cease our trials.

We will only receive regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the applicable regulatory agency that the product is safe and effective. We do not know whether our future clinical trials will demonstrate safety and efficacy sufficiently to result in marketable products. Because our clinical trials for the sugarBEATsugarBEAT® device may produce negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing for this product or cease our clinical trials. If this occurs, we may not be able to obtain approval for this product or our anticipated time to market for this product may be substantially delayed and we may also experience significant additional development costs. We may also be required to undertake additional clinical testing if we change or expand the indications for our product.

If approved, the commercialization of our product, the sugarBEAT® device, may not be profitable due to the need to develop sales, marketing and distribution capabilities, or make arrangements with a third party to perform these functions.

In order for the commercialization of our potential product to be profitable, our product must be cost-effective and economical to manufacture on a commercial scale. Subject to regulatory approval, we expect to incur significant sales, marketing, distribution, and to the extent we do not outsource manufacturing, manufacturing expenses in connection with the commercialization of the sugarBEATsugarBEAT® device and our other potential products. We do not currently have a dedicated sales force orand our current manufacturing capability andhas limited capacity, we also have nolimited experience in the sales, marketing and distribution of medical diagnostic device products. In order to commercialize the sugarBEATsugarBEAT® device or any of our other potential products that we may develop, we must develop sales, marketing and distribution capabilities or make arrangements with a third party to perform these functions. Developing a sales force is expensive and time-consuming, and we may not be able to develop this capacity. If we are unable to establish adequate sales, marketing and distribution capabilities, independently or with others, we may not be able to generate significant revenue and may not become profitable. Our future profitability will depend on many factors, including, but not limited to:

the costs and timing of developing a commercial scale manufacturing facility or the costs of outsourcing the manufacturing of the sugarBEATsugarBEAT® device;
receipt of regulatory approval of the sugarBEATsugarBEAT® device;
the terms of any marketing restrictions or post-marketing commitments imposed as a condition of approval by regulatory authorities;

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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
costs of establishing sales, marketing and distribution capabilities;
the effect of competing technological and market developments; and
the terms and timing of any collaborative, licensing and other arrangements that we may establish.

Even if we receive regulatory approval for the sugarBEATsugarBEAT® device or any other product candidates, we may never receive significant revenues from any of them. To the extent that we are not successful in commercializing our potential products, we will incur significant additional losses if we do not successfully commercialize our products.losses.

Our proprietary rights may not adequately protect our intellectual property and product and if we cannot obtain adequate protection of our intellectual property and product, we may not be able to successfully market our product.

Our commercial success will depend in part on obtaining and maintaining intellectual property protection for our technologies and product. We will only be able to protect our technologies and product from unauthorized use by third parties to the extent that valid and enforceable patents cover them, or that other market exclusionary rights apply. While we have issued enforceable patents covering the sugarBEATsugarBEAT® device, the patent positions of companies like ours can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in Great Britain and the European Union. The general patent environment outside the United States involves significant uncertainty. Accordingly, we cannot predict the breadth of claims that may be allowed or that the scope of these patent rights would provide a sufficient degree of future protection that would permit us to gain or keep our competitive advantage with respect to this product and technology. Additionally, companies like ours are dependent on creating a pipeline of products. We may not be able to develop additional proprietary technologies or products that produce commercially viable products or that are themselves patentable.

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Our issued patents may be subject to challenge and possibly invalidated by third parties. Changes in either the patent laws or in the interpretations of patent laws in Great Britain or the European Union or other countries may diminish the market exclusionary ability of our intellectual property.

In addition, others may independently develop similar or alternative technologies that may be outside the scope of our intellectual property. Should third parties obtain patent rights to similar technology, this may have an adverse effect on our business.

To the extent that consultants or key employees apply technological information independently developed by them or by others to our product, disputes may arise as to the proprietary rights of the information, which may not be resolved in our favour.favor. Consultants and key employees that work with our confidential and proprietary technologies are required to assign all intellectual property rights in their discoveries to us. However, these consultants or key employees may terminate their relationship with us, and we cannot preclude them indefinitely from dealing with our competitors. If our trade secrets become known to competitors with greater experience and financial resources, the competitors may copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. If we were to prosecute a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming and the outcome would be unpredictable. In addition, courts in Great Britain and the European Union are sometimes less willing to protect trade secrets than courts in the United States. Moreover, if our competitors independently develop equivalent knowledge, we would lack any contractual claim to this information, and our business could be harmed.

Our ability to commercialize our product will depend on our ability to sell such products without infringing the patent or proprietary rights of third parties. If we are sued for infringing intellectual property rights of third parties, such litigation will be costly and time consuming and an unfavorable outcome would have a significant adverse effect on our business.

Our ability to commercialize our product will depend on our ability to sell such products without infringing the patents or other proprietary rights of third parties. Third-party intellectual property in the field of diagnostic medical devices is complicated, and third-party intellectual property rights in this field are continuously evolving. We have not performed searches for third-party intellectual property rights that may raise freedom-to-operate issues, and we have not obtained legal opinions regarding commercialization of our product other than patent research prior to the filing of our patent applications, and search and examination reports from the respective patent examination offices.

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In addition, because patent applications are published months after their filing, and because applications can take several years to issue, there may be currently pending third-party patent applications that are unknown to us, which may later result in issued patents. If a third-party claimsclaim that we infringe on its patents or other proprietary rights, we could face a number of issues that could seriously harm our competitive position, including:

infringement claims that, with or without merit, can be costly and time consuming to litigate, can delay the regulatory approval process and can divert management’s attention from our core business strategy;
substantial damages for past infringement which we may have to pay if a court determines that our products or technologies infringe upon a competitor’s patent or other proprietary rights;
if a license is available from a holder, we may have to pay substantial royalties or grant cross licenses to our patents or other proprietary rights; and
Re-designing our process so that it does not infringe the third-party intellectual property, which may not be possible, or which may require substantial time and expense including delays in bringing our own products to market.

Such actions could harm our competitive position and our ability to generate revenue and could result in increased costs.

Nemaura Medical Inc. is an Emerging Growth Company (EGC) as defined under the Jumpstart Our Business Startups (JOBS) Act.

An “emerging growth company” is an issuer whose initial public offering was or will be completed after December 8, 2011, and had total annual gross revenues of less than $1 billion during its most recently completed fiscal year. An issuer’s EGC status terminates on the earliest of:

The last day of the first fiscal year of the issuer during which it had total annual gross revenues of $1 billion or more;
The last day of the fiscal year of the issuer following the fifth anniversary of the date of the issuer’s initial public offering;
The date on which such issuer has issued more than $1 billion in non-convertible debt securities during the prior three-year period determined on a rolling basis; or
The date on which the issuer is deemed to be a “large accelerated filer” under the Exchange Act, which means, among other things, that it has a public float in excess of $700 million.

We expect our Emerging Growth Company status to expire on March 31, 2020.

Pursuant to the JOBS Act of 2012, as an emerging growth company the Company can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the standard for the private company. This may make comparison of the Company's financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible as possible different or revised standards may be used.

The Company has elected to use the extended transition period for complying with new or revised financial accounting standards available under Section 102(b)(2)(B) of the Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company, the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected.

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If our product, the sugarBEAT® device, does not gain market acceptance among physicians, patients and the medical community, we will be unable to generate significant revenue, if any.

The sugarBEATsugarBEAT® device that we developed may not achieve market acceptance among physicians, patients, third-party payers and others in the medical community. If we receive the regulatory approvals necessary for commercialization, the degree of market acceptance will depend upon a number of factors, including:

limited indications of regulatory approvals;
the establishment and demonstration in the medical community of the clinical efficacy and safety of our product and its potential advantages over existing diagnostic medical devices;
the prevalence and severity of any side effects;
our ability to offer our product at an acceptable price;
the relative convenience and ease of use of our product;
the strength of marketing and distribution support; and
sufficient third-party coverage or reimbursement.

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The market may not accept the sugarBEATsugarBEAT® device based on any number of the above factors. If the sugarBEATsugarBEAT® device is approved, there may be other therapies available which directly compete for the same target market. The market may choose to continue utilizing the existing products for any number of reasons, including familiarity with or pricing of these existing products. The failure of any of our productproducts to gain market acceptance could impair our ability to generate revenue, which could have a material adverse effect on our future business.

We have outsourced the bulk of the commercial manufacturing operations for the various components of the sugarBEAT®, with the exception of the Sensor chemistry which is being conducted in-house. The failure to find manufacturing partners or expand our internal manufacturing facility could have an adverse impact on our ability to grow our business.

We are largely dependent on third parties to supply our product according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices. We cannot be sure that we will be able to obtain an adequate supply of our product candidates on acceptable terms, or at all.

Manufacturers supplying diagnostic medical devices must comply with regulations which require, among other things, compliance with evolving regulations under Medical Device Directives stipulated under ISO13485. The manufacturing of products at any facility will be subject to strict quality control, testing and record keeping requirements, and continuing obligations regarding the submission of safety reports and other post-market information. Both the sensor and patch manufacturing facilities for the sugarBEATsugarBEAT® device are currently ISO13485 certified. We cannot guarantee that the facilities will continue to pass regulatory inspection, or that future changes to ISO13485 standards will not also affect the manufacturesmanufacture of the sensors and patches.

If we fail to attract and retain senior management, consultants, advisors and scientific and technical personnel, our product development and commercialization efforts could be impaired.

Our performance is substantially dependent on the performance of our senior management and key scientific and technical personnel, particularly Dr. Dewan Fazlul Hoque Chowdhury, President, Chairman and Chief Executive Officer. The loss of the services of any member of our senior management or our scientific or technical staff may significantly delay or prevent the development of our product and other business objectives by diverting management’s attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business, operating results and financial condition.

We also rely on consultants and advisors to assist us in formulating our research and development strategy. All of our consultants and advisors are either self-employed or employed by other organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to us.

In addition, we believe that we will need to recruit additional executive management and scientific and technical personnel. There is currently intense competition for skilled executives and employees with relevant scientific and technical expertise, and this competition is likely to continue. The inability to attract and retain sufficient scientific, technical and managerial personnel could limit or delay our product development efforts, which would adversely affect the development of our product and commercialization of our potential product and growth of our business.

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We expect to expand our research, development, clinical research and marketing capabilities and, as a result of which we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to have significant growth in expenditures, the number of our employees and the scope of our operations, in particular with respect to those potential products that we elect to commercialize independently or together with others. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to train qualified personnel. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plan or disrupt our operations.

We will need to raise additional funds in order to finance the anticipated commercialization of our product by incurring indebtedness, through collaboration and licensing arrangements, or by issuing securities which may cause dilution to existing stockholders, or require us to relinquish rights to our technologies and our product.

Developing our product, conducting clinical trials, establishing manufacturing facilities and developing marketing and distribution capabilities is expensive. We will need to finance future cash needs through additional public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product or grant licenses on terms that are not favorable to us.

We have a limited operating history and you should not rely on our historical financial data as an indicator of our future financial performance.

We have a limited operating history in the medical device industry. You should consider our business and prospects in light of the risks and difficulties we face with our limited operating history and should not rely on our past results as an indication of our future performance. In particular, we may face challenges in planning our growth strategy and forecasting market demand accurately as a result of our limited historical data and limited experience in implementing and evaluating our business strategies. If we are unable to successfully address these risks, difficulties and challenges as a result of our limited operating history, our ability to implement our strategic initiatives could be adversely affected, which may in turn have a material adverse effect on our business, financial condition, results of operations and prospects.

We have a history of losses and may not achieve or maintain profitability.

We have incurred net losses every year since our inception in 2009 and have not generated revenue from the period of our inception from product sales or licenses to date. As of March 31, 2019, we had an accumulated deficit of approximately $13.4 million. We may expect to incur losses for the next several years and cannot be certain that we will ever achieve profitability. As a result, our business is subject to all of the risks inherent in the development of a new business enterprise, such as the risk that we may not obtain substantial additional capital needed to support the expenses of developing our technology and commercializing our potential products; develop a market for our potential products; successfully transition from a company with a research focus to a company capable of either manufacturing and selling potential products or profitably licensing our potential products to others; and/or attract and retain qualified management, technical and scientific staff.

We currently have not generated any revenue from product sales and may never become profitable.

To date, we have generated no revenue for product sales and we do not know when or if our product will generate revenue. Our ability to generate revenue depends on a number of factors, including our ability to successfully complete clinical trials for the sugarBEAT device and obtain regulatory approval to commercialize these potential products. Even then, we will need to establish and maintain sales, marketing, distribution and to the extent we do not outsource manufacturing, manufacturing capabilities. We plan to rely on one or more strategic collaborators to help generate revenues in markets outside of Great Britain however, we cannot be sure that our collaborators, if any, will be successful. Our ability to generate revenue will also be impacted by certain challenges, risks and uncertainties frequently encountered in the establishment of new technologies and products in emerging markets and evolving industries. These challenges include our ability to:

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execute our business model;
create brand recognition;
manage growth in our operations;
create a customer base cost-effectively;
retain customers;
access additional capital when required; and
attract and retain key personnel.

We cannot be certain that our business model will be successful or that it will successfully address these and other challenges, risks and uncertainties. If we are unable to generate significant revenue, we may not become profitable, and we may be unable to continue our operations. Even if we are able to commercialize the sugarBEAT device, we may not achieve profitability for at least several years, if at all, after generating material revenue.

Fluctuations in foreign exchange rates may adversely affect our financial condition and results of operations.

Our functional currency is the Great Britain Pound Sterling (“GBP”). The reporting currency is the United States dollar (US$(U.S.$). Income and expenditures are translated at the appropriate weighted average exchange rates prevailing during the reporting period. Assets and liabilities are translated at the exchange rates as of balance sheet date. Stockholders’ equity is translated into United States dollars from GBP at historical exchange rates. Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert GBP into foreign currencies and, if the GBP were to decline in value, reducing our revenue in U.S. dollar terms. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income (loss). We have not entered into agreements or purchased instruments to hedge our exchange rate risks. The availability and effectiveness of any hedging transaction may be limited, and we may not be able to successfully hedge our exchange rate risks.

In addition, followinga number of events have occurred in recent years, including the UK’s Brexit vote to leave the EU, there has beenthe impact of Covid-19, and the invasion of Ukraine by Russia, that have had significant and potentially lasting effect of both the global economic outlook as well as a weakening of GBP against many currencies. We expect to have to pay some of our service providers and vendors in USDU.S.$ which given the exchange rate impact and weknock on inflationary pressure, will pay approximately 10% more at present than we would have done priorrepresent a significant increase in costs to the Brexit vote.business compared to prior years. The currency exchange rate continues to be very unstable and therefore the future impact or further weakening of GBP is not known at this time. 

Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the COVID-19 pandemic.

A regional or global health pandemic, including COVID-19, could severely affect our business, results of operations and financial condition. A regional or global health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic has had numerous effects on the global economy and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures, including shutdowns and “shelter-in-place” orders suggested or mandated by governmental authorities or otherwise elected by companies as a preventive measure, have adversely affected workforces, customers, consumer sentiment, economies and financial markets, and, along with decreased consumer spending, have led to an economic downturn in many of our markets.

As a result of the COVID-19 pandemic, we evaluated and executed the steps available to us to ensure we were able to provide protection of our employees and instigated remote working where possible combined with following all government advice and guidance regarding any engagement within the workplace that could not be completed remotely. To date this transition has had little impact on our employee productivity and has caused limited interruption to our business. Whilst restrictions associated with COVID-19 have largely been removed, we will continue to assess the situation, including abiding by any government-imposed restrictions, as and where relevant.

At this point in time, there remains some uncertainty relating to the potential effect of COVID-19 on our business. As infections may continue to become more widespread, we could experience a severe negative impact on our business, financial condition, and results of operations. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk factors” section.

Risks Related to Our Industry

Our competitors may develop products that are less expensive, safer or more effective, which may diminish or eliminate the commercial success of any potential products that we may commercialize.

If our competitors market products that are less expensive, safer or more effective than our future products developed from our product candidates, or that reach the market before our products, we may not achieve commercial success. For example, if approved, the sugarBEATsugarBEAT® device’s primary competition in the glucose monitoring device setting will be companies such as Dexcom, Abbott, and Senseonics who produce glucose monitoring devices.  The market may choose to continue utilizing the existing products for any number of reasons, including familiarity with or pricing of these existing products. The failure of our product to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, financial condition and results of operations.

We expect to compete with several companies including Dexcom, Abbott, and Senseonics, and our competitors may:

develop and market products that are less expensive or more effective than our future product;
commercialize competing products before we can launch any products developed from our product candidate;
operate larger research and development programs or have substantially greater financial resources than we do;
initiate or withstand substantial price competition more successfully than we can;
have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;
more effectively negotiate third-party licenses and strategic relationships; and
take advantage of acquisition or other opportunities more readily than we can.

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We expect to compete for market share against large medical diagnostic device manufacturing companies, smaller companies that are collaborating with larger companies, new companies, and other public and private research organizations.

In addition, our industry is characterized by rapid technological change. Because our research approach integrates many technologies, it may be difficult for us to stay abreast of the rapid changes in each technology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages in our product discovery process that we believe we derive from our research approach and proprietary technologies.

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The use of hazardous materials in our operations may subject us to environmental claims or liabilities.

Our research and development activities involve the use of hazardous chemical materials. Injury or contamination from these materials may occur and we could be held liable for any damages, which could exceed our available financial resources. This liability could materially adversely affect our business, financial condition and results of operations.

We are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We may be required to incur significant costs to comply with environmental laws and regulations in the future that could materially adversely affect our business, financial condition and results of operations.

If we fail to comply with extensive regulations enforced by regulatory agencies with respect to diagnostic medical device products, the commercialization of our product could be prevented, delayed or halted.

Research, preclinical development, clinical trials, manufacturing and marketing of our product is subject to extensive regulation by various government authorities. We have not received marketing approval for the sugarBEAT device.sugarBEAT® device in all of our target markets. The process of obtaining the required regulatory approvals is lengthy and expensive, and the time required for such approvals is uncertain. The approval process is affected by such factors as:

the indication and claims of the diagnostic device;
the quality of submission relating to the product;
the product’s clinical efficacy and safety;
the manufacturing facility compliance;
the availability of alternative devices;
the risks and benefits demonstrated in clinical trials; and
the patent status and marketing exclusivity rights of certain innovative products.

Any regulatory approvals that we or our partners receive for our product may also be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies. The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product and withdrawal of the product from the market.

Manufacturing, labelling, storage and distribution activities also are subject to strict regulation and licensing by government authorities. The manufacturing facilities for our product will be subject to periodic inspection by the regulatory authorities and from time to time, these agencies may send notice of deficiencies as a result of such inspections. Our failure, or the failure of our manufacturing facilities, to continue to meet regulatory standards or to remedy any deficiencies could result in corrective action by the authorities, including the interruption or prevention of marketing, closure of our manufacturing facilities, and fines or penalties.

Regulatory authorities also will require post-marketing surveillance to monitor and report potential adverse effects of our product. If approved, any of our products’ subsequent failure to comply with applicable regulatory requirements could, among other things, result in warning letters, fines, suspension or revocation of regulatory approvals, product recalls or seizures, operating restrictions, injunctions and criminal prosecutions.

Government policies may change, and additional government regulations may be enacted that could prevent or delay regulatory approval of our product. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action. If we are not able to maintain regulatory compliance, we might not be permitted to market our product and our business could suffer.

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In the future, we hope to distribute and sell our product outside of the United Kingdom and the European Union, which will subject us to further regulatory risk.

In addition to seekingmaintaining approval from the United Kingdom and the European Union for the sugarBEATsugarBEAT® device, we may seek regulatory approval from Saudi Arabia and the United Arab Emirates, Hong Kong, Australia, and the USA,U.S., to market the sugarBEATsugarBEAT® device, however, there is no guarantee we will do so. We may in the future also seek approvals for additional countries. The regulatory review process varies from country to country, and approval by foreign government authorities is unpredictable, uncertain and generally expensive. The ability to market our product could be substantially limited due to delays in receipt of, or failure to receive, the necessary approvals or clearances. Marketing of our product in these countries, and in most other countries, is not permitted until we have obtained required approvals or exemptions in each individual country. Failure to obtain necessary regulatory approvals could impair our ability to generate revenue from international sources.

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Market acceptance of our product will be limited if users are unable to obtain adequate reimbursement from third-party payers.

Government health administration authorities, private health insurers and other organizations generally provide reimbursement for products like our product and our commercial success will depend in part on these third-party payers agreeing to reimburse patients for the costs of our product. Even if we succeed in bringing our product to market, we cannot assure you that third-party payers will consider our product cost effective or provide reimbursement in whole or in part for its use.

Significant uncertainty exists as to the reimbursement status of newly approved health care products. Our product is intended to replace or alter existing therapies or procedures. These third-party payers may conclude that our product is less safe, effective or cost-effective than existing therapies or procedures. Therefore, third-party payers may not approve our product for reimbursement.

If third-party payers do not approve our product for reimbursement or fail to reimburse for them adequately, sales will suffer as some physicians, or their patients will opt for a competing product that is approved for reimbursement or is adequately reimbursed. Even if third-party payers make reimbursement available, these payers’ reimbursement policies may adversely affect our ability and the ability of our potential collaborators to sell our product on a profitable basis.

The trend toward managed healthcare, the growth of organizations such as health maintenance organizations and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of healthcare services and products, resulting in lower prices and reduced demand for our product which could adversely affect our business, financial condition and results of operations.

In addition, legislation and regulations affecting the pricing of our product may change in ways adverse to us before or after the regulatory agencies approve our product for marketing. While we cannot predict the likelihood of any of these legislative or regulatory proposals, if any government or regulatory agencies adopt these proposals, they could materially adversely affect our business, financial condition and results of operations.

Product liability claims may damage our reputation and, if insurance proves inadequate, the product liability claims may harm our business.

WeAs with other companies in our field, we may be exposed to the risk of product liability claims that is inherent in the diagnostic medical device.device sector. A product liability claim may damage our reputation by raising questions about our product’s safety and efficacy and could limit our ability to sell our product by preventing or interfering with commercialization of our product.

In addition, product liability insurance for our industry is generally expensive to the extent it is available at all. There can be no assurance that we will be able to obtain and maintain such insurance on acceptable terms or that we will be able to secure increased coverage ifas the commercialization of our product progresses, or that future claims against us will be covered by our product liability insurance. Moreover, there can be no assurance that any product liability coverage from any insurance policy and/or any rights of indemnification and contribution that we may have in place currently will offset any / all future claims. We currently do not maintain product liability insurance. A successful claim against us with respect to uninsured liabilities and not subject to any indemnification or contribution could have a material adverse effect on our business, financial condition, and results of operations.

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We could be negatively impacted by the application or enforcement of fraud and abuse laws, including anti-kickback laws and other anti-referral laws.

We are not aware of any current business practice which is in violation of any fraud and abuse law. However, continued vigilance to assure compliance with all potentially applicable laws will be a necessary expense associated with product development. For example, all product marketing efforts must be strictly scrutinized to assure that they are not associated with improper remunerations to referral sources in violation of any anti-kickback statutes. Remunerations may include potential future activities for our product, including discounts, rebates and bundled sales, which must be appropriately structured to take advantage of statutory and regulatory “safe harbors.”harbors”. From time to time we may engage physicians in consulting activities. In addition, we may decide to sponsor continuing medical education activities for physicians or other medical personnel. We may also may award or sponsor study grants to physicians from time to time. All relationships with physicians, including consulting arrangements, continuing medical education and study grants, must be similarly reviewed for compliance with any anti-kickback statute to assure that remuneration is not provided in return for referrals. Patient inducements may also be unlawful. Inaccurate reports of product pricing, or a failure to provide a product at an appropriate price to various governmental entities, could also serve as a basis for an enforcement action under various theories.

Claims which are “tainted” by virtue of kickbacks or a violation of self-referral rules may be alleged as false claims if other elements of a violation are established. Because our potential customers may seek payments from healthcare programs for our product, even during the clinical trial stages, we must assure that we take no actions which could result in the submission of false claims. For example, free product samples which are knowingly or with reckless disregard billed to healthcare programs could constitute false claims. If the practice was facilitated or fostered by us, we could be liable. Moreover, inadequate accounting for or a misuse of grant funds used for product research and development could be alleged as a violation of relevant statutes.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations, and additional legal or regulatory change.

Risks Related to Our Common Stock

Our stock price may be volatile.

The stock market, particularly in recent years, has experienced significant volatility particularly with respect to pharmaceutical, biotechnology and other diagnostic medical device company stocks. The volatility of pharmaceutical, biotechnology and other diagnostic medical device company stocks often does not relate to the operating performance of the companies represented by the stock. Factors that could cause this volatility in the market price of our Common Stockcommon stock include:

results from and any delays in our clinical trials;
failure or delays in entering our product into clinical trials;
failure or discontinuation of any of our research programs;
delays in establishing new strategic relationships;
delays in the development or commercialization of our product;
market conditions in the diagnostic medical device sectors and issuance of new or changed securities analysts’ reports or recommendations;
actual and anticipated fluctuations in our financial and operating results;
developments or disputes concerning our intellectual property or other proprietary rights;
introduction of technological innovations or new commercial products by us or our competitors;
issues in manufacturing our product;
market acceptance of our product;
third-party healthcare reimbursement policies;
regulatory actions affecting us or our industry;
litigation or public concern about the safety of our product; and
additions or departures of key personnel.

These and other external factors may cause the market price and demand for our Common Stockcommon stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Common Stockcommon stock and may otherwise negatively affect the liquidity of our Common Stock.common stock. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

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We have not paid and may not pay any dividends on our Common Stock.common stock.

We have paid no dividends on our Common Stockcommon stock to date and may not pay dividends to holders of our Common Stockcommon stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business, it is currently anticipated that any earnings will be retained to finance our future expansion and for the implementation of our business plan. As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock and could significantly affect the value of any investment in our Company.

We are subject to the reporting requirements of federal securities laws. This can be expensive and may divert resources from other projects, and thus impairing our ability to grow.

We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SECSecurities and Exchange Commission (“SEC”) (including reporting of any Merger that may occur in the future) and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if we had remained privately held.

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.

common stock.

We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes- Oxley Act of 2002, or the Sarbanes-Oxley Act,(“SOX”), adopted rules requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting.  Our management has concluded that our internal control over our financial reporting is not effective. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

Prior to 2014, we were a private company with a short operating history and limited accounting personnel and other resources with which to address our internal control and procedures over financial reporting.  We have identified material weaknesses, which include (i) our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system, (ii) a lack of adequate financial expertise related to the assessment of complex transactions and a lack of adequate resources to review out of the ordinary transactions and arrangements of the Company, (iii) limited policies and procedures over related party transactions. We will continue to implement measures to remedy these material weaknesses as well as other deficiencies.  If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal control over financial reporting. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the market price of our common stock.

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist and may in the future discover areas of our internal control that need improvement.

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We have disclosed a material weakness in our internal control over financial reporting which could have an adverse effect on our ability to report our financial condition, results of operations or cash flows accurately and on a timely basis.

We have disclosed a material weakness in our internal control over financial reporting due to (i) our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system, (ii) a lack of adequate financial expertise related to the assessment of complex transactions and a lack of adequate resources to review out of the ordinary transactions and arrangements of the Company, and (iii) limited policies and procedures over related party transactions. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. We have determined that further improvements are required in our accounting processes and personnel before we can consider the material weakness remediated. Management's procedures and testing identified errors that, although not material to the consolidated financial statements, led management to conclude that control deficiencies exist related to the timely production and filing of financial information. As a result of these deficiencies, it is reasonably possible that internal controls over financial reporting may not have prevented or detected errors from occurring that could have been material, either individually or in the aggregate.

A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. While considerable actions have been taken and are underway to improve our internal controls in response to the identified material weaknesses and further action steps to strengthen controls have been taken, additional work continues to address and remediate the identified material weaknesses. If we are unsuccessful in implementing or following our remediation plan, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or maintain effective internal controls over financial reporting. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, which could adversely affect the valuation of our common stock and could adversely affect our business prospects.

Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs in 20192021 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

Our Common Stock will beIf our common stock is deemed a “penny stock,” which makesit will make it more difficult for our investors to sell their shares.

Our Common Stockcommon stock will be subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on The Nasdaq Stock Market or other national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

Offers or availability for sale of a substantial number of shares of our Common Stockcommon stock may cause the price of our Common Stockcommon stock to decline.

If our stockholders sell substantial amounts of our Common Stockcommon stock in the public market upon the expiration of any statutory holding period, under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our Common Stockcommon stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

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The interests of Dr. D.F.Dr D.F.H. Chowdhury, or the controlling shareholders, may not always coincide with the interests of us and our other shareholders, and the controlling shareholders may exert significant control or substantial influence over us and may take actions that are not in, or may conflict with, public shareholders’ best interests.

The controlling shareholders control the exercise of voting rights of over 50 %50% of the shares eligible to vote in any of our annual or special meeting.meetings. Therefore, these controlling shareholders will be able to exercise significant influence over all matters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets. The controlling shareholders may cause us to take actions that are not in, or may conflict with, the interests of us or the public shareholders. In the case where the interests of the controlling shareholders conflict with those of our other shareholders, or if the controlling shareholders choose to cause us to pursue objectives that would conflict with the interests of our other shareholders, such other shareholders could be left in a disadvantageous position by such actions caused by the controlling shareholders and the price of our common stock could be adversely affected.

We are subject to the anti-takeover provisions of the Nevada Revised Statutes governing business combinations and control share acquisition.

acquisitions.

Applicability of the Nevada business combination statute would discourage parties interested in taking control of our company if they cannot obtain the approval of our board of directors. These provisions could prohibit or delay a merger or other takeover or change in control attempt and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

The effect of the Nevada control share statute is that the acquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders at an annual or special meeting of the stockholders. The Nevada control share law, if applicable, could have the effect of discouraging takeovers of our company based on our organizational structure.

We are subject to compliance with multiple tax jurisdictions.

As we transact out of both the UK and United States, we must comply with tax filing requirements in both jurisdictions.

We may not manage to implement changes to our control environment within the timeframes required.

We have identified changes that we need to make to our control environment in order to move to SOX compliance. While we have an action plan in place, it may not be possible for us to implement all of the changes required by the required date.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.  PROPERTIES.

OurWe have registered corporate offices arein the U.S. at 57 West 57th Street, Manhattan, NY 10019. We have offices and laboratories located at ATIC Building, 5 Oakwood Drive,across two locations on the Loughborough University Science and Enterprise Park (LUSEP), Loughborough, Leicestershire, United Kingdom. The offices house our headquarters and offices. Theaggregate monthly rent is $2,410. The lease isapproximately $34,000. All leases are currently operated on a three-year term which commenced on August 1, 2017.rolling 12-month terms. The terms of the leasedifferent leases provide a break optionoptions allowing both landlord and tenant to terminate the lease on provision of not less than one month’s prior written notice. We believe that we will be able to continue on a year to year lease for as long as necessary.

ITEM 3.  LEGAL PROCEEDINGS.

We do not know of any material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

ITEM 4.  MINE SAFETY DISCLOSURES.

Not applicable

 

29 
27 
 

 

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

 

Our common stock began quotation on the OTCBB under the symbol “NMRD” on November 4, 2014. On June 30, 2017, our common stock began quotation on the OTCQB.

On January 25, 2018, the Company’s common stock commenced tradingis traded on the NASDAQ Capital Market under its existingthe trading symbol, “NMRD”. ForOn June 28, 2022, the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The following quotations reflect the high and low bidsclosing price for our shares of common stock basedas reported on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Fiscal Year 2018 High Bid Low Bid
First Quarter  9.00   2.00 
Second Quarter  6.99   4.04 
Third Quarter  6.49   4.20 
Fourth Quarter  6.80   4.50 

Fiscal Year 2019 High Bid Low Bid
First Quarter  5.00   2.51 
Second Quarter  3.98   2.05 
Third Quarter  2.50   0.80 
Fourth Quarter  1.93   0.90 

Fiscal Year 2020 High Bid Low Bid
First Quarter (through June 1, 2019)  1.48   0.80 

the NASDAQ Capital Market was $2.61.

As of June 9, 2019,28, 2022, we had approximately 9283 holders on record of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

Dividends

Since incorporation, we have not paid any dividend on any class of equity securities. We anticipate that for the foreseeable future all earnings will be retained for use in our business and no cash dividends will be paid to stockholders. Any payment of cash dividends in the future on the Company’s common stock or preferred stock, will be dependent upon our financial condition, results of operations, current and anticipated cash requirements, plans for expansion, as well as other factors that the Board of Directors deems relevant. The ability to pay dividends will be reliant on the ability of DDL, the UK trading entity, to pay dividends to the Company and satisfying the capital maintenance requirements of UK company’s legislation in line with statutory and company law.

Securities Authorized for Issuance Under Equity Compensation Plans

We have not adoptedapproved the adoption of an employee equity compensation plan.plan at our Annual General Meeting (“AGM”) on May 15, 2020. No awards have been made to date.

Unregistered Sales of Securities

None.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers

We have not repurchased any shares of our common stock during the fiscal year ended March 31, 2019.2022. 

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ITEM 6.  SELECTED FINANCIAL DATA.[RESERVED]

Financial highlights

Year Ended March 31, 2019 2018 2017 2016 2015
           
Net loss $(4,452,797) $(1,820,449) $(1,551,266) $(1,539,637) $(1,319,840)
Diluted loss per share $(0.02) $(0.01) $*  $*  $* 
Cash, cash equivalents, and short-term investments $3,740,664  $5,733,886  $2,779,309  $9,403,965  $354,749 
Total assets $4,763,715  $6,255,402  $7,401,906  $9,732,783  $913,108 
Long-term obligations $—    $—    $—    $—    $(170,000)
Non-current portion of Deferred Revenue $1,237,850  $1,333,128  $1,183,035  $1,396,005  $1,538,300 
Stockholders’ equity/(deficit) $2,226,904  $4,110,965  $5,366,500  $7,678,765  $(917,411)

* less than $0.01

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

TheYou should read the following discussion and analysis below includes certain forward-lookingof our financial condition and results of operations together with our financial statements that are subjectand the notes to risks, uncertainties and other factors, as described in “Risk Factors” andthose statements included elsewhere in this Annual Report on Form 10-K,10-K. In addition to historical financial information, this discussion and analysis contains forward-looking statements that could causereflect our plans, estimates and beliefs. You should not place undue reliance on these forward-looking statements, which involve risks and uncertainties. As a result of many factors, including but not limited to those set forth under ‘‘Risk Factors,’’ our actual growth, results of operations, performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow tomay differ materially from those expressedanticipated in or implied by, thosethese forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”.

Overview

Corporate OverviewBusiness Review and Outlook

Since inception we have devoted substantially allIt is management’s view that the Company has made good progress during the fiscal year ended March 31, 2022, with December 2021 marking a significant milestone in the Company’s evolutionary journey as the first commercial deliveries of our efforts establishingsugarBEAT® non-invasive glucose monitor (“CGM”) were made to the UK licensee, MySugarWatch Limited (“MSW”). It is expected that MSW will sell the CGM under the brand MySugarWatch® and MSW has developed a subscription-based diabetes coaching and management service that will be provided alongside the CGM, primarily targeting those with type 2 diabetes. A key priority of the Company’s being to provide ongoing support to MSW as it commences its own launch plan.

Furthermore, on September 24, 2021, the Company entered into a License, Supply and Distribution Agreement with ‘MySugarWatch DuoPack Limited’ (“MSW-DP”), a sister company of MSW, whereby MSW-DP will provide CGM sensors free of charge with certain medications that are widely prescribed to persons with Type 2 diabetes. These medications are due to come off patent in the fourth calendar quarter of 2022 in Europe and the UK, and 2023 in the USA. The agreed sale price of sensors to MSW-DP under the terms of the agreement is $20 per box of 5 sensors for the USA market, and in Europe and the UK 12.50 Euros in the first 12 months from product launch and 10 Euros thereafter per box of 5 sensors. Nemaura’s anticipated cost of goods per sensor on large-scale production is $1 per sensor. As of January 2022, there were over 2 million prescriptions written for these medications each month in the combined key EU and UK territories. The company believes this will provide an opportunity for rapid market penetration in the use of its CGM sensors, at a scale that can enable the targeted lower cost of goods to be achieved and thereby support both revenue and margin growth into the future.

Management is now focused on fulfilling the remainder of the UK licensees’ initial orders and supporting MSW’s UK launch, while also developing the capabilities of the Company to develop and service new channels of business across other geographic markets via the use of our BEAT platform. To this end the company is now actively planning product launch in other territories that accept the CE mark registration. In addition, the company is seeking to exploit its product platform in the consumer space. All of these avenues are expected to strengthen revenue generation in future periods.

In line with this view, the Company has taken the following actions during the fiscal year ended March 31, 2022

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Affiliated Company Relationships

Nemaura Pharma Ltd (Pharma) was incorporated in November 2005. Through October 2013, all technology development and related transactions were incurred by Pharma. As new technology platforms were invented and developed, additional companies were set up to contain these new technology platforms, and to aid in the process of raising further investments to progress the development of these subsequent technologies. However, due to the small size of the operations, low number of employees and laboratory and office space required, initially, only one payroll was maintained and invoicescertain costs were posted inborne by Pharma and recharges were madecharged to DDL as required. Prior to the year ended March 31, 2016, recharges included a proportion of the overhead allocated based on management’s assessment. On April 4, 2018, a service agreement was put into place between Pharma and DDL. ThisDDL which covered the development of SugarBeatsugarBEAT® under Pharma’s ISO13485 Accreditation. In lieu of these services, DDLPharma invoices PharmaDDL on a periodic basis for said services. Services are provided at cost plus a service surcharge amounting to less than 10% of the total costs incurred. This agreement includes all aspects of the development, registration and manufacture of sugarBEAT. sugarBEAT®.

Full legal title and beneficial ownership of the CE Markmark and all related intellectual property remains with Nemaura Medical under the terms of the service contract. 

Dr. D.F.D.F.H. Chowdhury and Mr. Bashir Timol are officers of Pharma. However, Pharma plans a management restructuring and a new management team is planned to be recruited in due course, aligned with commercial launch plans. The current management at DDL, including Dr. D. F. H. Chowdhury will allocate 15%-20% - 20% of their time to oversee the current operations at Pharma and the implementation of thewill in due course implement a new management team in Pharma, and to provide ongoing support in an advisory role. Pharma is a drug delivery company, which means that its activities are entirely related to the deliveryadministration of drugs to the body of a human or animal subject. DDL is a diagnostic company, which means it is entirely focused on extracting molecules from the human or animal subject and analyzing it to make a diagnosis or to monitor the level of a particular molecule such as glucose. These are two independent businesses engaged in different activities, therefore there is no conflict of interest between the two and management does not see any conflicts arising from the allocations of some of DDL management time to overseeing the operations of Pharma.

Payments made solely for work that Dr. D.F.D. F. H. Chowdhury performed/performs for Pharma in his capacity as Managermanager are not rechargedcharged to Nemaura Medical Inc. and are not included in our consolidated financial statements.

RESULTS OF OPERATIONS

Management’s plans and basis of presentation

The Company has experienced recurring losses and negative cash flows from operations. AtOn March 31, 2019,2022, the Company had approximate cash balances of $3,740,664, working capital of $3,216,199,$17,749,233, total stockholders’ equity of $2,226,904$466,804 and an accumulated deficit of $13,425,879.$37,731,476. To date, the Company has in large part relied on equity financing to fund its operations. Initially additional funding also came from related party contributions. The Company expects to continue to incur losses from operations for the near-term and these losses could be significant as the Company implements and scales its product development, regulatory activities, clinical trials and other commercial and product development related expenses are incurred.

commercialization strategy.

Management’s strategic assessment includes the following potential options:

support the UK and EU launch of sugarBEAT®;
obtaining further regulatory approval for the sugarBEAT device: CE mark review and approvalsugarBEAT® device in Europe was received in May 2019, and FDA submission is planned for Q2 2019.other countries such as the U.S.;
pursuing additional capital raising opportunities;exploring licensing and partnership opportunities in other territories;
exploring licensing opportunities;developing the sugarBEAT® device for commercialization for other applications; and
undertaking manufacturing developmentconsidering whether additional future capital raises can further enhance and scale-upaccelerate the delivery of the sugarBEAT device for commercialization.Company’s strategic growth objectives.

 

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Results of Operations

Fiscal Year Ended March 31, 20192022 Compared To Theto Fiscal Year Ended March 31, 20182021

Revenue

December 2021 marked a pivotal milestone for the Company as the Company commenced deliveries of sugarBEAT® to MSW pursuant to the initial order placed in April 2021. These deliveries continued in line with the schedule agreed with MSW during the remainder of the current fiscal year.

While the majority of the $503,906 revenue recognized related to the delivery of goods, a proportion also related to the recognition of the GBP 1 million (approximately $1.32 million), that was previously received and held within deferred revenue, relating to the exclusive Marketing Rights Agreement that was signed with MSW. We expect to record the remainder of the revenue over an approximately 10-year term from the date sales to MSW commenced. 

There was no revenue recognized in the yearsyear ended March 31, 2019 and March 31, 2018. In 2014, we received an upfront non-refundable cash payment of £1 million (approximately $1.30 million at March 31, 2019) in connection with an Exclusive Marketing Rights Agreement with an unrelated third party that provides the third party the exclusive right to market and promote the sugarBEAT device and related patch under its own brand in the United Kingdom and the Republic of Ireland.  We have deferred this licensing revenue until we complete our continuing performance obligations, which include securing successful CE marking of the sugarBEAT patch (received in May 2019), and we expect to record the revenue in income over an approximately 10-year term after CE marking approval is obtained.   Although the revenue is deferred at March 31, 2019 and 2018, the cash payment became immediately available and was being used to fund our operations, including research and development costs associated with obtaining the CE marking approval.2021.

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Research and Development Expenses

Research and development expenses were $2,296,668$1,556,988 and $993,833$1,554,603 for the fiscal years ended March 31, 20192022 and 2018,2021, respectively. This increase was driven by the increased level of activityThe stabilization in costs here being established as the Company draws closer to commercialization. This amount relatedCompany’s historically more significant research and development expenditure relating to clinical trials and improvements made to the sugarBEATsugarBEAT® device and expenditures included sub-contractor activities, and consultant’s fees and wages.started to flatten out over the year. We expect that the sugarBEAT® related research and development expenses to continue to be a significant costwill reduce in future periods as wethe product is launched, however the Company expects to continue our clinical studies of our sugarBEAT deviceto incur research and pursue strategic opportunities.development costs to both enhance, refine and extend the platform capabilities for alternative applications.

General and Administrative Expenses

General and administrative expenses were $2,180,056$6,173,049 and $915,132$3,032,138 for the fiscal years ended March 31, 20192022 and 2018,2021, respectively. This increase is due to higher insurance costs andThese consisted of fees for professional services. These consisted primarily of legal, professional, consultancy, audit services, investor relations, insurance, advertising and audit fees plusgeneral and operational wages. The increase in expenses being driven predominantly by increased wages, as additional headcount has been added to support the operational scale up process across both our UK and charitable contributions. GeneralU.S. teams. Increases have also been seen in insurance, rent and depreciation and amortization, which are considered to be directly related to the commercialization steps undertaken during the period. In addition to this, a non-cash item charge of $440,196 was booked as a result of the mark-to-market impact from the revaluation of the foreign currency forward contracts in place as of the fiscal period end, along with a further non-cash charge of $133,529 in relation to the fair value of share options issued to directors.

As the Company continues to scale up to service its existing order book, it is expected that general and administrative expenses will becontinue to exhibit a similar higher cost profile moving forward, as the business continues to transition to an operationally focused base that is expected to significantly increaseresult in increased functional expenses relating to production, sales, marketing, customer service, as we commence product manufacture and commercialization. well as enhancements to other existing functions.

Other Comprehensive Income

For the fiscal years ended March 31, 20192022 and 20182021 other comprehensive income/(loss) was ($299,263) and $564,914,income saw a charge of $257,885 versus a credit of $472,559, respectively, arising from foreign currency translation adjustments.

Year Ended March 31, 2018 Compared To The Year Ended March 31, 2017

Revenue

There was no revenue recognized in the years ended March 31, 2018 and March 31, 2017. In 2014, we received an upfront non-refundable cash payment of £1 million (approximately $1.40 million at March 31, 2018) in connection with an Exclusive Marketing Rights Agreement with an unrelated third party that provides the third party the exclusive right to market and promote the sugarBEAT device and related patch under its own brand in the United Kingdom and the Republic of Ireland.  We have deferred this licensing revenue until we complete our continuing performance obligations, which include securing successful CE marking of the sugarBEAT patch, and we expect to record the revenue in income over an approximately 10 year term after CE marking approval is obtained.    Although the revenue is deferred at March 31, 2018 and 2017, the cash payment became immediately available and was being used to fund our operations, including research and development costs associated with obtaining the CE marking approval.

Research and Development Expenses

Research and development expenses were $993,833 and $1,034,605 for the years ended March 31, 2018 and 2017, respectively. This amount related to clinical trials and improvements made to the sugarBEAT device, and expenditures included sub-contractor activities, and consultancy fees and wages. We expect research and development expenses to continue to be a significant cost in future periods as we continue our clinical studies of our sugarBEAT device and pursue strategic opportunities.

General and Administrative Expenses

General and administrative expenses were $915,132 and $516,661 for the years ended March 31, 2018 and 2017, respectively.  These consisted primarily of legal, professional and audit fees plus wages and charitable contributions. General and administrative expenses will be expected to significantly increase as we commence product manufacture and commercialization. 

Other Comprehensive Income

For the years ended March 31, 2018 and 2017 other comprehensive income/(loss) was $564,914 and ($760,999), respectively, arising from foreign currency translation adjustments.

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Liquidity and Capital Resources

We have experienced net losses and negative cash flows from operations since our inception. We have sustained cumulative losses of $13,425,879$37,731,476 through March 31, 2019.2022. We have historically financed our operations through a combination of debt and equity funding. During the issuancesfiscal year ended March 31, 2022, warrants to purchase 366,892 shares of equity, UK government grantscommon stock were exercised and contributionsprovided $2,963,658 of services from related entities.additional funding. Additionally, 397,524 shares of common stock were issued under the ATM facility, which provided $1,568,027 of additional funds, net of costs of $50,765, and a further 375,000 shares of common stock were issued to generate further funding of $1,500,000.

At March 31, 2019,2022, the Company had net working capital of $ 3,216,199($494,444) which included cash account balances of $3,740,664.$17,749,233 and notes payable of $19,188,724. The Company reported a net loss of $4,452,797$13,886,805 for the fiscal year ended March 31, 2019.2022, which included interest expense of $6,666,630.

30 

We have completed clinical studies required for FDA submission and plan to submit an applicationHaving reviewed the company’s forward looking cashflow requirements in relation to the FDA for approvalcash balance held at March 31, 2022, management is aware of the device in Q2 2019, and therefore will not incur any further research and development costs for glucose monitoring for the foreseeable future. We are scaling-up our manufacturing operations to support product launch in EU now that CE mark approval has been received. Our long-term business plan will require further funds to support commercialization and large scale manufacture, and is therefore contingent upon our abilityneed to raise additional funds.  This may include a combinationfunds in order to finance the ongoing commercialization of debt, equity and licensing fees.  We are currently in discussions with twosugarBEAT®. The Company had $17,749,233 of cash at March 31, 2022, which management consider to be more than sufficient to fund the ongoing operational expenses of the largest shareholders inbusiness, however the terms of the existing debt held on balance sheet will fall due for repayment as of February 2023, which will trigger a requirement to either restructure the debt or obtain additional, new, funding. 

In evaluating the going concern position of the company, with respect to potentially securing non-dilutive conventional interest bearing loans from these shareholders, now thatmanagement have considered the ability of the company to raise additional funding in combination with one or more of the different funding options available to it at this time.  Based on current and ongoing engagement with potential funding providers, Management believe that there is expected to become revenue generating through licensing and product sales in Europea reasonable expectation that funding could be provided by one, or more, of the following the recent CE approval.options:

·Equity funding – the company has immediate access to funds through the ATM facility that is currently in place; in addition to this, there are various alternative mechanisms available to the company similar to those used previously e.g. direct sale of shares to interested third parties, similar to the stake sold to Tiger Trading Partners L.L.C. in February 2022, as well as other mechanisms to sell common stock via an underwritten agreement or the further exercise of warrants by the current warrant holders etc.
·Debt funding – the company continues to be in ongoing discussions with third party debt providers, including the incumbent, to enable the existing debt facility to be restructured or renewed, should management feel that this route offers a more attractive option compared to the sale of equity that is dependent on the current market conditions.
·Alternative funding as used in the past such as the sale of licenses.  As product development is now at a significant more advanced stage then it was, it is management’s belief that the sufficient funding could be provided through the sale of licenses in a similar way to the UK license agreement sale that help provided early-stage development funding.

 

We believeAs a consequence of this funding requirement being triggered without the cash positionfunding bridge have been put in place by the date of filing these consolidated financial statements, ASC 205-40 requires that management recognize and disclose this point as of March 31, 2019 is adequate for our current level of operations through June  2020, and foran event which creates a substantial doubt as the achievement of certain of our product development milestones.  Our plan is to utilize the cash on handCompany’s ability to continue establishing commercial manufacturing operationsas a going concern for at least one year from the commercial supplydate of the sugarBEAT device and patches now that CE mark approval has been received.filing of these consolidate financial statements. 

Cash Flows

Net cash used by our operating activities for the fiscal year ended March 31, 20192022, was $3,560,952$6,504,041 which reflected ourthe following key cashflow movements: a net loss of $4,452,797, increased$13,886,805 which included non-cash items booked as an expense relating to the accretion of the debt discount ($6,666,630), mark-to-market valuation of the foreign currency forward contracts that were held at fiscal year-end ($440,196), stock-based compensation paid to an employee combined the fair value of options issued to directors ($220,917), and depreciation and amortization ($229,810).

Cashflows were also impacted by anincreases in inventory of $637,149, and accounts receivable – related parties of $250,092 relating to the acquisition of raw materials to support manufacture and delivery of product to our UK Licensee; the increase in inventory being largely offset by the decrease in prepaid expenses and other receivables of $456,125 and increase in$519,346 vs the prior year end which reflected upfront payments for inventory of $37,396. Thisat that time.

Working capital cashflow was offsetalso impacted by stock-based compensation $429,610, an increasea decrease in accounts payable of $98,118,$117,384, due to timing of purchases and an increase in liability due to related parties $697,182, an increase inother liabilities and accrued expenses and other liabilities $21,494 and a decrease in accrued interest receivable of $70,759. This was further offset by depreciation and amortization of $33,407 and a loss on disposal of $34,796. 

$310,490.

Net cash used by our operating activities for the fiscal year ended March 31, 20182021, was $2,136,977$5,998,097 which reflected ourwere driven by cashflow movements relating to the following: A net loss of $1,820,449, increased$6,258,596 which was partially offset by non-cash items booked as an expense relating to the accretion of the debt discount ($2,007,687), stock-based compensation paid to third party suppliers ($113,171), and depreciation and amortization ($98,075). Cashflows were also impacted by an increase in accounts payable, aninventory of $564,313, combined with and increase in prepayments, a decrease in liability due to related partiesprepaid expenses of $767,050, and an increase in accrued interestAccounts receivable of $452,535, and offset by an increase in accruals of $106,751. 

Net cash used by our operating activities for– related party, as the year ended March 31, 2017 was $1,192,828 which reflected our net loss of $1,551,266, and offset by a net increase in accounts payable, liability due to related parties and accrued expenses of $252,638, and by a decrease in prepayments and other receivables of $85,367.

Net cash provided by investing activities was $4,403,855 for the year ended March 31, 2019, which reflected $4,483,852 returned from the maturity of a fixed rate savings account but reduced by the expenditures made in developing intellectual property, primarily related to patent filings of $20,331 and the purchase of capital equipment of $59,666.

Net cash generated by investing activities was $1,949,215 for the year ended March 31, 2018, which reflected the cash received from the maturity of a fixed rate savings account of $1,994,475 offset by expenditures made in developing intellectual property, primarily related to patent filings of $45,260.

Company geared up towards commercialization.

Net cash used in investing activities was $6,306,089$956,482 for the fiscal year ended March 31, 2017,2022, which reflected expenditure on property and equipment to support the expenditures made in developingcommencement of manufacture of product for sale during the year of $481,718, combined with ongoing spend on software development ($391,073) and patent costs ($83,691), to enhance the businesses digital offering and protect the intellectual property primarilydeveloped.

Net cash used in investing activities was $836,440 for the fiscal year ended March 31, 2021, which reflected expenditure for software development costs of $663,758, combined with costs related to patent filings of $73,070,$81,952, and the purchase of property and equipment of $6,519 and $6,226,500 invested$90,730.

Net cash utilized in fixed rate savings account.

financing activities for the fiscal year ended March 31, 2022, was $6,368,315. This includes repayments made in relation to debt funding of $12,400,000, which was partially offset by the proceeds from the issuance of common stock in relation to equity funding was $3,118,792, with associated cash costs of $50,765, combined with the sale of warrants which provided a further $2,963,658 of cash funding.

Net cash provided by financing activities for the fiscal year ended March 31, 20192021, was $2,049,855.$37,986,392. Proceeds from the saleissuance of the Company’s common stock and warrants were $2,539,258, the majority of this reflected the December 2018 public offering which generated gross proceeds of $2,019,743 and the ATM facility which delivered gross proceeds of $455,105. In addition, $100 was raised in relation to equity funding was $15,750,672 with associated cash costs of $957,193; the sale of warrants providing a unit purchase option and $64,311further $400,503. $25,000,000 was raised in connectionprovided via the issuance of two notes payable during the year, with the exerciseassociated cash costs incurred of warrants. Cash costs relating to these offerings$1,525,035 while repayments made were $489,404; $328,302$600,000. $82,555 of cash costs relatedexpense was incurred in relation to concluding the December public offering and $161,102 related tofull repayment of the ATM.insurance financing arrangement.

For the years ended March 31, 2018 and 2017, there were no financing activities.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements including unrecorded derivative instruments that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

None.

None

Critical Accounting Policiesand Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires managementus to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with research and development, income taxes and intangible assets, revenue recognition and stock-based compensation.

The Company's financial position, results of operations and cash flows are impacted by the accounting policies the Company has adopted. In order to get a full understanding of the Company's financial statements, one must have a clear understanding of the accounting policies employed. A summary of the Company's critical accounting policies follows:

Research and Development Expenses: The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs.

Income taxes: Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred income taxthe disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported results of operations during the reporting periods. Our estimates are measured using enacted tax rates expected to apply to taxable income inbased on our historical experience and on various other factors that we believe are reasonable under the year incircumstances, the results of which those temporary differences are expected to be recovered or settled. The effect on deferred income taxform the basis for making judgments about the carrying values of assets and liabilities of a changethat are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in tax rates is recognized in incomemore detail in the period that includes the enactment date. A valuation allowance is providednotes to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changesour consolidated financial statements included elsewhere in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of comprehensive loss.

Intangible Assets: Intangible assets consist of licenses and patents associated with the sugarBEAT device and are amortizedthis Annual Report on a straight-line basis, generally over their legal lives of up to 20 years and are reviewed for impairment. Costs capitalized relate to invoices received from third parties and not any internal costs. The Company evaluates its intangible assets (all have finite lives) and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable, or at least annually. Recoverability of finite and other long-lived assets is measured by comparing the carrying amount of an asset group to the future undiscounted net cash flows expected to be generated by that asset group. The Company groups assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. The amount of impairment to be recognized for finite and other long-lived assets is calculated as the difference between the carrying value and the fair value of the asset group, generally measured by discounting estimated future cash flows. There were no impairment indicators present during the years ended March 31 2019, 2018 or 2017.Form 10-K.

35 

Revenue Recognition: While the Company is not currently recognizing revenue, we have considered the guidelines within ASC Topic 606,Revenue from Contracts with Customers.. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company may enter into product development and other agreements with collaborative partners. The terms of the agreements may include non-refundable signing and licensing fees, milestone payments and royalties on any product sales derived from collaborations.

The Company has entered into license agreements and for these, recognizes up front license payments as revenue upon delivery of the license only if the license has stand-alone value to the customer. However, where further performance criteria must be met, revenue is deferred and recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Royalty revenue will be recognized upon the sale of the related products provided the Company has no remaining performance obligations under the agreement.

Stock-based compensation:For stock options granted as consideration for services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “Equity Based Payments to Non- Employees.” Non-employee restricted common stock and stock option grants that do not vest immediately upon grant, and whose terms are known, are recorded as an expense over the vesting period of the underlying instrument granted. At the end of each financial reporting period prior to vesting, the value of the instruments granted, will be re-measured using the fair value of the Company’s common stock and the stock-based compensation recognized during the period will be adjusted accordingly.

For restricted common stock and stock option awards that have performance-based conditions, the Company recognizes the stock-based compensation expense at the fair value of the award based on the date that the performance conditions have been met.   The Company calculates the fair value of the stock options using the Black Scholes option pricing model.   The fair value of restricted common stock awards is based on the closing price of the Company’s common stock on the applicable measurement date.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

To date, the Company has not granted any stock-based compensation awards to employees.

In June 2018, the FASB issued ASU 2018-07,Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company will adopt ASU 2018-07 prospectively as of April 1, 2019. The adoption of ASU 2018-07 is not expected to have a material impact on the Company’s financial position, results of operations or related disclosures.

36 

ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate RiskNot required for smaller reporting companies. 

 

The Company’s exposure to interest rate risk is minimal. We have no bank borrowings and, although we have placed funds on deposit to earn interest during the year, these are of fixed-term and fixed-rate and therefore offer little exposure to interest rate risk. The long term fixed rate account held matured in December, 2018 and all interest accrued was received.

Foreign Exchange Risk

Our foreign currency exposure gives rise to market risk associated with exchange rate movements against the US dollar, our reporting currency. Currently, the majority of our expenses and cash and fixed rate deposits are denominated in Pounds Sterling, with the remaining portion denominated in US dollars. Fluctuations in exchange rates, primarily the US dollar against the Pound Sterling, will affect our financial position. At March 31, 2019, the Company held approximately USD 2.5 million in GBP-denominated bank accounts. Based on this balance, a 1% depreciation of the Pound against the US dollar would cause an approximate USD 25,000 reduction in cash and fixed rate deposit account balances.

We have not utilized any hedging instruments in order to mitigate the foreign currency risk.

Inflation

Historically, with UK inflation rates having been low in recent years, inflation has not had a significant effect on our business in the UK, the location of the substantial part of our activities. Due to uncertainty surrounding Brexit, it is possible that UK inflation may be more volatile in the future.

37 
32 
 

NEMAURA MEDICAL INC.

INDEX TO CONSOLIDATEDITEM 8. FINANCIAL STATEMENTS

MARCH 31, 2019 AND 2018

SUPPLEMENTARY DATA

  
Page
Page
ReportsReport of Independent Registered Public Accounting FirmsFirmF-2
Consolidated Balance Sheets as of March 31, 20192022 and 20182021F-4F-3
Consolidated Statements of Operations and Comprehensive Loss for the years ended March 31, 2019, 20182022 and 20172021F-5F-4
Consolidated Statements of Changes ofin Stockholders’ Equity for the years ended March 31, 2019, 20182022 and 20172021F-6F-5
Consolidated StatementStatements of Cash Flows for the years ended March 31, 2019, 20182022 and 20172021F-7F-6
Notes to Consolidated Financial StatementsF-8-23F-7-19

 

F-1 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Stockholders andTo the Board of Directors and Stockholders of Nemaura Medical Inc.

Loughborough, United Kingdom

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetsheets of Nemaura Medical Inc. (the "Company")Company) as of March 31, 2019,2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the year thenyears in the two-year period ended March 31, 2022, and the related notes (collectively referred to as the "financial statements")financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019,2022 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Mayer Hoffman McCann P.C.

We have served as the Company's auditor since 2018.

Denver, Colorado

June 14, 2019

F-2 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and the Board of Directors of Nemaura Medical Inc.

Loughborough, United Kingdom

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Nemaura Medical Inc. (the "Company") as of March 31, 2018, the related consolidated statements of comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended March 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2018,2021, and the results of its operations and its cash flows for each of the two years in the two-year period ended March 31, 2018,2022, in conformity with accounting principles generally accepted in the United States of America.

 

Substantial Doubt about Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, current debt due over current cash balances, and has accumulated deficits that raised substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

 

These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB.reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Emphasis of Matter – Related Party TransactionsCritical Audit Matters

 

The Company has significant transactionsCritical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and relationships with related partiesthat (1) relate to accounts or disclosures that are described in Note 7material to the consolidated financial statements.statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

 

 

/s/ Crowe LLP.Mayer Hoffman McCann P.C.

 

We have served as the Company'sCompany’s auditor since 2017.

2018.

Denver, Colorado

199

June 12, 201829, 2022

 

F-3 

NEMAURA MEDICAL INC.

CONSOLIDATED BALANCE SHEETS

     
  

As of

March 31,

 

As of

March 31,

  

2019

($)

 

2018

($)

     
ASSETS        
Current assets:        
Cash  3,740,664   822,335 
Fixed rate cash account  —     4,911,551 
Prepaid expenses and other receivables  736,460   187,139 
Accrued interest receivable  —     77,508 
Inventory  38,036   —   
Total current assets  4,515,160   5,998,533 
         
Other assets:        
Property and equipment, net of accumulated depreciation  56,871   5,770 
Intangible assets, net of accumulated amortization  191,684   251,099 
   248,555   256,869 
         
         
Total assets  4,763,715   6,255,402 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities        
Accounts payable  161,348   49,912 
Liability due to related party  964,679   613,818 
Other liabilities and accrued expenses  107,759   77,414 
Deferred revenue  65,175   70,165 
         
Total current liabilities  1,298,961   811,309 
         
Non-current portion of deferred revenue  1,237,850   1,333,128 
         
         
Total liabilities  2,536,811   2,144,437 
         
Commitments and contingencies        
         
Stockholders’ equity:        
Series A convertible preferred stock, $0.001 par value, 200,000 shares authorized; 0 and 137,324 outstanding at March 31, 2019 and March 31, 2018, respectively.  —     137 
Common stock, $0.001 par value, 420,000,000 shares authorized and 207,655,916 shares issued and outstanding at March 31, 2019 (420,000,000 shares authorized and 67,676,000 shares issued and outstanding at March 31, 2018 )  207,656   67,676 
         
Additional paid in capital  15,785,015   13,056,859 
Accumulated deficit  (13,425,879)  (8,973,082)
Accumulated other comprehensive loss  (339,888)  (40,625)
Total stockholders’ equity  2,226,904   4,110,965 
Total liabilities and stockholders’ equity  4,763,715   6,255,402 

See notes to consolidated financial statements

F-4 
F-2 
 

 

NEMAURA MEDICAL INC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINC.
Consolidated Balance Sheets

 

       
  Year Ended March 31,
  

2019

($)

 

2018

($)

 

2017

($)

Revenues      
   Total revenues  —     —     —   
             
Operating expenses:            
Research and development  2,296,668   993,833   1,034,605 
General and administrative  2,180,056   915,132   516,661 
Total operating expenses  4,476,724   1,908,965   1,551,266 
Loss from operations  (4,476,724)  (1,908,965)  (1,551,266)
             
Interest income  23,927   88,516   —   
             
Net loss  (4,452,797)  (1,820,449)  (1,551,266)
             
             
Other comprehensive income/ (loss)            
Foreign currency translation adjustment, net of tax  (299,263)  564,914   (760,999)
Comprehensive loss  (4,752,060)  (1,255,535)  (2,312,265)
             
Loss per share            
   Basic and diluted  (0.02)  (0.01)  * 
             
Weighted average number of common shares outstanding  180,903,839   150,070,400   205,000,000 
         
  As of March 31,  As of March 31, 
  

2022

($)

  

2021

($)

 
       
ASSETS        
Current assets:        
Cash  17,749,233   31,865,371 
Prepaid expenses and other receivables  750,167   1,269,513 
Accounts receivable – related party  101,297   0   
Inventory  1,487,771   850,622 
Total current assets  20,088,468   33,985,506 
         
Other assets:        
Property and equipment, net of accumulated depreciation  532,508   202,145 
Intangible assets, net of accumulated amortization  1,480,980   1,055,256 
Total other assets  2,013,488   1,257,401 
Total assets  22,101,956   35,242,907 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable  136,310   253,694 
Liability due to related parties  0     148,795 
Other liabilities and accrued expenses  998,622   180,522 
Notes payable, current portion  19,188,724   5,733,370 
Deferred revenue  259,256   103,470 
Total current liabilities  20,582,912   6,419,881 
         
Non-current portion of notes payable  0     19,188,724 
Non-current portion of deferred revenue  1,052,960   1,276,130 
Total liabilities  21,635,872   26,884,735 
         
Commitments and contingencies        
         
Stockholders’ equity:        
Common stock, par value $0.001 - authorized: 42,000,000 shares;          issued and outstanding: 24,102,866 and 22,941,157 as of March 31, 2022 and 2021, respectively  24,103   22,941 
Additional paid-in capital  38,295,775   32,044,335 
Accumulated deficit  (37,731,476)  (23,844,671)
Accumulated other comprehensive (loss) income  (122,318)  135,567 
Total stockholders’ equity  466,084   8,358,172 
Total liabilities and stockholders’ equity  22,101,956   35,242,907 

 

 

 

* less than $0.01

See notes to consolidated financial statements

statements.

F-5 
F-3 
 

NEMAURA MEDICAL INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED MARCH 31, 2019, 2018, 2017
Consolidated Statements of Operations and Comprehensive Loss

 

  Common Stock Convertible preferred Additional Paid in Accumulated Accumulated Other Comprehensive Income Total Stockholders’
  Shares Amount
($)
 stock
($)
 Capital
($)
 Deficit
($)
 (Loss)
($)
 Equity
($)
               
Balance at April 1, 2016  205,000,000   205,000   —     12,919,672   (5,601,367)  155,460   7,678,765 
Net loss  —     —     —     —     (1,551,266)  —     (1,551,266)
Other comprehensive income - foreign currency translation loss  —     —     —     —     —     (760,999)  (760,999)
Balance at March 31, 2017  205,000,000   205,000   —     12,919,672   (7,152,633)  (605,539)  5,366,500 
Cancellation of common stock and issue of convertible preferred stock  (137,324,000)  (137,324)  137   137,187   —     —     —   
Net loss  —     —     —     —     (1,820,449)  —     (1,820,449)
Other comprehensive income - foreign currency translation gain  —     —     —     —     —     564,914   564,914 
Balance at March 31, 2018  67,676,000   67,676   137   13,056,859   (8,973,082)  (40,625)  4,110,965 
Conversion of preferred stock into common stock  137,324,000   137,324   (137)  (137,187)  —     —     —   
Issuance of stock – exercise of Invictus warrants  50,000   50   —     450   —     —     500 
Issuance of common shares under ATM financing net of offering costs of $161,102  234,998   235   —     293,768   —     —     294,003 
Issuance of common shares  and warrants under public offering –net of offering costs of $328,302  1,942,061   1,942   —     1,689,499   —     —     1,691,441 
Exercise of warrants under public offering  61,357   61   —     63,750   —     —     63,811 
Underwriter purchase of option to purchase units      —     —     100   —     —     100 
Restricted shares and warrants issued as stock-based compensation to investor relations and Management consultants  367,500   368   —     514,957   —     —     515,325 
Net loss  —     —     —     —     (4,452,797)  —     (4,452,797)
Other comprehensive income - foreign currency translation loss  —     —     —     —     —     (299,263)  (299,263)
Forgiveness of payable by a related party  —     —     —     302,819   —     —     302,819 
Balance at March 31, 2019  207,655,916   207,656   —     15,785,015   (13,425,879)  (339,888)  2,226,904 
         
  Years Ended March 31, 
  

2022
($)

  

2021
($)

 
Sales  503,906   0   
Cost of Sales  (344,300)  0   
Gross Profit  159,606   0   
         
Operating expenses:        
Research and development  1,556,988   1,554,603 
General and administrative  6,173,049   3,032,138 
Total operating expenses  7,730,037   4,586,741 
         
Loss from operations  (7,570,431)  (4,586,741)
         
Interest expense  (6,666,630)  (2,007,687)
Loss before income tax benefit  (14,237,061)  (6,594,428)
         
Provision for income tax benefit  350,256   335,832 
Net loss  (13,886,805)  (6,258,596)
         
Other comprehensive income:        
Foreign currency translation adjustment  (257,885)  472,559 
Comprehensive loss  (14,144,690)  (5,786,037)
         
Net loss per share, basic and diluted $(0.59) $(0.28)
Weighted average number of shares outstanding  23,383,758   22,283,377 

 

 

 

 

See notes to consolidated financial statements

statements.

F-6 
F-4 
 

NEMAURA MEDICAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Consolidated Statements of Changes in Stockholders’ Equity

 

       
  Year Ended March 31
  

2019

($)

 

2018

($)

 

2017

($)

Cash Flows from Operating Activities:            
Net loss  (4,452,797)  (1,820,449)  (1,551,266)
             
Adjustments to reconcile net loss to net cash used in operating activities:            
Depreciation and amortization  33,407   29,256   20,433 
Stock Based Compensation  429,610   —     —   
Other non-cash expenses  34,796   —     —   
Changes in assets and liabilities:            
Prepaid expenses and other receivables  (456,125)  (138,859)  85,367 
Accrued interest receivable  70,759   (73,441)  —   
Increase in inventory  (37,396)  —     —   
Accounts payable  98,118   (31,247)  2,522 
Liability due to related party  697,182   (162,644)  270,975 
Other liabilities and accrued expenses  21,494   60,407   (20,859)
Net cash used in operating activities  (3,560,952)  (2,136,977)  (1,192,828)
             
Cash Flows from Investing Activities:            
Capitalized patent costs  (20,331)  (45,260)  (73,070)
Purchase of property and equipment  (59,666)  —     (6,519)
Fixed rate savings account  4,483,852   1,994,475   (6,226,500)
Net cash provided by/ (used in) investing activities  4,403,855   1,949,215   (6,306,089)
             
Cash Flows from Financing Activities:            
Costs incurred in relation to ATM Financing  (161,102)  —     —   
Costs incurred in relation to public offering  (328,302)  —     —   
Gross proceeds from issuance of common stock in relation to ATM financing  455,105   —     —   
Gross proceeds from public offering  2,019,743   —     —   
Gross proceeds from warrant exercise  64,311   —     —   
Gross proceeds from unit purchase option  100   —     —   
Net cash provided by financing activities  2,049,855   —     —   
             
Net increase/(decrease)/ in cash  2,892,758   (187,762)  (7,498,917)
Effect of exchange rate changes on cash  25,571   98,738   (993,689)
Cash at beginning of year  822,335   911,359   9,403,965 
Cash at end of year  3,740,664   822,335   911,359 
             
Supplemental disclosure of non-cash financing activities:
            
Conversion of Series A preferred stock to common stock  137,324   —     —   
Prepayment of equity compensation  85,715   —     —   
Forgiveness of payable from a related party  302,819   —     —   
                         
   Common Stock                 
   Shares   

Amount

($)

   Additional Paid-in Capital   ($)   

Accumulated Deficit

($)

   Accumulated Other Comprehensive Loss ($)   

Total Stockholders’ Equity (Deficit)

($)

 
Balance at March 31, 2020  20,850,848   20,851   16,589,272   (17,586,075)  (336,992)  (1,312,944)
Issuance of common shares, net of costs of $957,193  1,994,924   1,995   14,791,484             14,793,479 
Exercise of warrants  38,683   38   400,465             400,503 
Restricted shares issued as stock-based compensation  56,702   57   263,114             263,171 
Foreign currency translation adjustment  —                    472,559   472,559 
Net loss  —               (6,258,596)       (6,258,596)
Balance at March 31, 2021  22,941,157   22,941   32,044,335   (23,844,671)  135,567   8,358,172 
Issuance of common shares, net of costs of $50,765  772,524   773   3,067,254             3,068,027 
Exercise of warrants  366,892   367   2,963,291             2,963,658 
Restricted shares issued as stock-based compensation  22,293   22   87,366             87,388 
Options issued to directors  —          133,529             133,529 
Foreign currency translation adjustment  —                    (257,885)  (257,885)
Net loss  —               (13,886,805)       (13,886,805)
Balance at March 31, 2022  24,102,866   24,103   38,295,775   (37,731,476)  (122,318)  466,084 
                         

 

 

See notes to consolidated financial statements

statements.

F-7 
F-5 
 

NEMAURA MEDICAL INC.
Consolidated Statements of Cash Flows

         
  Year Ended March 31, 
  

2022
($)

  

2021
($)

 
Cash Flows from Operating Activities:        
Net loss  (13,886,805)  (6,258,596)
         
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  229,810   98,075 
Accretion of debt discount  6,666,630   2,007,687 
Mark-to-market foreign exchange revaluation  440,196   0   
Stock-based compensation  220,917   113,171 
         
Changes in assets and liabilities:        
Prepaid expenses and other receivables  519,346   (767,050)
Inventory  (637,149)  (564,313)
Accounts payable  (117,384)  (39,914)
Accounts receivable – related party  (250,092)  (681,298)
Other liabilities and accrued expenses  310,490   94,141 
Net cash used in operating activities  (6,504,041)  (5,998,097)
         
Cash Flows from Investing Activities:        
Capitalized patent costs  (83,691)  (81,952)
Purchase of property and equipment  (481,718)  (90,730)
Capitalized software development costs  (391,073)  (663,758)
Net cash used in investing activities  (956,482)  (836,440)
         
Cash Flows from Financing Activities:        
Proceeds from issuance of common stock  3,118,792   15,750,672 
Costs incurred in relation to equity financing  (50,765)  (957,193)
Proceeds from warrant exercise  2,963,658   400,503 
Proceeds from issuance of notes payable  0     25,000,000 
Debt issuance costs paid  0     (1,525,035)
Repayments of notes payable  (12,400,000)  (600,000)
Repayments of insurance financing  0     (82,555)
Net cash (used in) provided by financing activities  (6,368,315)  37,986,392 
         
Net (decrease) increase in cash  (13,828,838)  31,151,855 
Effect of exchange rate changes on cash  (287,300)  607,409 
Cash at beginning of year  31,865,371   106,107 
Cash at end of year  17,749,233   31,865,371 

Supplemental disclosure of non-cash financing activities:

 

        
Prepayment of equity compensation  0    $50,000 
Licenses acquired through stock issuance  0    $100,000 
Monitoring fees added to notes payable $2,764,775  $718,661 

 

See notes to consolidated financial statements.

F-6 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION, PRINCIPAL ACTIVITIES AND MANAGEMENT’S PLANS

Nemaura Medical Inc. (“Nemaura” or the “Company”), through its operating subsidiaries, performs medical device research and manufacturing of a continuous glucose monitoring system (“CGM”), named sugarBEAT.sugarBEAT®. The sugarBEATsugarBEAT® device is a non-invasive, wireless device for use by persons with Type I and Type II diabetes and may also be used to screen pre-diabetic patients. The sugarBEATsugarBEAT® device extracts analytes, such as glucose, to the surface of the skin in a non-invasive manner where it is measured using unique sensors and interpreted using a unique algorithm.

Nemaura is a Nevada holding company organized in 2013. Nemaura owns one hundred percent (100%) of Region Green Limited, a British Virgin Islands corporation (“RGL”) formed on December 12, 2013. RGL owns one hundred percent (100%) of the stock in Dermal Diagnostic (Holdings) Limited, an England and Wales corporation (“DDHL”) formed on December 11, 2013, which in turn owns one hundred percent (100%) of Dermal Diagnostics Limited, an England and Wales corporation formed on January 20, 2009 (“DDL”), and one hundred percent (100%) of Trial Clinic Limited, an England and Wales corporation formed on January 12, 2011 (“TCL”).

DDL is a diagnostic medical device company headquartered in Loughborough, Leicestershire, England, and is engaged in the discovery, development and commercialization of diagnostic medical devices. The Company’s initial focus has been on the development of the sugarBEATsugarBEAT® device, which consists of a disposable patch containing a sensor, and a non-disposable miniature electronic watchtransmitter device with a re-chargeable power source, which is designed to enable trending or tracking of blood glucose levels. All of the Company’s operations and assets are located in England.

The following diagram illustrates Nemaura’s corporate and shareholder structure as of March 31, 2019:2022:

 

F-8 


During the fiscal year ended March 31, 2021, the Board of Directors assessed the adequacy of the group’s organizational structure and concluded that an intermediary holding company, Region Green Limited, was no longer required, as the entity had been effectively dormant since inception, and no longer represented a requirement to be maintained. It was therefore determined that Region Green Limited should be unwound, with the assets held by Region Green Limited being transferred up to Nemaura Medical Inc. following which Region Green Limited would be dissolved.

The transfer of assets took place on March 5, 2021 and Region Green Limited was formally dissolved as of April 23, 2021.


NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to Consolidated Financial Statements

 

The Company was incorporated in 2013 since which period thereand has beenreported recurring losses from operations to date and an accumulated deficit of $13,425,879$37,731,476 as of March 31, 2019.2022. These operations have resulted in the successful completion of clinical programs to support a European CE mark (European Union approval of the product) approval, as well as a USDe Novo 510(k) medical device application to the U.S. Food and Drug Administration (“FDA”) submission. The Company expects to continue to incur losses from operations until revenues are generated through licensing fees or product sales. However, given the completion of the requisite clinical programs, these losses are expected to be reduceddecrease over time. Management has entered into licensing, supply, or collaboration agreements with unrelated third parties relating to the United Kingdom (“UK”), Europe, Qatar, and all countries in the Gulf Cooperation Council, Management has evaluatedCouncil.

Going Concern

As identified under Item 1A, management is aware of the expected expensesneed to raise additional funds in order to finance the ongoing commercialization of sugarBEAT®. The Company had $17,749,233 of cash at March 31, 2022, which management consider to be incurred alongmore than sufficient to fund the ongoing operational expenses of the business, however the terms of the existing debt held on balance sheet will fall due for repayment as of February 2023, which will trigger a requirement to either restructure the debt or obtain additional, new, funding. 

In evaluating the going concern position of the company, management have considered the ability of the company to raise additional funding in combination with itsone or more of the different funding options available cashto it at this time.  Based on current and has determinedongoing engagement with potential funding providers, Management believe that there is a reasonable expectation that funding could be provided by one, or more, of the Company hasfollowing options:

·Equity funding – the company has immediate access to funds through the ATM facility that is currently in place; in addition to this, there are various alternative mechanisms available to the company similar to those used previously e.g. direct sale of shares to interested third parties, similar to the stake sold to Tiger Trading Partners L.L.C. in February 2022, as well as other mechanisms to sell common stock via an underwritten agreement or the further exercise of warrants by the current warrant holders etc.
·Debt funding – the company continues to be in ongoing discussions with third party debt providers, including the incumbent, to enable the existing debt facility to be restructured or renewed, should management feel that this route offers a more attractive option compared to the sale of equity that is dependent on the current market conditions.
·Alternative funding as used in the past such as the sale of licenses.  As product development is now at a significant more advanced stage then it was, it is management’s belief that the sufficient funding could be provided through the sale of licenses in a similar way to the UK license agreement sale that help provided early-stage development funding.

However, as a consequence of this funding requirement being triggered without the funding bridge having been put in place by the filing date of these consolidated financial statements, ASC 205-40 requires that management recognise and disclose this point as an event which creates a substantial doubt as to the Company’s ability to continue as a going concern for at least one year subsequent tofrom the date of issuancefiling of these consolidatedconsolidate financial statements. The Company has $3,740,664

Following the receipt of readily availablethe CE mark approval in the EU, and in support of our plans for similar certification with the FDA in the U.S., our plan is to utilize the cash on hand at March 31, 2019.

to continue establishing commercial manufacturing operations for the commercial supply of the sugarBEAT® device and sensor patches in our target markets.

Management's strategic plans include the following:

support the UK and EU launch of sugarBEAT®;
obtaining further regulatory approval for the sugarBEATsugarBEAT® device in other countries such as the USA;U.S.;
pursuingexploring licensing and partnership opportunities in other territories;
developing the sugarBEAT® device platform for commercialization across other applications; and
pursue additional capital raising opportunities in additionas and when required to the Equity Distribution Agreement entered into on October 19, 2018 by the Company and Maxim pursuant to which the Company may offer and sell, from time to time, through Maxim, up to $20,000,000 in shares of the Company’s common stock.further enhance our growth plans.
exploring licensing opportunities; and
developing the sugarBEAT device for commercialization for other applications.

 

NOTE 2 – BASIS OF PRESENTATION

(a)  Basis of presentation

The accompanying consolidated financial statements include the accounts of the Company and the Company’s subsidiaries, DDL, TCL, DDHL and RGL. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and all significant intercompany balances and transactions have been eliminated in consolidation.

The functional currency for the majority of the Company’s operations is the Great Britain Pound Sterling (“GBP”), and the reporting currency is the US Dollar.U.S. Dollar (“U.S.$”).

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

(a)   Cash and cash equivalents

Revenue recognition

The Company considershas considered the guidelines within the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers as a requirement of the revenue recognition that it commenced during the current fiscal year. This standard applies to all highly liquid investments purchasedcontracts with original maturitiescustomers, except for contracts that are within the scope of three monthsother standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or lessservices, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be cash equivalents. within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company may enter into product development and other agreements with collaborative partners. The terms of the agreements may include non-refundable signing and licensing fees, milestone payments and royalties on any product sales derived from collaborations.

Deferred revenue

The Company has entered into license agreements and recognizes up front license payments as revenue upon delivery of the license only if the license has stand-alone value to the customer. However, where further performance criteria must be met, revenue is deferred and recognized on a basis that is considered to be appropriate to the conditions associated with the license and over the period the Company is expected to complete these performance obligations.

Royalty revenue will be recognized upon the sale of the related products provided the Company has no remaining performance obligations under the agreement.

Research and development expenses

The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs.

Cash

Cash and cash equivalents consistconsists primarily of cash deposits maintained in the United Kingdom. From time to time, the Company's cash account balances exceed amounts covered by the Financial Services Compensation Scheme. The Company has never suffered a loss due to such excess balances.UK.

(b)  Fixed rate cash accounts

From time to time the Company may invest funds in fixed rate cash savings accounts.  Customarily, these accounts, at the time of the initial investment, provide a higher interest rate than other bank accounts, and require the Company to maintain the funds in the accounts for a certain period of time. As of March 31, 2019, the Company does not hold any cash reserves in any such savings accounts.

(c)  Fair value of financial instruments

The Company's financial instruments primarily consist of cash, fixed rate cash accounts, accounts payableIn accordance with ASC 820, “Fair Value Measurements and other current liabilities. The estimated fair values of non-related party financial instruments approximates their carrying values as presented, due to their short maturities. TheDisclosures,” the Company determines the fair value of amounts payablefinancial instruments with the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to related parties are not practicable to estimate duemeasure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the related party naturefair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the underlying transactions.fair value of the assets or liabilities.

F-9 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

 

(d)  Property and equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally four to five years. This is charged to operating expenses.

F-9 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(e)  Intangible assets

Intangible assets consist of licenses and patents associated primarily with the sugarBEATsugarBEAT® device and are amortized on a straight-line basis, generally over their legal lives of up to 20 years and are reviewed for impairment. Costs capitalized relate to invoices received from third parties and not any internal costs. The Company evaluates its intangible assets (all have finite lives) and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable, or at least annually. Recoverability of finite and other long-lived assets is measured by comparing the carrying amount of an asset group to the future undiscounted net cash flows expected to be generated by that asset group. The Company groups assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. The amount of impairment to be recognized for finite and other long-lived assets is calculated as the difference between the carrying value and the fair value of the asset group, generally measured by discounting estimated future cash flows. There were no0 impairment indicators present during the fiscal years ended March 31, 2019, 20182022 or 2017.2021.

(f)  Revenue RecognitionSoftware development costs

Capitalization of software development costs incurred in the research and development of new software products and enhancements to existing software products for external use begins when a product’s technological feasibility has been established and ends when the resulting product is available for general market release. Amortization of the capitalized software is classified within product cost of goods sold in the consolidated statements of operations and comprehensive loss.

WhileFor each capitalized software product, the Companyannual amortization is not currently recognizingequal to the greater of:

1. The amount computed using the ratio of software product’s current fiscal year gross revenue we have consideredbears to the guidelines within ASC Topic 606,Revenue from Contracts with Customers, which is effectivetotal current fiscal year and anticipated future gross revenues for the Company beginning April 1, 2019. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goodsproduct, or services, in an

2. The amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company may enter into product development and other agreements with collaborative partners. The terms of the agreements may include non-refundable signing and licensing fees, milestone payments and royalties on any product sales derived from collaborations.

The Company has entered into license agreements and for these, recognizes up front license payments as revenue upon delivery of the license only if the license has stand-alone value to the customer. However, where further performance criteria must be met, revenue is deferred and recognizedcomputed based on a straight-line basismethod over the period the Company is expected to complete its performance obligations.

Royalty revenue will be recognized upon the saleremaining estimated economic life of the related products provided the Company has no remaining performance obligations under the agreement.

(g)  Research and development expenses

product, which can be a range between 3 – 8 years.

The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consistAnnually, or more frequently if required by triggering events, an analysis of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costsnet realizable value of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. The CE mark has now been grantedthe capitalized software is completed and the FDA submissionamount by which unamortized software costs exceeds the net realisable value, if any, is plannedrecognized as a charge to income in Q2 2019. Research and Development costs will therefore decrease significantly for the glucose monitoring application given these major milestones have been achieved and FDA submissionperiod it is imminent.determined.

Inventory

(h)  Inventory

Inventories are is stated at the lower of cost or net realizable value, with cost determined on a first-in first-out basis. At present all inventory relates to raw materials.materials purchased from third parties and to be used in the Company’s product.

F-10 

(i)  Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of comprehensive loss. The Company does not0t have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense related to unrecognized tax benefits recognized for the three years ended March 31, 2019.

2022 and 2021.

In December 2017, the USU.S. Tax Cuts and Jobs Act was signed into law. Generally, this Act reduces corporate rates from a top rate of 35%35% to a top rate of 21%21%, effective January 1, 2018. As the Company’s USU.S. operations are minimal, and all deferred tax assets maintain a full valuation allowance, there is no significant impact to the Company as of and for the yearyears ended March 31, 2019.2022 and 2021.

F-10 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

(j)  

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. For the yearsfiscal year ended March 31, 2019, 2018, and 2017,2022, warrants to purchase 10 million1,573,098 shares of common stock, options to purchase 40,000 shares of common stock and a unit purchase option to purchase 9,710 shares of common stock as well as 9,710 warrants were considered anti-dilutive and were excluded from the calculation of diluted loss per share.share. For the fiscal year ended March 31, 2019,2021, warrants to purchase 1,880,7041,939,990 shares of common stock and a unit purchase option to purchase 97,1039,710 shares of common stock as well as 97,1039,710 warrants were considered anti-dilutive and were also excluded from the calculation of diluted loss per share. For the years ended March 31, 2018 and 2017 preferred stock convertible to 137,324,000 shares of common stock were anti-dilutive and were excluded from the calculation of diluted loss per share.

(k)  Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaU.S. 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 amounts of revenues and expenses during the periods presented. Actual results may differ from those estimates.

F-11 

(l)  Foreign currency translation

The functional currency of the Company is the Great Britain Pound Sterling ("GBP"). TheGBP, while the reporting currency is the United States dollar (US$)U.S.$. Stockholders' equity is translated into United States dollars from GBP at historical exchange rates. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Incomedate with income and expenses arebeing translated at the averageweighted-average exchange rates prevailing during the reporting period.

The translation rates are as follows:

   2019   2018   2017 
Year end GBP : US$ exchange rate  1:1.3030   1:1.4033   1:1.2453 
Average period/yearly GBP : US$ exchange rate  1:1.3026   1:1.3305   1:1.3146 

Stockholders' equity is translated into U.S.$ from GBP at historical exchange rates.

Adjustments resulting from translating the consolidated financial statements into the United States dollarU.S.$ are recorded as a separate component of accumulated other comprehensive loss in stockholders’ equity.

Derivative Financial Instruments

(m)  Stock-based compensationDerivative financial instruments are used as part of the overall strategy to manage exposure to foreign currency primarily associated with fluctuations in foreign currency exchange rates. Derivative financial instruments are included in the consolidated balance sheets and are measured at fair value on a recurring basis.

The Company is exposed to the impact of foreign currency exchange fluctuations as a significant proportion of our expenses are incurred within our UK subsidiary which is denominated GBP, with the remaining portion denominated in USD and a small amount in Euros (“EUR”). In addition to this, we hold the majority of our cash in USD, with amounts also held in GBP and, to a much smaller amount, in EURs. The Company’s objective is to reduce the volatility associated with these foreign exchange rate changes to allow management to focus our attention on our core business strategy and objectives. Accordingly, the Company entered into a target accrual redemption forward (“TARF”) agreement to sell USD and buy GBP across 25 defined monthly fixings in order to fix the costs associated with the foreign currency exchange fluctuations associated with our GBP denominated expenses. These fixings allow for $250,000 to be converted into GBP at a rate of $1.359 subject to the spot rate on the fixing date being above the fixed rate. Should the spot rate fall below $1.359 on the scheduled fixing date but above a rate of $1.319, the Company can exchange the fixing amount at the spot rate on the day; should the spot rate fall below $1.319 the Company is obligated to convert $500,000 to GBP at the fixed rate of $1.359. The exchange rate range experienced by the Company over the last two years for USD: GBP has seen a high of approximately $1.216 in May 2020 and a low of approximately $1.423 in June 2021. Cumulative profit on the sale of USD is capped at an aggregate of approximately $55,000 over the shorter of the life of the contract fixings or the utilization of the cap.

At March 31, 2022, the Company held a forward contract to sell up to $12.5 million, which when remeasured at fair value generated a non-cash item loss of $440,196 and has been accounted for within the foreign exchange translation adjustments line within general and administrative expenses and is held on the Company’s balance sheet within other liabilities and accrued expenses. No such similar derivative financial instruments were in place at the fiscal year ended March 31, 2021.

The Company’s foreign currency forward contracts are measured at fair value on a recurring basis and are classified as Level 2 under our fair value of financial instruments policy.

Retirement benefit plan

The Company operates a retirement plan which covers most of our regular employees in the UK and allows them to make contributions. The Company also provides a matching contribution on a portion of the employee contributions. Total expenses incurred under this plan for the fiscal years ended March 31, 2022 and 2021, were approximately $24,300 and $12,100, respectively. The increase in the fiscal year ended March 31, 2022 was driven by the increase in our employee numbers.

F-11 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

 

For stock options granted as consideration

Stock-based compensation

The Company accounts for services rendered by non-employees, the company recognizes compensation expensestock-based payments in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “Equity Based Paymentsstock-based payment accounting guidance which requires all stock-based payments to Non- Employees.” Non-employee restricted common stock and stock option grants that do not vest immediatelybe recognized based upon grant, and whose terms are known, are recorded as an expense over the vesting period of the underlying instrument granted. At the end of each financial reporting period prior to vesting, the value of the instruments granted, will be re-measured using thetheir fair value of the Company’s common stock and the stock-based compensation recognized during the period will be adjusted accordingly.

For restricted common stock and stock option awards that have performance-based conditions, the Company recognizes the stock-based compensation expense at the fair value of the award based on the date that the performance conditions have been met.values. The Company calculates the fair value of the stock options using the Black Scholes option pricing model.   The fair value of restricted common stock awards is based on the closing price of the Company’s common stock on the applicable measurement date.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertaintiesis estimated at the grant date using the Black-Scholes Option Pricing Model and the applicationportion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of management’s judgment.fair value using the Black-Scholes Option Pricing Model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. The Company accounts for forfeitures of unvested awards as they occur.

To date,The Company accounts for share-based payments to non-employees by aligning it with the Company has not granted any stock-based compensation awardsaccounting for share-based payments to employees.employees, with certain exceptions.

(n)  Direct costs incurred for equity financing

The Company includes all direct costs incurred in connection with successful equity financings as a component of additional paid-in capital. Direct costs incurred for equity financings that are unsuccessful are expensed.

Risks and Uncertainties

F-12 

The Company is in the commercialization stage for its primary product, sugarBEAT®, following the receipt of the CE mark covering the EU, with the intention of entering into sales and marketing agreements for the product with prioritization having been initially set for the UK and Germany.

Aside from the UK and Germany, the Company considers the U.S.A. to be a primary market for its product offerings, and while uncertainties exist with regards to regulatory acceptance of the Company’s primary product, an FDA PMA application has been submitted and is currently being reviewed; some delays have been experienced as a direct consequence of COVID-19, whereby the application remained dormant with the FDA for a period of 6 months. In the interim, and further to discussions with the FDA, the Company has determined that it may sell an adapted version of the CGM device as a wellbeing device, whereby the Company will gather the data and provide feedback in the form of educational reports providing insights into factors that may be causing glucose fluctuations and therefore how lifestyle interventions may help improve control of the fluctuations.

NEMAURA MEDICAL INC.The Company has taken steps to support the commercialization process by increasing raw material inventory over the year in order to support the transition to product manufacturing in relation to sale to the UK Licensee.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe Company is also in the process of establishing options to broaden the existing internal manufacturing capabilities with the expectation that it will leverage the manufacturing capacity and capabilities of one or more contract manufacturers as volume increases.

(o)  Recent accounting pronouncements

 

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 has been modified multiple times since its initial release. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09, as amended, becomes effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted. As an Emerging Growth Company (we expect our Emerging Growth Company status to expire on March 31, 2020), the Company is allowed to adopt new, or updated, accounting standards using the same time frame that applies to private companies. The Company will adopt this standard on April 1, 2019. Management is currently evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-02, Leases. The main difference between the provisions of ASU No. 2016-02 and previous U.S. GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU No. 2016-02 retains a distinction between finance leases and operating leases, and the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted as of the beginning of any interim or annual reporting period. As an Emerging Growth Company, the Company is allowed to adopt new, or updated, accounting standards using the same time frame that applies to private companies. The Company will adopt this standard on April 1, 2020. Management is currently evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07,Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company will adopt ASU 2018-07 prospectively as of April 1, 2019. The adoption of ASU 2018-07 is not expected to have a material impact on the Company’s financial position, results of operations or related disclosures.

In August 2018, the FASB issued ASU No. 2018-13,Fair Value Measurement: Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement(ASU 2018-13), which adds and modifies certain disclosure requirements for fair value measurements. Under the new guidance, entities will no longer be required to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, or valuation processes for Level 3 fair value measurements. However, public business entities will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods. Management is currently evaluating the impact that this guidance will have on the Company’s consolidated financial statements.

(p)  Risks and Uncertainties:

The Company is in the commercialization stage for sugarBEAT in the EU now that CE mark approval (European Union approval of the product) has been received. The Company has entered into sales and marketing agreements for the product. It has also placed orders for the first commercial batch of transmitter devices with the electronics manufacturer Datalink Limited. It has not entered into exclusive manufacturing agreements with any of its contract manufacturers. Uncertainties still exist with regards to regulatory acceptance of the Company’s primary product development efforts in territories outside of Europe.

F-13 

(q)  Preferred shares

On October 5, 2017, the Company entered into common stock exchange agreements with each of its three largest shareholders, to exchange, in the aggregate, 137,324,000 shares of the Company’s common stock for 137,324 shares of Series A Convertible Preferred Stock (the “Series A Preferred”).  Each share of Series A Preferred is convertible into 1,000 shares of the Company’s common stock, automatically upon the occurrence of all of certain triggering events, as set forth in the Certificate of Designation for the Series A Preferred, namely (a) the sugarBEAT® device to be commercialized has CE regulatory approval; (b) retail sales having commenced; and (c) retail sales exceeding USD$5 million, inclusive of advanced sales or voluntarily by the holder after February 7, 2018, if these triggering events have not occurred.  Each holder of issued and outstanding Series A Preferred is entitled to a number of votes equal to the number of shares of common stock into which the Series A Preferred is convertible. Holders of Series A Preferred are entitled to vote on any and all matters presented to stockholders of the Company, except as provided by law.  The Series A Preferred has no preference to the common stock as to dividends or distributions of assets upon liquidation or winding up of the Company (which has been agreed to by the holders of the Series A Preferred).  The Company determined that the fair value of the shares of Series A Preferred issued for the shares of common stock was equivalent to the fair value of the shares of common stock exchanged.

On November 6, 2017, the transactions contemplated by the exchange agreements were consummated and 137,324,000 shares of common stock were cancelled.  As a result, the Company had 67,676,000 shares of common stock issued and outstanding as of March 31, 2018.

On June 5, 2018, the three holders of the Company’s Series A Preferred each delivered notices of conversion to voluntarily convert their Series A Preferred, in the aggregate amount of 137,324 of Series A Preferred shares, into 137,324,000 shares of commonstock.  The holders had the right to voluntarily convert each share of Series A Preferred into 1,000 shares of common stock of the Company. 

(r)  Subsequent events

S-3 Registration

Prior to the year end, the Company filed a new Registration Statement on Form S-3, registering up to $250,000,000 of our common stock, preferred stock, warrants, debt securities and units (the “Form S-3”). The Form S-3 was declared effective by the Securities and Exchange Commission on April 8, 2019. We may offer and sell up to $250,000,000 in the aggregate of the securities identified from time to time in one or more offerings. The securities may be sold directly by us, through dealers, or agents, designated from time to time, to or through underwriters, or through a combination of these methods as set forth in the “Plan of Distribution” included therein. Each time we offer securities under the prospectus that is part of the Form S-3, we will provide the specific terms of the securities being offered, including the offering price in a prospectus supplement.

On April 10, 2019, the Company re-started the ATM offering, with Maxim Group LLC, as sales agent (“Maxim”), pursuant to which the Company may offer and sell, from time to time, through Maxim (the “Offering”), up to $19,544,895 in shares of its common stock (the “Shares”).

F-14 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CE Approval

On May 29, 2019 Nemaura Medical announced it had received confirmation of approval of the European Conformity for sugarBEAT which now allows Nemaura to commence commercialization of the product in to the European Union.

Nemaura has initiated plans to launch the product into the UK market in Q3 of 2019, followed by Germany and other markets. In the UK, Nemaura is working with its licensee DBP (Jersey) Ltd., to launch the product in the UK, and is working with its joint venture partner DB Ethitronix to commence registration and commercial launch into the German market.

The Company ordered 12,500 sugarBEAT devices in July 2018 in anticipation of CE approval, and these devices are currently being assembled and programmed with the updated software for the planned launch in Germany and the UK, and they are in discussions with their UK licensee with regards to taking orders for additional quantities to support product launch for the next 12 months.

Nemaura has also commenced activities with respect to registering the CGM product based on the CE Mark in the GCC countries with their respective licensees in that region, Al-Danah Medical and TPMena.

(s)   Reclassifications

To conform to the current year’s presentation, as of March 31, 2018, the Company reclassified $70,165 from other liabilities and accrued expenses to current portion of deferred revenue. There was no impact on total assets, total liabilities, net loss or total equity.

F-15 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – LICENSING AGREEMENTS

United Kingdom and the Republic of Ireland, the Channel Islands and the Isle of Man

In March 2014, the Company entered into an Exclusive Marketing Rights Agreement with an unrelated third party that granted to the third party the exclusive right to market and promote the sugarBEATsugarBEAT® device and related patches under its own brand in the United Kingdom and the Republic of Ireland, the Channel Islands and the Isle of Man. The Company received a non-refundable, up-front cash payment of GBP 1,000,000 (approximately $1.303$1.32 million and $1.403$1.38 million as of March 31, 20192022 and 2018,2021, respectively), which was wholly non-refundable, upon signing the agreement.

As the Company has continuing performance obligations under the agreement, the up-front fees received from this agreement have been deferred and willwith the expectation that this deferred revenue would be recorded astreated income over the term of the commercial licensing agreement beginning from the date of clinical evaluation approval. AsThe Company received this confirmation during the Company expects commercialization of the sugarBEAT device to occurcurrent fiscal year, along with an initial order against which deliveries commenced in the year endingDecember 2021. At March 31, 2020,2022, approximately $65,000$107,000 of thethis deferred revenue has been classifiedtreated as a current liability within the $259,256 deferred revenue balance held; the remainder being shown as of March 31, 2019.a non-current liability balance sheet item.

 

In April 2014, a Letter of Intent was signed with a third party which specified a 10-year term and in November 2015, a License, Supply and Distribution Agreement with an initial 5-year term was executed. Pursuant to this agreement, the Company grants the exclusive right to market and promote its product in the United Kingdom and purchase the product at specified prices.

Other European territories

In May 2018, the Company signed a commercial agreement with Dallas Burston Ethitronix Limited (DBEE) for all other European territories as part of an equal joint collaboration agreement. The joint collaboration agreement intends to seek sub-license rights opportunities to one or more leading companies in the diabetes monitoring space, in order to leverage their network, infrastructure and resources. The Company and DBEE agreed that they shall share proceeds equally from sales of the Company’s sugarBEAT products. In consideration of the sub-license rights granted, DBEE shall pay to the Company the sum of approximately $1 if demanded and, except as described elsewhere in the Agreement, no commission, royalties or other payments shall be due to the Company from DBEE. The initial term of the Agreement is for five years, which may be terminated at the end of such five-year initial term by either party upon at least 12 months’ prior written notice. If such notice of termination is not provided by either party during the initial term, the Agreement shall automatically continue until terminated by either party upon 12 months’ prior written notice. In the event the Agreement is terminated as provided above, the non-terminating party shall receive an exit payment equal to 50% of the open market value of the joint collaboration business as defined in the collaboration agreement and as agreed to by the parties at the time of termination. The parties may also terminate the Agreement if the other party commits a material breach of the terms of the Agreement which is not remedied within 30 days of written notification of such breach, or the other party dissolves or goes bankrupt. Commercialization is expected to occur in the second half of 2019. As of March 31, 2019 no payments have been made or received or are due or receivable under the terms of the collaboration agreement.

Qatar

In November 2018, the Company signed a commercial agreement with Al-Danah Medical Company for the exclusive license and distribution of the sugarBEAT device in Qatar. This agreement gives Al-Danah Medical Company the exclusive rights to sell and market the Company’s products in Qatar. The Company will sell devices to Al-Danah Medical Company at a specified price and with minimum order quantities which will be set post product launch. The Company’s responsibility is limited to the supply of the device and related consumables. Al-Danah Medical Company is responsible for ensuring compliance with all local regulation related to registering and selling the device within Qatar. Product launch in Qatar is expected to take place after the initial commercialization of the sugarBEAT device which is expected to occur in the second half of 2019.

F-16 
F-12 
 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gulf Cooperation Council (GCC) excluding Qatar

In February 2019, the Company signed a commercial agreement with The Principals Mena DMCC (TPM), for the exclusive licence and distribution of the sugarBEAT device in all countries of the Gulf Cooperation Council (GCC) excluding Qatar. This agreement gives TPM the exclusive rights
Notes
to sell and market the Company’s products in the GCC subject to mutual agreement on minimum order quantities and supply price which are to be determined pre-launch in the territory. The Company’s responsibility is limited to the supply of the device and related consumables, and maintenance of the mobile phone Application. TPM is responsible for ensuring compliance with all local regulations related to registering and selling the device within the GCC, and marketing and sales. Product launch in the GCC is expected to take place after the initial commercialization of the sugarBEAT device in Europe.Consolidated Financial Statements

 

NOTE 5 – PROPERTY AND EQUIPMENT

As of March 31, 2019,2022 and March 31, 20182021, property and equipment is summarized as follows.follows:

PROPERTY AND EQUIPMENT        
  March 31, 
  

2022
($)

  

2021
($)

 
Property and equipment  806,117   346,500 
Less accumulated depreciation  (273,609)  (144,335)
   532,508   202,145 

  

March 31, 2019

($)

 

March 31, 2018

($)

Property and equipment  77,597   18,213 
Less accumulated depreciation  (20,726)  (12,443)
   56,871   5,770 


Depreciation expense relatedexpensed within the consolidated statements of operations and comprehensive loss relating to property and equipment for the years ended March 31, 2019, 20182022 and 20172021 was approximately $9,000, $4,000$138,000 and $4,000$69,000, respectively.

NOTE 6 - INTANGIBLE ASSETS

The following table summarises our intangible assets and capitalized software development costs at March 31, 2022 and 2021:

Schedule of Intangible Assets        
  March 31, 
  

2022
($)

  

2021

($)

 
Patents and licenses  1,084,081   516,935 
Less accumulated amortization  (186,927)  (125,437)
   897,154   391,498 
         
 Software development costs  583,826   663,758 
         
   1,480,980   1,055,256 

Amortization expensed within the consolidated statements of operations and comprehensive loss relating to intangible assets for the years ended March 31, 2022 and 2021 was approximately $92,000 and $29,000, respectively.

Assuming a constant currency, the following table represents the estimated amortization for intangible assets relating to patents and licenses for the years ending March 31; no amortization has been estimated for software development as this is considered to be work-in-progress and the final costs are yet to be determined:

Schedule of amortization expenses    
   ($) 
 2023   174,964 
 2024   173,910 
 2025   173,857 
 2026   149,783 
 2027   98,307 
 Thereafter   126,333 
 Total future net intangible amortization expense   897,154 

NOTE 7 – PREPAID EXPENSES

PREPAID EXPENSES        
  March 31, 
  

2022
($)

  

2021
($)

 
Prepaid expenses  473,799   592,695 
Prepaid inventory  0     587,493 
Other taxes  276,368   89,325 
  750,167   1,269,513 

 

F-13 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

NOTE 8 – NOTES PAYABLE

NOTE PURCHASE AGREEMENT 1

On April 15, 2020, the Company entered into a note purchase agreement (the “Note Purchase Agreement 1”) by and among the Company, DDL, TCL and a third-party investor (the “Investor”).

Pursuant to the terms of the Note Purchase Agreement, the Company agreed to issue and sell to the Investor and the Investor agreed to purchase from the Company a secured promissory note (the “Secured Note”) in the original principal amount of $6,015,000. In consideration thereof, on April 15, 2020 (the closing date), (i) the Investor (a) paid $1,000,000 in cash, (b) issued to the Company (1) Investor Note #1 in the principal amount of $2,000,000 (“Investor Note #1”), and (2) Investor Note #2 in the principal amount of $2,000,000 (“Investor Note #2” and together with Investor Note #1, the “Investor Notes”), and (ii) the Company delivered the Secured Note on behalf of the Company, to the Investor, against delivery of the Purchase Price. For these purposes, the “Purchase Price” means the Investor’s initial cash purchase price, together with the sum of the initial principal amounts of the Investor Notes.

The Secured Note is secured by the Collateral (as hereinafter defined). The Secured Note carries an original issue discount (“OID”) of $1,000,000 (16.7%). In addition, the Company agreed to pay $15,000 to the Investor to cover the Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Secured Note (the “Transaction Expense Amount”). In addition to this, a payment of $325,000 was made to Ascendiant Capital Markets, LLC, (the “Commission”) for structuring the agreement between both parties. The Purchase Price for the Secured Note is $4,675,000, computed as follows: $6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.

The borrowing period is 24 months, and the Company shall pay the outstanding balance and all fees on maturity. A monitoring fee equal to 0.833% of the outstanding balance will automatically be added to the outstanding balance on the first day of each month. The debt less the discount and transaction expenses will be accreted over the term of the Note using the effective interest method.

Security Agreement

On April 15, 2020, the Company entered into the Security Agreement by the Company, DDL and TCL, in favor of the Investor (the “Security Agreement”). Pursuant to the terms of the Security Agreement, the Company granted the Investor a first-priority security interest in all rights, title, interest, claims and demands of the Company in and to all of the Company’s patents and all other proprietary rights, and all rights corresponding to the Company’s patents throughout the world, now owned and existing, and all replacements, proceeds, products, and accessions thereof.

NOTE PURCHASE AGREEMENT 2

On February 8, 2021, the Company entered into an additional note purchase agreement (“Note Purchase Agreement 2”) with the Investor.  Pursuant to the terms of Note Purchase Agreement 2, the Company agreed to issue and sell to the Investor and the Investor agreed to purchase from the Company, a secured promissory note (“Secured Note 2”) in the original principal amount of $24,015,000. The Secured Note carries an OID of $4,000,000 (16.7%), and the Company agreed to pay $15,000 to the Investor to cover the Investor’s transaction expenses. In addition to this, a Commission of $1,200,000 was also payable to Ascendiant Capital Partners, LLC.

In consideration thereof, on February 9, 2021 (the “closing date”), (i) the Investor paid $20,000,000 in cash to the Company, and (ii) the Company delivered Secured Note 2 on behalf of the Company, to the Investor, against the delivery of the Purchase Price.  For these purposes, the “Purchase Price” means the Investor’s initial cash purchase price. After adjusting for transaction expenses of $1,200,000, cash proceeds received were $18,800,000.

The borrowing terms for Note Purchase Agreement 2 are consistent with those of Note Purchase Agreement 1, with the borrowing period being 24 months from the date of the agreement, the Company being required to pay the outstanding balance and all fees on maturity, and a monitoring fee equal to 0.833% of the outstanding balance being automatically added to the outstanding balance on the first day of each month. The debt less discount and transaction expenses will be accreted over the term of the Note using the effective interest rate method.

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

Security Agreement

On February 8, 2021, the Security Agreement established in respect to Note Purchase Agreement 1 was extended to include Note Purchase Agreement 2, which is also secured against all of the Company’s assets owned as of the closing date and extends to any assets acquired at any time that the Company’s obligations under Secured Note 2 are outstanding.

As of March 31, 2019, and March 31, 2018 intangible assets are summarized as follows:

     
  

March 31, 2019

($)

 

March 31, 2018

($)

Patents and licenses  261,938   323,987 
Less accumulated amortization  (70,254)  (72,888)
   191,684   251,099 

Estimated amortization expense2022, all outstanding debt in relation to the Note Purchase Agreements is approximately $19,000due for each ofrepayment within the next five years.12 months.

NOTE 79RELATED PARTY TRANSACTIONS

Nemaura Pharma Limited (Pharma)(“Pharma”), Black and White Health Care Limited (B&W)(“B&W”) and NDM Technologies Limited (NDM)(“NDM”) are entities controlled by the Company’s chief executive officer interim chief financial officer, and majority shareholder, Dewan F.H.D.F.H. Chowdhury.

In accordance with the United States Securities and Exchange Commission (SEC) Staff Accounting Bulletin 55, these financial statements are intended to reflect all costs associated with all operations of Nemaura Medical and its subsidiaries Pharma has a service agreement with DDL, to undertake development, manufacture, and regulatory approvals under Pharma’s ISO13485 Accreditation. In lieu of these services, Pharma invoices DDL on a periodic basis for said services. Services are provided at cost plus a service surcharge amounting to less than 10% of the total costs incurred.

F-17 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FollowingThe following is a summary of activity between the Company and Pharma, B&W and NDM for the years ended March 31, 2019, 20182022 and 2017. These amounts are unsecured, interest free, and payable on demand.2021:

       
  

Year Ended

March 31,

2019

($)

 

Year Ended

March 31,

2018

($)

 

Year Ended

March 31,

2017

($)

Balance due to Pharma and NDM at beginning of period  613,818   687,609   494,145 
Amounts received from Pharma  —     145,214   2,480 
Amounts invoiced by Pharma to DDL, NM and TCL (1)  2,312,412   842,739   577,481 
Amounts invoiced by DDL to Pharma  (977)  —     (15,305)
Amounts repaid by DDL to Pharma  (1,569,496)  (1,096,767)  (249,060)
Amounts paid by DDL on behalf of Pharma  —     (19,889)  (42,403)
Amounts invoiced by B&W to DDL  2,206   —     —   
Amounts repaid by DDL to B&W  (5,622)  —     —   
Foreign exchange differences  (84,843)  54,912   (79,729)
Forgiveness of payable accounted for as equity contribution  (302,819)  —     —   
Net balance due to Pharma and NDM at end of the period  964,679   613,818   687,609 
Schedule of Related Party Transactions        
  March 31, 
  

2022
($)

  

2021
($)

 
Liability due to related parties at beginning of year  148,795   830,093 
Amounts invoiced by Pharma to DDL, NM and TCL (1)  3,245,985   2,441,108 
Amounts invoiced by DDL to Pharma  (2,495)  (17,213)
Amounts repaid by DDL to Pharma  (3,492,962)  (3,209,084)
Foreign exchange differences  (620)  103,891 
(Receivable)/Liability due (from) to related parties at end of year  (101,297)  148,795 

 

(1)These invoiced amounts are included primarily inrelate to research and development expenses.

All related party transactions relate to operating activities in the years ended March 31, 2019, 20182022 and 2017.2021.

Total costs charged to the Company by Pharma and NDM were $2,312,412, $842,739, and $577,481 for the years ended March 31, 2019, 2018 and 2017, respectively.

In the year ended March 31, 2019, consultancy services totalling $2,160 relating to the preparation of tax advice was provided by Diagnostax Limited, a company of which Mr. T. Johnson is a director. Mr. T. Johnson is a non-executive director of the Company.

NOTE 810INCOME TAXES

The Company and its subsidiaries file separate income tax returns.

The United States of America

The Company is incorporated in the USU.S. and is subject to a USU.S. federal corporate income tax rate of 21%21% for the yearyears ended March 31, 2019.As a result of the US Tax Cuts2022 and Jobs Act, the Company was subject to a US federal corporate income tax blended rate of 30.79% for the year ended March 31, 2018and 35% for the year ended March 31, 2017.2021.

British Virgin Islands

RGL iswas incorporated in the British Virgin Islands (“BVI”). Under the current laws of the BVI, RGL iswas not subject to tax on income or capital gains. In addition, upon payments of dividends by RGL, no BVI withholding tax iswas imposed. During the years ended March 31, 2019, 20182022 and 2017,2021, there waswere no income or expenses in the BVI.BVI; RGL was formally dissolved as of April 23, 2021.

UK

DDL, TCL and DDHL are all incorporated in the United Kingdom (UK)UK and the applicable UK statutory income tax rate for these companies is 19%19%.

 

 

F-18 
F-15 
 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the fiscal years ended March 31, 2019, 20182022 and 20172021 loss before income tax expense (benefit)benefit arose in the UK and U.S. as follows:

  Year Ended March 31,
  2019 2018 2017
   $   $   $ 
Loss before income taxes arising in UK  (2,726,862)  (1,353,243)  (1,251,870)
Loss before income taxes arising in United States  (1,725,935)  (467,206)  (299,396)
Total loss before income tax  (4,452,797)  (1,820,449)  (1,551,266)

Schedule of loss before Income Tax, Domestic and Foreign        
  March 31, 
  2022  2021 
   $   $ 
Loss before income taxes arising in UK  (11,716,916)  (5,030,204)
Loss before income taxes arising in U.S.  (2,520,145)  (1,564,224)
Total loss before income tax benefit  (14,237,061)  (6,594,428)

 

Reconciliation of our effective tax rate to the loss tocalculated at the statutory U.SU.S. federal tax rate is as follows:

 

Reconciliation of effective tax rate                
 Year Ended March 31, March 31, 
 2019 2018 2017 2022 2021 
 $   $   $    $       $     
Loss before income taxes  (4,452,797)      (1,820,449)      (1,551,266)      (14,237,061)      (6,594,428)    
Expected tax benefit  (935,000)  (21%)  (561,000)  (31%)  (527,000)  (34%)  (2,989,783)  (21%)  (1,384,830)  (21%)
Foreign tax differential  55,000   1%  36,000   2%  270,000   17%  234,338   2%  100,604   2%
Enhanced research and development  (297,000)  (7%)  (215,000)  (12%)  (198,000)  (13%)  (463,591)  (3%)  (259,861)  (4%)
Prior year true-up of NOL’s  2,401,930   17%  0     0  
Other  1,000   0%  35,000   2%  —     —     74,579   1%  20,226   0  
Change in valuation allowance  1,176,000   26%  705,000   39%  455,000   29%  742,527   5%  1,523,861   23%
R&D credit received  350,256   2%  335,832   5%
Actual income tax benefit  —     —     —     —     —     —     350,256   2%  335,832   5%
                

 

The tax effects of the temporary differences that give rise to significant portions of deferred income tax assets are presented below:

Schedule of deferred income tax assets        
 Year Ended March 31, March 31, 
 2019 2018 2022  2021 
 $ $   $   $ 
Net operating tax loss carried forwards  2,641,000   1,627,000 
Net operating tax loss carried forward  6,671,000   5,204,000 
Research and development enhancement  867,000   602,000   335,000   1,057,000 
Other items  (103,000)  —     (335,000)  (333,000)
Valuation allowance  (3,405,000)  (2,229,000)  (6,671,000)  (5,928,000)
        
Net deferred tax assets  —     —     0     0   

 

F-19 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the fiscal year ended March 31, 2022, the Company received $350,256 from HMRC (Her Majesty’s Revenue and Customs) in tax credits relating to the reimbursement of research and development expenses incurred during the fiscal year ended March 31, 2021. For the fiscal year ended March 31, 2021, the research and development tax credit received was $335,832, relating to expenses incurred for the fiscal year ended March 31, 2020. These amounts are reflected as a credit provision for income taxes in the Company’s consolidated statements of operations and comprehensive loss in the respective years received.

For each of the fiscal years ended March 31, 2019, 20182022 and 2017,2021, the Company did not have unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. Management does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

The Company mainly files income tax returns in the United StatesU.S. and the UK. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2015.2017.  The UK tax returns for the Company’s UK subsidiaries are open to examination by the UK tax authorities for the tax years beginning in April 1, 2013.2016.

As of March 31, 2019,2022, the Company has net operating losses (NOLs)(“NOLs”) of approximately $3.2 million$8,351,000 in the U.S. and $11.5 million$25,879,000 in the UK. NOLs may be carried forward indefinitely. Additionally, the Company has a research and development enhancement deduction carry forward of approximately $5.1 million$1,762,000 for purposes of UK income tax filings.

F-16 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS’ EQUITY

 

In November 2015,NOTE 11 – STOCKHOLDERS’ EQUITY

Shelf Registration Statement

The Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on March 24, 2022 (the “2022 Shelf Registration Statement”). The 2022 Shelf Registration Statement provides the Company issued 5 million shares ofwith the ability to issue common stock and warrantsother securities as described in the registration statement from time to purchase 10 million sharestime up to an aggregate amount of common stock for total proceeds of $10 million. The warrants are exercisable at $0.50 per share through to the fifth anniversary of the listing of the Company on a national exchange. The Company listed to the Nasdaq exchange on January 25, 2018.$224,634,031, dependent upon available shares.

Other equity transactions

On October 19, 2018,July 23, 2021, the Company entered into an Equity DistributionAt The Market Offering Agreement (the “Distribution Agreement”“2021 ATM”) with Maxim GroupH.C. Wainwright & Co., LLC as sales agent (“Maxim”(the “Agent”), pursuant to which the Company may offer and sell from time to time through Maxim (the “Offering”),to, at its option, up to $20,000,000 inan aggregate of $100 million of shares of its common stock. Shares sold under the 2021 ATM are issued pursuant to the Company’s 2019 Shelf Registration Statement and a prospectus supplement dated July 23, 2021.

The Company is required to pay the Agent a commission of 3% of the gross proceeds from the sale of shares and has also agreed to provide the Agent with customary indemnification rights. During the year ended March 31, 2022, the Company issued and sold 397,524 shares of its common stock (the “Shares”). Between October 31, 2018,at an average price of $4.07 per share under the 2021 ATM for aggregate net proceeds of $1.6 million after deducting commissions and offering expenses payable by the Company.

During the fourth quarter of the fiscal year ended March 31, 2019,2022, the Company issued 234,998was approached by Tiger Management L.L.C. (a vehicle for the family office of Julian H. Robertson) with a view to acquiring a direct stake in the Company. The Company agreed to sell 750,000 shares to Tiger Trading Partners L.L.C. (an affiliate undertaking) at a price of $4 per share and gross proceeds of $3 million; 50% of the shares being sold within the 2021 ATM facility noted above, and the remainder as a direct issuance which completed on February 10, 2022.

The Company commenced an offering of up to $20,000,000 worth of shares of its common stock throughon October 19, 2018. For the Distribution Agreement and receivedfiscal year ended March 31, 2021, a total of 408,718 shares were issued pursuant to the offering, generating gross proceeds of $455,105. $161,102$4,250,676 and costs of costs were incurred in relation to this transaction. As of$127,520. For the fiscal year ended March 31, 2019, the Company may sell, from time to time, the remaining $19,544,895 under the distribution agreement.

On December 18, 2018, the Company entered into a placement agency agreement with Dawson James Securities, Inc. with respect2022, no shares were issued pursuant to the issuance and sale of an aggregate of up to 2,400,000 units, each unit consisting of one share of common stock, par value $0.001 per share, together with one warrant to purchase one share of common stock at an exercise price equal to $1.04 per share, in a public offering. The warrants offered in the public offering will terminate on the fifth anniversary of the date of issuance. The public offering price for each unit was $1.04.

The closing ofas the offering occurred on December 20, 2018 and at such closing the Company sold 1,942,061 shares of common stock and 1,942,061 warrants for gross proceeds of $2,019,743. The net proceeds to the Company from the sale of the shares of common stock and the warrants was $1,691,541, after deducting $328,302 of placement agent commissions and other offering expenses payable by the Company. As at March 31, 2019 61,357 of the warrantsagreement had been exercised, generating $63,811terminated as of additional funds. At the end of March 31, 2019, there were 1,880,704 warrants outstanding.August 18, 2020.

EffectiveOn December 18, 2018, the Company issued a unit purchase option, to the placement agent to purchase 97,1039,710 shares and 97,103 warrants.9,710 warrants, to Dawson James Securities, Inc. The Company has classified this option as equity. The unit purchase option has a term of three years and an exercise price of $1.30.$13.00 per unit and can be exercised for a period of three years from 180 days following the date that the registration became effective.

On December 20, 2018, the Company sold 194,206 units, with each unit consisting of one share of common stock and one 5-year warrant to purchase one share of common stock at an exercise price of $10.40 per share, at a purchase price of $10.40 per unit, for gross proceeds of $2,019,743 and net proceeds to the Company of $1,691,541, after deducting $328,302 of placement agent commissions and other offering expenses. As of March 31, 2022, 58,569 of the warrants had been exercised, generating $609,118 of additional funds. At March 31, 2022, there were 135,753 warrants outstanding.

On July 30, 2020, the Company sold 1,586,206 shares of the Company’s common stock and warrants to purchase up to 793,103 shares of common stock. Each share of common stock and accompanying one-half of a warrant were sold for a combined purchase price of $7.25, for gross proceeds of $11.5 million and net proceeds to the Company of $10.7 million, after deducting placement agent fees and offering expenses. Each whole warrant is immediately exercisable at a price of $8.00 per share, subject to adjustment in certain circumstances, and will expire five years from the date of issuance. As of March 31, 2022, 58,569 of the warrants had been exercised, generating $2,846,064 of additional funds. At March 31, 2022, there were 437,345 warrants outstanding.

 

F-20 
F-17 
 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

 

Stock options

NEMAURA MEDICAL INC.On January 28, 2022, the Board of Directors granted to each of the directors, an option to purchase 8,000 shares of common stock at an exercise price of $3.98 per share, being the closing price of the Company’s common stock on the date of grant. The option was fully vested at grant and is exercisable for a period of five years from the date of grant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSThe following table provides a summary of the Options Award activity is presented below:

NOTE 10 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Schedule of stock options            
  Number of Options 

Weighted Average Exercise Price

$

 Weight Average remaining Contractual Term (years)
Balance at April 1, 2021  0     0       
Granted  40,000   3.98     
Exercised  0     0       
Forfeited  0     0       
Expired  0     0       
Balance at March 31, 2022  40,000   3.98   4.83 
 Vested and exercisable at March 31, 2022  40,000   3.98   4.83 

 

The following isfair value of stock options granted during the fiscal year ended March 31, 2022 was determined using a summary of consolidated quarterly financial information: Black-Scholes Option Pricing Model (there were no options granted as at April 1, 2021). The key assumptions for which have been set-out below:

Schedule of assumptions for stock options    
Stock Price $3.98 
Exercise Price $3.98 
Term  5 years 
Volatility  122.52%
Expected dividend yield (%)  0   
Discount Rate (Bond Equivalent Yield)  2.28%

NOTE 12 – OTHER ITEMS

(a)COVID-19 Pandemic

  Quarter Ended
2019 June 30 Sept. 30 Dec. 31 March 31
Total revenue $—    $—    $—    $—   
Loss from operations $(771,963) $(1,147,357) $(932,925) $(1,624,479)
Net loss $(763,154) $(1,139,275) $(925,889) $(1,624,479)
Basic and diluted loss per share $(0.01) $(0.01) $*  $(0.01)
Weighted average number of shares outstanding  105,821,556   205,003,261   205,407,088   207,561,482 

The outbreak of COVID-19 originating in Wuhan, China, in December 2019 has since rapidly increased its exposure globally. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. We continue to monitor the global outbreak of COVID-19 and are working with our employees, suppliers and other stakeholders to mitigate the risks posed by its spread, COVID-19 is not expected to have any long-term detrimental effect on the Company’s success. While key suppliers have not been accessible throughout the whole period of the outbreak, we have, to date, been able to be flexible in our priorities and respond favorably to the challenges faced during the outbreak. We have also seen a surge in the uptake of technologies for remote and patient self-monitoring, which therefore potentially enhances the prospects for the likes of the Company and its CGM product and planned digital healthcare offering.

F-18 

NEMAURA MEDICAL INC.
Notes to Consolidated Financial Statements

 

  Quarter Ended
2018 June 30 Sept. 30 Dec. 31 March 31
Total revenue $—    $—    $—    $—   
Loss from operations $(417,320) $(447,516) $(476,353) $(567,776)
Net loss $(407,787) $(393,031) $(466,365) $(553,266)
Basic and diluted loss per share $*  $*  $*  $* 
Weighted average number of shares outstanding  205,000,000   205,000,000   121,411,478   150,070,400 
                 

Whilst restrictions associated with COVID-19 have largely been removed in our operational locations, we will continue to assess the situation, including abiding by any government-imposed restrictions, as and where relevant.

(b)Investor relations agreements

  Quarter Ended
2017 June 30 Sept. 30 Dec. 31 March 31
Total revenue $—    $—    $—    $—   
Loss from operations $(494,183) $(322,482) $(375,366) $(359,235)
Net loss $(494,183) $(322,482) $(375,366) $(359,235)
Basic and diluted loss per share $*  $*  $*  $* 
Weighted average number of shares outstanding  205,000,000   205,000,000   205,000,000   205,000,000 
                 

* less than $0.01

NOTE 11 – OTHER ITEMS

(a)Investor relations agreements

The Company currently has entered into contracts with several investor relations specialists to help support the ongoing financing activities of the business.

During the fiscal year ended March 31, 2022, the Company extended the contractual agreement that it had entered into in the year ended March 31, 2021, into a rolling monthly agreement, compensation for which was settled in cash. Stock-based compensation of $50,000 was expensed during the current year end, all of which related to the previous agreement terms.

On June 27, 2018,During the fiscal year ended March 31, 2021, the Company entered into a Master Services Agreementcontractual agreement with a new investor relations company, 1, pursuant tothe term of which for an initial three month term,was set at 12 months with the third party shall provide services related to advisingcompensation being paid via a mixture of cash and assisting the Company in developing and implementing appropriate plans and materials for presenting the Company and its business plans, strategy and personnel to the financial community, introducing the Company to the financial community through the use of social media, digital media and other online awareness campaigns. The aggregate fees in the amount of $160,000 are payable to the third party during the initial three-month term. On July 23, 2018 the Board of Directors approved the issuance of a warrant to the third party exercisable for 75,000 shares of common stock at an exercise price of $0.01 per share. As of September 30, 2018, the Company recognized $114,500 ofstock. Total stock-based compensation expense related tofor the 50,000 warrants that had vested as of that date based on a fair value of $2.29 per warrant. On October 9, 2018, 50,000 shares of common stock were issued to the third party, as a result of the third party’s exercise of 50,000 warrants on September 24, 2018. Atyear ended March 31, 2019, all liabilities for share based compensation were considered fully settled. It was agreed by both parties that there is no further obligation to issue the remaining 25,000 warrants.

F-21 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 31, 2018, the Company entered into an agreement to receive investor relations services from investor relations company 2. The term of the agreement was 1 year, although cancellable after 3 months if certain performance-based conditions are not met, including if the share trade volumes fail to meet an average of 100,000 shares per day minimum. Compensation is partly in cash and partly in restricted stock, 40,000 shares of restricted stock due on the 3-month anniversary and the final 40,000 due on the one-year anniversary, provided performance conditions are met as per the agreement. On November 30, 2018, 20,000 shares of common stock were issued to investor relations company 2 in compensation for services performed over the previous 3 months. A fair value of $1.90 was established based on the closing price of the common stock on November 30, 2018 and $38,000 was expensed. This fulfilled all liabilities2021, in relation to this was $50,000. In addition to this, $59,000 was paid by way of stock-based compensation to two additional investor relations companies, whose services were terminated during the year.

NOTE 13 – Subsequent Events

At The Market Offering

The At The Market Offering Agreement, or the sales agreement, and as of November 30, 2018 the agreement was terminated.

On December 1, 2018 a new agreementthat was entered into with H.C. Wainwright & Co., LLC, or the sales agent or Wainwright, dated as of July 23, 2021 was amended as of April 1, 2022, relating to receive investor relations services from investor relations company 2. The termthe offer and sale of shares of our common stock. In accordance with the terms of the sales agreement, is 1 year, although cancellable at the endwe may offer and sell up to a maximum aggregate amount of each three-month period if certain performance obligations are not met, including if the share trade volumes fail$3,000,000 (as opposed to meet an average of 100,000 shares per day minimum. Compensation is partly in cash and partly in restricted stock. A cash payment of $22,500 will be made at the beginning of each quarter and 12,500$100,000,000) shares of restrictedour common stock will be issued atfrom time to time through the end of each quarter dependent on the performance obligations being met.sales agent.

Note Purchase Agreement

On March 1, 2019, the existing agreement with investor relations company 2 was cancelled and replaced with a rolling monthly contract. At this point it was agreed that there was no obligation to issue the 12,500 shares that were part of the compensation for the December 1, 2018 contract. Compensation for the new agreement is a rolling contract in the form of a $5,000 payment made at the beginning of each month. There is no stock based compensation included in this agreement.

On December 11, 2018 the Company entered into an agreement to receive investor relations services from investor relations company 3. The term of this agreement is 3 months. Compensation is partly in cash and partly in restricted common stock. At the beginning of each month a cash payment of $10,000 will be made and 15,000 shares of restricted stock will be issued. As a result of this agreement a total of 45,000 shares were issued with an average fair value of $1.05, $47,400 was expensed in relation to this agreement.

On March 18, 2019 the Company cancelled its existing agreement and entered into a new agreement with investor relations company 3. The term of this contract has been agreed to be on a month to month basis. Compensation is partly in cash and partly in restricted common stock. At the beginning of each monthly term a cash payment of $5,000 will be made and 7,500 shares of restricted stock will be issued. At March 31, 2019 7,500 shares had been issued in relation to this contract. A fair value of $1.03 with a total value of $7,725, $3,240 of this cost has been treated as a prepayment as the contract length spans the month end.

(b)Management Consulting Agreement

On December 3, 2018, the Company entered into an agreement to receive management consulting advice from management consulting company 1. The term of this agreement is 12 months but is cancellable prior to this date on written notice to the other party. Compensation is partly in cash and partly in restricted stock. A cash payment of $25,000 together with the issuance of 12,500 shares of restricted common stock was made at the inception of the agreement and will be made at the beginning of each subsequent quarter. A fair value of $1.90 was established for the shares issued in December based on the closing price of common stock on December 3, 2018 with a total of $23,750 being expensed. A fair value of $1.14 was established for the shares issued on March 2019, based on the closing price of common stock on March 4, 2019. $9,500 of the total $14,250 expense was treated as a pre-payment as of March 31, 2019.

F-22 

NEMAURA MEDICAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 4, 2019, the Company signed an addendum to the contract with management consulting company 1. This extended the range of services from this company. Compensation for the initial 120-day period will be in the form of a cash payment of $20,000 and the issuance of 20,000 restricted shares of common stock. Compensation for subsequent 90-day periods will be comprised of a cash payment of $15,000 and the issuance of 15,000 restricted shares of common stock. The contract is on a rolling 90-day period and can be cancelled at the end of each three-month period and at the end of the initial 120-day period. A fair value of $1.11 was established based on the closing price of common stock on February 4, 2019. $11,100 of the total $22,200 expense was treated as a pre-payment as of March 31, 2019.

On January 7, 2019May 20, 2022, the Company entered into a six-month contractnew note purchase agreement (“Note Purchase Agreement 3”) by and among the Company, DDL, TCL and a third-party investor.

Pursuant to the terms of the Note Purchase Agreement 3, the Company agreed to issue and sell to the Investor and the Investor agreed to purchase from the Company a secured promissory note (the “Secured Note”) in the original principal amount of $6,015,000. In consideration thereof, on May 20, 2022 (the closing date), (i) the Investor paid $5,000,000 in cash, and (ii) the Company delivered the Secured Note on behalf of the Company, to the Investor, against delivery of the Purchase Price. For these purposes, the “Purchase Price” means the Investor’s initial cash purchase price.

The Secured Note is secured by the Collateral (as hereinafter defined). The Secured Note carries an original issue discount (“OID”) of $1,000,000 (16.7%). In addition, the Company agreed to pay $15,000 to the Investor to cover the Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with management consulting company 2the purchase and sale of the Secured Note (the “Transaction Expense Amount”). In addition to this, a payment of $300,000 was made to Ascendiant Capital Markets, LLC, (the “Commission”) for structuring the agreement between both parties. The Purchase Price for the provisionSecured Note is $4,700,000, computed as follows: $6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.

The borrowing period is 24 months, and the Company shall pay the outstanding balance and all fees on maturity. A monitoring fee equal to 0.833% of specialist consulting services. Compensation is wholly through the issueoutstanding balance will automatically be added to the outstanding balance on the first day of 250,000 restricted shares of common stock whicheach month. The debt less the discount and transaction expenses will be issued on commencementaccreted over the term of the contractNote using the effective interest method.

Security Agreement

On May 20, 2022, the Company entered into the Security Agreement by the Company, DDL and 150,000 additional restricted shares which will be issued on the fourth month after commencementTCL, in favor of the contract. If the contract has been terminated priorInvestor (the “Security Agreement”). Pursuant to the fourth month, the additional restricted shares will not be payable. A fair value of was based on the closing price of common stock on January 7, 2019, of $0.99 per common share. $61,875terms of the total $247,500 expense was treated as a pre-payment at March 31, 2019.

During the year ended March 31, 2019,Security Agreement, the Company issuedgranted the Investor a totalfirst-priority security interest in all rights, title, interest, claims and demands of 367,500 restricted common sharesthe Company in and warrants to purchase 50,000 common sharesall of the Company’s patents and all other proprietary rights, and all rights corresponding to investor relationsthe Company’s patents throughout the world, now owned and management consultants. The equity instruments were valued at $515,325 of which $429,610 was expensedexisting, and $85,715 is included in prepaid expenses as at March 31, 2019.all replacements, proceeds, products, and accessions thereof.

F-23 

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Dr. Dewan F.H. Chowdhury, our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of ourWe have established disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a companythe Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controlsforms of the Securities and procedures include, without limitation, controlsExchange Commission and procedures designed to ensure that such information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to a company'sthe officers who certify the Company's financial reports and to other members of senior management including its principal executive and principal financial officers,the Board of Directors as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures no matter how well designed(as defined in Rules 13a-15(e) and operated, can provide only reasonable assurance15d-15(e) under the Exchange Act) as of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.March 31, 2022. Based on thistheir evaluation, managementthe Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2019, at the reasonable assurance level due to a material weakness in our internal control over financial reporting, which is described below.2022.

Management’sManagement's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act Rule 13a-15(f).of 1934. Our internal control systemover financial reporting is a process designed by, or under the supervision of our principal executivethe Chief Executive Officer and principal financial officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel,Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with the authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

principles. Because of ourits inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our internal control over financial reporting includes those policies and procedures that:

1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company;

2. Provide reasonable assurance that the transaction is recorded as necessary to permit preparation of consolidated financial

statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Management, assessedincluding our Chief Executive Officer and Chief Financial Officer conducted an evaluation, as of March 31, 2022, of the design and effectiveness of our internal control over financial reporting as of March 31, 2019. In making this assessment we usedbased on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Integrated Framework (2013). As a result of its assessment, management identified material weaknesses inCommission. Based on this evaluation our internal control over financial reporting. During fiscal year 2019, significant work has been done to address these weaknesses, but this is not yet fully complete and further formal testing is planned for later in 2019. On this basis, management concluded that our internal control over financial reporting was not effective as of March 31, 2019.2022.

Since we are a smaller reporting company, this Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies,Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting such(as defined in Rule 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended) during the quarter ended March 31, 2022, that there is a reasonable possibility that a material misstatement ofmaterially affected, or are reasonably likely to materially affect, our annual or interim financial statements will not be prevented or detected on a timely basis. The summary below details the material weaknesses in internal control that were identified over financial reporting due to lack of formal testing are still deemed to be in place as of March 31, 2019.

reporting.

37 
33 
 

· Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. This has resulted in a number of internal control deficiencies. Specifically,

there is a lack of segregation of duties in the processing of financial transactions which could result in inappropriate initiation, processing and review of transactions and the financial reporting of such transactions whether due to errors or fraud;
there is a lack of review and approval of journal entries which could result in the improper initiation and reporting of transactions; and
there is a lack of access controls and documentation over the Company’s IT applications which could result in the improper initiation and reporting of significant transactions.

· Management has identified that there is a lack of adequate financial expertise related to the assessment of complex transactions and a lack of adequate resources to review out of the ordinary transactions and arrangements of the Company. This could result in the improper reporting of significant transactions or arrangements.

· Related party transactions. Specifically, there are limited policies and procedures to ensure that financial statement disclosures reconcile fully to the underlying accounting records and that Board approval of these transactions is not documented.

In addition, during the three-month period September 30, 2018, material weaknesses were identified for the accounting and reporting in the following complex areas:

-Deferred offering costs and cutoff for accrued expenses were not properly accounted for.
-Stock based compensation was not properly accounted for.
-Preparation of condensed consolidated financial statements.

The material weaknesses that occurred in the three-month period ended September 30, 2018 related to complex accounting issues and supported the view that there is a lack of adequate financial expertise related to the assessment of complex transactions and a lack of adequate resources to review out of the ordinary transactions and arrangements of the Company.

Since the September 2018 quarter end the Company has enhanced the quarterly financial reporting process by taking the following actions:

External advice from a specialized third-party provider has been sought to provide technical guidance on accounting for December 2018 Public offering and related costs.
Additional training for accounting personnel on the proper accounting and reporting for stock-based compensation and complex equity transactions.
The month end process has been enhanced and additional controls such as full balance sheet reconciliations have been implemented.
In addition, the increased size of the finance team has enabled and increased level of segregation of duties and enhanced opportunity for review.

Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

38 

Remediation of Material Weaknesses

We are in the process of implementing improvements and remedial measures in response to the material weaknesses. During fiscal year 2019, we have continued to engage with a third-party consulting firm to help us to assess our current internal controls over financial reporting against COSO 2013. They have completed specific gap analysis, suggested improvements in controls, and assisted us in testing our control systems. They have completed specific testing of our IT general controls, purchasing processes, payment processes and month end closing procedures. Their recommendations have led to a number of the actions below, and we will continue to work with them through fiscal year 2020 to complete formal testing of the revised procedures. Key actions taken in fiscal year 2019 to remediate the identified weaknesses are detailed below:

The Company has increased the size of the finance function and restructured responsibilities to ensure greater segregation of duties within the purchase to pay process.

Greater visibility of bank transactions and enhanced use of the accounting system are allowing more accurate and efficient debt management.

The addition of an assistant management accountant in October 2018, allows better segregation of duties within the month end process.

Balance sheets are reconciled on a monthly basis to ensure controls are working correctly.

The Company continues to look at the development of the existing accounting system.

IT processes have been strengthened and controls implemented around user access and systems installation.

An engagement letter has been signed with a specialized third-party provider for the provision of technical guidance on accounting for specialized transactions such as the December 2018 Public offering and related costs.

During this financial year, the Company has strengthened internal controls over related party transactions by putting in place a service contract between Nemaura Pharma and the Company. All costs are now invoiced between the two parties on a monthly basis, and outstanding balances are reported as a disclosure in the quarterly reporting.

Continuing to develop and formalize the activities of the audit committee. The committee will be helped by an outsourced internal audit department to review our internal control processes, policies and procedures to ensure compliance with the Sarbanes-Oxley Act of 2002.

In order to build on the work done in fiscal year 2019, in fiscal year 2020 we intend to take the following actions:

-Assembling a team from our finance department to be responsible for the preparation of financial statements under U.S. securities laws, including hiring additional qualified personnel such as a CFO with US listed company experience.

The Company intends to continue to strengthen controls through enhanced use of our accounting system and further strengthening of standard processes and procedures.

Requiring our finance personnel to participate in regular US GAAP training courses;

Continued testing of the operating effectiveness of the controls that have been identified and implemented in order to prevent misstatement of the financial statements. In addition, the Company will focus on the design and implementation of Key Performance Indicators (KPIs) to measure the quality of the processes in place, and the efficiency of the controls.

As the SugarBeat product reaches the commercialization stage, new processes such as stock management and revenue recognition will come into scope. We intend to take external advice as required to ensure that processes implemented are sufficient to ensure compliance with the Sarbanes-Oxley Act of 2002.

 

ITEM 9B. OTHER INFORMATION.

On May 20, 2022, the Company entered into a new note purchase agreement (“note Purchase Agreement 3”) by and among the Company, DDL, TCL and a third-party investor.

Pursuant to the terms of the Note Purchase Agreement, the Company agreed to issue and sell to the Investor and the Investor agreed to purchase from the Company a secured promissory note (the “Secured Note”) in the original principal amount of $6,015,000. In consideration thereof, on May 20, 2023 (the closing date), (i) the Investor paid $5,000,000 in cash, and (ii) the Company delivered the Secured Note on behalf of the Company, to the Investor, against delivery of the Purchase Price. For these purposes, the “Purchase Price” means the Investor’s initial cash purchase price.

The Secured Note is secured by the Collateral (as hereinafter defined). The Secured Note carries an original issue discount (“OID”) of $1,000,000 (16.7%). In addition, the Company agreed to pay $15,000 to the Investor to cover the Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Secured Note (the “Transaction Expense Amount”). In addition to this, a payment of $300,000 was made to Ascendiant Capital Markets, LLC, (the “Commission”) for structuring the agreement between both parties. The Purchase Price for the Secured Note is $4,700,000, computed as follows: $6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.

The borrowing period is 24 months, and the Company shall pay the outstanding balance and all fees on maturity. A monitoring fee equal to 0.833% of the outstanding balance will automatically be added to the outstanding balance on the first day of each month. The debt less the discount and transaction expenses will be accreted over the term of the Note using the effective interest method.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

 

None.

 

 

38 
34 
 

 

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following persons are our executive officers and directors, and hold the positions set forth opposite their respective names as of the date hereof.

Name Age Position Date of Appointment
Dewan Fazlul Hoque Chowdhury  4649  Chief Executive Officer, Interim Chief Financial Officer, President and Director  December 24, 2013
Justin Mclarney50Chief Financial OfficerSeptember 15, 2020
Arash Ghadar45Chief Operating OfficerJanuary 5, 2022 
Bashir Timol  4447  Director,

Chief Business Officer
  December 24, 2013

April 9, 2018
 
Thomas Moore58Independent DirectorAugust 3, 2017
Dr. Salim Natha  55  Independent Director  August 3,July 26, 2017 
Dr. Salim NathaTimothy Johnson  5238  Independent Director  July 26, 2017
Timothy Johnson35Independent DirectorJuly 17, 2017 

 

Our directors hold office until the earlier of their death, resignation, or removal or until their successors have been qualified.

Dewan Fazlul Hoque Chowdhury. Dr. D.F.D.F.H. Chowdhury has been our President, Chief Executive Officer and a member of our board of directors since ourthe incorporation of DDL on January 20, 2009. Dr. D.F. Chowdhury is also currently acting as interim Chief Financial Officer. He is in charge of research and development of our core technologies, product development, innovation and commercialization. He also coordinates and oversees legal compliance; development of the company mission; policy and planning. Prior to establishing the Company, Dr. D.F.D.F.H. Chowdhury was the founder and CEO of Microneedle Technologies and Nemaura Pharma Limited where he played a pivotal role in the development, manufacture and launch of a microneedle device used in skin clinics, which is also currently being evaluated for skin cancer drug delivery.Limited. Dr. D.F.D.F.H. Chowdhury has been responsible for negotiating licensing deals for a transdermal patch to treat Alzheimer’s disease. Additionally, he wasis involved in commercial negotiations for out-licensing patches to treat Parkinson’s and Hypertension, and in-licensing complementary technologies.

global strategy development.

Dr. D.F.D.F.H. Chowdhury originally trained as a pharmaceutical scientist and has an MSc in Microsystems and Nanotechnology from Cranfield University, and a Doctorate from the University of Oxford on nano-drug delivery. His experience in the Pharmaceutical Industry includes product development; manufacturing; and technical and corporate management.

Justin Mclarney. Mr. Mclarney joined the business as Chief Financial Officer in September 2020, having over 20 years’ experience in corporate and international financial management, accounting, and process development and control. He has a strong track record of driving profitable growth across businesses encompassing ecommerce, retail, logistics and supply chain operations at an international level. Mr. Mclarney has held various Senior Finance & Operational roles, including most recently the position of Senior Director, International Finance at Lands’ End Inc. from January 2016 to June 2020 where he was responsible for all Finance teams across the European and Japanese business units. From February 2007 to September 2015, Mr. Mclarney worked for Office Depot in a range of increasingly senior roles culminating in the Senior Director of Finance for the European Contract business. Prior to this, he spent over 10 years in practice, the final 7 years of which was with Ernst & Young LLP. Before transitioning to become a qualified Chartered Accountant, Mr. Mclarney studied Law and obtained his Legal Practice Certificate.

Arash Ghadar. Dr Ghadar joined the business as Chief Operating Officer on January 5, 2022, prior to joining Nemaura, Dr. Ghadar spent a decade as the Technical Director of Datalink Electronics (Datalink) in Loughborough, England where he managed the design team as an autonomous entity within Datalink. He was responsible for management of the day-to-day operations, business planning, legal affairs, finance, sales, and business development of the design team. In this role, he also oversaw numerous technical projects for healthcare and industrial customers that included product development lifecycle, feasibility studies, design, development, prototyping, validation, certification, quality management, and volume manufacturing.

Dr. Ghadar is also currently a non-executive director at Medilink Midlands, the Midlands (England) Life Sciences industry association with a vision to stimulate the growth of the Midlands life science sector. He has a BSc Degree and Masters in Electronics and Control Systems Engineering, where he achieved a First Class degree and Distinction respectively, and he also has a Ph.D. in Biosensors from the University of Warwick (U.K.).

Bashir Timol. Mr. Timol has been a Director sinceserved as member of the board of Nemaura Medical Inc. was organized onsince formation in December 24, 2013. He has been a director of Dermal Diagnostics Limited from October 30, 2013. On April 9, 2018 Mr Timol was appointed toco-founded, managed, and funded several biotech and life science companies, and led the role of Chief Business Officer.investment consortium that provided capital for the initial two funding rounds for Nemaura Medical. Mr. Timol possesses over 10 years’ experience in food and beverage, franchise, and logistic operations.  His experience includes constructing sales contracts and having the responsibility for overseeing the key managers in the operationobtained his Bachelor of a large scale retail food chain.  He has experience as an entrepreneur investing in and operating a number of retail food chains in the UK, including DIXY Chicken and Costa Coffee.  Prior to joining Nemaura Mr. Timol has been employed as a director at SABT 1 Ltd. since March of 2009 and One-E Group since January of 2007.  Mr. Timol holds a bachelorArts degree in Economics from the University of Central Lancashire, UK.

Timothy Johnson. Mr. Johnson was elected as a director in July 2017. He is currently serving in executive positions in Diagnostax advisory, EQIQ. Mr. Johnson received his first class Mastersseveral tax consultancy and accountancy businesses in the UK. He is a practicing Chartered Tax Adviser and holds a first-class Master of Science in Mathematics and Physics from the University of Manchester, UK. Mr Johnson’s work involves in depth review and analysis of financial statements on a daily basis, and he has significant experience in matters relating to financial accounts, tax, financial management, financial regulatory requirements and anti-money laundering requirements.

35 

Thomas Moore. Mr. Moore was elected as a director in August 2017. He is currently working as a director, tax consultant and co-owner of a tax consultancy and pensions administration business (WestBridge), having built up three decades of experience in accounting and consulting fields at leading accounting firms including Grant Thornton, KPMG and PricewaterhouseCoopers. Throughout the last five years, Mr Moore has held his current role with WestBridge since May 2017 and before that was a Director with Grant Thornton UK PLC. He is a practicing Chartered Tax Adviser and earned his first-class Bachelor of Arts in French and Russian from the University of Northumbria, UK. The qualifications Mr Moore brings to the role include a wealth of experience in matters relating to accounts, financial management and financial regulatory requirements including his current experience as an MLRO in two companies.

Dr. Salim Natha.Dr. Natha was elected as a director in July 2017. He is currently practicing as an Eye Surgeon in the UK National Health Service (NHS), and is the clinical lead for a retinopathy screening program for over 20,000 diabetics in the Ashton, Wigan and Leigh region. He has published several articles in the medical literature and is a peer reviewer for the English National Diabetic Retinopathy Screening Program. Dr. Natha graduated with honorshonours from the University of Liverpool Medical School.

Thomas Moore.Mr. Moore was elected as a director in August 2017. He is currently working as a management consultant, having built up three decades of experience in accounting and consulting fields at leading accounting firms including Grant Thornton, KPMG and PricewaterhouseCoopers. He is a practicing Chartered Tax Adviser and earned his first class Bachelor of Arts in French and Russian from the University of Northumbria, UK.

39 

Family Relationships

There are no family relationships between any of our directors or executive officers.

Involvement in Certain Legal Proceedings.

None.

Board of Directors

All directors hold office until the next Annual Meeting of shareholders and until their successors have been duly elected and qualified. Directors are elected at the annual meetings to serve for one-year terms. Officers are elected by, and serve at the discretion of, the Board of Directors. Our Board of Directors shall hold meetings on at least a quarterly basis.

The Board of Directors complies with the NASDAQ Listing Rules with respect to corporate governance matters. Under the NASDAQ rules we are required to maintain a board of directors comprised of at least 50% independent directors, and an audit committee of at least two members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange Act of 1934.

Director Independence

The board of directors has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board of directors determined that each of Thomas Moore, Dr. Salim Natha and Timothy Johnson are independent within the meaning of the NASDAQ rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet on a regular basis as often as necessary to fulfil their responsibilities, including at least annually in executive session without the presence of non-independent directors and management.

Board Committees

Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our board of directors has adopted written charters for each of these committees. Copies of the charters are available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

Our Audit Committee was established on July 26, 2017 and is comprised of our independent directors: Thomas Moore, Dr. Salim Natha and Timothy Johnson. Mr. Johnson qualifies as the Audit Committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.

According to its charter, the Audit Committee consists of at least three members, each of whom shall be a non-employee director who has been determined by the Board to meet the independence requirements of NASDAQ, and also Rule 10A-3(b)(1) of the SEC, subject to the exemptions provided in Rule 10A-3(c). The Audit Committee Charter describes the primary functions of the Audit Committee, including the following:

Oversee the Company’s accounting and financial reporting processes;

Oversee audits of the Company’s consolidated financial statements;

Discuss policies with respect to risk assessment and risk management, and discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;

 

 

40 

Review and discuss with management the Company’s audited consolidated financial statements and review with management and the Company’s independent registered public accounting firm the Company’s consolidated financial statements prior to the filing with the SEC of any report containing such consolidated financial statements.

Recommend to the board that the Company’s audited consolidated financial statements be included in its annual report on Form 10-K for the last fiscal year;

Meet separately, periodically, with management, with the Company’s internal auditors (or other personnel responsible for the internal audit function) and with the Company’s independent registered public accounting firm;

Be directly responsible for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged to prepare or issue an audit report for the Company;

Take, or recommend that the board take, appropriate action to oversee and ensure the independence of the Company’s independent registered public accounting firm; and

Review major changes to the Company’s auditing and accounting principles and practices as suggested by the Company’s independent registered public accounting firm, internal auditors or management.

Compensation Committee

The Compensation Committee is responsible for, among other matters:

reviewing and approving, or recommending to the board of directors to approve the compensation of our CEO and other executive officers and directors reviewing key employee compensation goals, policies, plans and programs;

administering incentive and equity-based compensation;

reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and

appointing and overseeing any compensation consultants or advisors.

Our Compensation Committee was established on July 26, 2017, and currently consists of Thomas Moore, Dr. Salim Natha and Timothy Johnson. Dr. Salim Natha serves as chair of the Compensation Committee.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee is responsible for, among other matters:

selecting or recommending for selection candidates for directorships;

evaluating the independence of directors and director nominees;

reviewing and making recommendations regarding the structure and composition of our board and the board committees;

developing and recommending to the board corporate governance principles and practices;

reviewing and monitoring the Company’s Code of Ethics; and

overseeing the evaluation of the Company’s management.

Our Corporate Governance and Nominating Committee was established on July 26, 2017, and currently consists of Thomas Moore, Dr. Salim Natha and Timothy Johnson. Mr. Johnson serves as chair of the Corporate Governance and Nominating Committee.

41 

Material Changes to Procedures by which Security Holders May Recommend Board Nominees

We do not currently have a procedure by which security holders may recommend nominees to the Board. Prior to the listing of our common stock on NASDAQ, as a private company with a limited shareholder base, we did not believe that it was important to provide such a procedure. However, as a publicly traded NASDAQ company with the requirement to hold annual shareholder meetings, we will consider implementing such a policy in the future.

None.

37 

The Board does not have a formal policy on Board candidate qualifications. The Board may consider those factors it deems appropriate in evaluating director nominees made either by the Board or stockholders, including judgment, skill, strength of character, experience with businesses and organizations comparable in size or scope to the Company, experience and skill relative to other Board members, and specialized knowledge or experience. Depending upon the current needs of the Board, certain factors may be weighed more or less heavily. In considering candidates for the Board, the directors evaluate the entirety of each candidate’s credentials and do not have any specific minimum qualifications that must be met. The directors will consider candidates from any reasonable source, including current Board members, stockholders, professional search firms or other persons. The directors will not evaluate candidates differently based on who has made the recommendation.

Board Leadership Structure and Role in Risk Oversight

Dr. Chowdhury holds the positions of chief executive officer, interim chief financial officer, and chairman of the board of the Company. Prior to the appointment of Mr. Justin Mclarney to the role of chief financial officer as of September 15, 2020, Dr. Chowdhury also acted as interim chief financial officer. The board believes that Dr. Chowdhury’s services as both chief executive officer and chairman of the board and interim Chief Financial Officer is in the best interest of the Company and its shareholders. Dr. Chowdhury possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company in its business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters relating to the business of the Company. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareholders, employees and customers.

The board has not designated a lead director. Given the limited number of directors comprising the Board, the independent directors call and plan their executive sessions collaboratively and, between meetings of the Board, communicate with management and one another directly. Under these circumstances, the directors believe designating a lead director to take on responsibility for functions in which they all currently participate might detract from rather than enhance performance of their responsibilities as directors.

Management is responsible for assessing and managing risk, subject to oversight by the board of directors. The board oversees our risk management policies and risk appetite, including operational risks and risks relating to our business strategy and transactions. Various committees of the board assist the board in this oversight responsibility in their respective areas of expertise.

The Audit Committee assists the board with the oversight of our financial reporting, independent auditors, and internal controls. It is charged with identifying any flaws in business management and recommending remedies, detecting fraud risks and implementing anti-fraud measures. The audit committee further discusses Nemaura’s policies with respect to risk assessment and management with respect to financial reporting.

The Compensation Committee oversees compensation, retention, succession and other human resources-related issues and risks.

The Corporate Governance and Nominating Committee overviews risks relating to our governance policies and initiatives.

 

Delinquent Section 16(a) Reports

To the Company's knowledge, based solely on a review of copies of such reports furnished to the Company during and/or with respect to year ended March 31, 2019, the Company is not aware of any delinquent filings required under Section 16(a) of the Exchange Act.

Code of Ethics

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer and other persons performing similar functions. A copy of our Code of Ethics is available on our website. We intend to post amendments to, or waivers from a provision of, our Code of Ethics that apply to our principal executive officer, principal financial officer or persons performing similar functions on our website.

42 

ITEM 11. EXECUTIVE COMPENSATION.

2022 Summary Compensation Table

This table provides disclosure, for fiscal years 20192022 and 2018,2021, of the compensation paid to our named executive officers.

Named Executive Officer
and Principal Position
 Year Salary Bonus Stock Awards Option Awards All Other Compensation Total
    $ $ $ $ $ $
Dr. D.F.H. Chowdhury, Chief Executive Officer and President 2022   109,416   —     —     26,706(1) 3,849   139,971 
 2021   104,840   —     —     —     3.368   108.208 
Justin McLarney
Chief Financial Officer (2)
 2022   256,444(3)  —     —     —     2,498   258,942 
 2021   67,107   —     —     —     1,162   68,269 

Named Executive Officer
and Principal Position
 Year Salary Bonus All Other Compensation Total
    $ $ $ $
Dr. D.F.H. Chowdhury Chief Executive Officer (Principal Executive Officer) Interim Chief Financial Officer (Interim Principal Financial and Accounting Officer)
  2019   104,208   —     1,050   105,208 
  2018   106,440   —     390   106,830 
                     
Iain Anderson
Chief Financial Officer (Principal Financial Officer)*
  2019   52,178   —     737   52,915 
  2018   57,938   —     297   58,235 
(1)On January 28, 2022, in compensation for Dr. Chowdhury’s service as a director, the Company’s Board of Directors granted to Dr. Chowdhury an option to purchase 8,000 shares of common stock at an exercise price of $3.98 per share, the closing price of the Company’s common stock on the date of grant. The option was fully vested at grant and is exercisable for a period of five years from the date of grant. The fair value attributed to the options has been calculated using a Black-Scholes Option Pricing Model.
(2)Mr. Mclarney was appointed Chief Financial Officer of the Company on September 15, 2020. Prior to Mr. Mclarney’s appointment, Dr. Chowdhury acted as Interim Chief Financial Officer.
(3)Of this amount, $169,055 was paid in cash, and $87,389 was paid in stock. At Mr. Mclarney’s election, a portion of his base salary was paid in stock. Accordingly, on January 31, 2022, Mr. Mclarney received 22,293 shares at the market price of $3.92.

* Mr. Anderson resigned effective immediately on February 8, 2019.

Dr. D.F.D.F.H. Chowdhury

We entered into an employment agreement with Dr. D.F.D.F.H. Chowdhury on November 2, 2013. Dr. D.F.D.F.H. Chowdhury’s contract is for an unspecified period. He may leave the Company with notice, or the Company may terminate his contract with notice. Termination may be with or without cause. Dr. D.F.D.F.H. Chowdhury receives an annual salary of £80,000 pounds sterling or $104,000 USD.(approximately $109,000). Our contract with Dr. D.F.D.F.H. Chowdhury does not include any provision for stock options or equity incentives.

Under the executive employment agreement Dr. D.F.D.F.H. Chowdhury’s annual salary was adjusted on a pro rata basis to reflect only work that was performed for Nemaura Medical Inc. The disclosure set forth in the table reflects his pro rata compensation from April 1, 2017 throughfor the periods ending March 31, 2019.2022 and March 31, 2021, respectively.

Mr. AndersonMcLarney

We did not have a writtenentered into an employment contractagreement with our Chief Financial Officer, Iain Anderson.Mr. Justin Mclarney on September 15, 2020. Mr Anderson hadMclarney’s contract is for an unspecified period. He may leave the Company with notice, or the Company may terminate his contract with notice. Termination may be with or without cause. Mr Mclarney receives an annual base salary of £100,000£90,000 pounds sterling (approximately $143,000)$123,000). These amounts have been prorated for the 2018 and 2019 fiscal years based on actual time working for the Company. Our contractcontractual arrangements with Mr. Anderson did not include any provisionMr Mclarney allow for stock options, and equity or equity incentives. Mr. Anderson resigned from his position as Chief Financial Officer on February 8, 2019 and left the company with immediate effect.cash incentives to be provided upon certain conditions having been met.

Outstanding Equity Awards for 2019fiscal year ended March 31, 2022.

The table below sets forth the outstanding option awards for the named executive officers, as of March 31, 2022; there were no outstanding stock awards as of this date:

  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

  

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

  

 

 

Option

Exercise

Price 

($)

  

 

 

Option

Expiration

Date

 Dr. D.F.H. Chowdhury
  8,000   —     3.98   January 28, 2027

 

We have not currently granted any stock based compensation to employees of the Company.

Potential payments upon termination or change-in-control.

None.

None. Upon termination by us or Dr D.F.H.. Chowdhury, officers shall only be entitled to receive their base salary through the date of termination.

43 

Director Compensation

Each of our independent directors receivereceived annual fees of £5,000 pounds sterling or $6,513 USD(approximately $6,838) for the year ended March 31, 2022, for their service on our board of directors and committees. We currently have no plan for compensating our executive directors for their services in their capacity as directors. Although we have agreements with each of our independent directors to serveIn addition, on our board, in which we provide for the grant of options, at this time no such option grants have been made and no equity compensation plan has been approved.

Name 

Fees Earned or paid in Cash

($US)

 

Non-Equity Incentive Plan Compensation

($US)

 All other Compensation
($US)
 

Total

($US)

Timothy Johnson  6,513   —     —     6,513 
Dr. Salim Natha  6,513   —     —     6,513 
Thomas Moore  6,513   —     —     6,513 

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has at any time been an officer or employee of ours or our subsidiaries. No interlocking relationship exists between our Board of Directors or Compensation Committee andJanuary 28, 2022, the Board of Directors or Compensation Committeegranted to each of any other company, nor has any interlocking relationship existed in the past.directors, including Dr. Chowdhury, an option to purchase 8,000 shares of common stock at an exercise price of $3.98 per share, the closing price of the Company’s common stock on the date of grant. The option was fully vested at grant and is exercisable for a period of five years from the date of grant.

Name 

Fees Earned or Paid in Cash

($)

  

Option Awards

($)

 All Other Compensation
($)
  

Total

($)

 
Timothy Johnson  6,838  26,706 (1)  —     33,544 
Dr. Salim Natha  6,838  26,706 (1)  —     33,544 
Thomas Moore  6,838  26,706 (1)  —     33,544 

(1)On January 28, 2022, the Board of Directors granted to each of the directors, including Dr. Chowdhury, an option to purchase 8,000 shares of common stock at an exercise price of $3.98 per share, the closing price of the Company’s common stock on the date of grant. The option was fully vested at grant and is exercisable for a period of five years from the date of grant. The fair value attributed to the options has been calculated using a Black-Scholes Option Pricing Model.

39 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDERSTOCKHOLDER MATTERS.

The following tables set forth certain information as of March 31, 20192022, regarding the beneficial ownership of our Common Stock,common stock, by (i) each person or entity who, to our knowledge, owns more than 5% of our Common Stock;common stock; (ii) our named executive officers; (iii) each director; and (iv) all of our executive officers and directors as a group.

Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is c/o NEMAURA MEDICAL INC., Advanced Technology Innovation Centre, 5 Oakwood Drive, Loughborough, Leicestershire, United Kingdom LE11 3QF.

Name of Beneficial Owner Amount and Nature of Beneficial Ownership  Percentage (1) 
Dr. D.F.H. Chowdhury  8,761,700(2)  36.4%
Justin Mclarney  22,293   *
Bashir Timol  2,798,310(3)  11.6%
Timothy Johnson  8,000(4)  *
Dr. Salim Natha  427,390(2)  1.8%
Thomas Moore  8,000(4)  *
All Executive Officers and Directors as a Group (6 persons)  12,025,693(5)  49.9%
Holders of 5% or more of our common stock       
Ismail, Sufyan (6)  2,270,525   9.4%

 

Beneficial Ownership

     
Name of Beneficial Owner Shares Beneficially Owned Percentage Total Voting Power1
Dr. D.F.H. Chowdhury  87,537,000   42%
Bashir Timol  27,082,100   13%
Timothy Johnson  —     —   
Dr. Salim Natha  4,193,889   2%
Thomas Moore  —     —   
Total Officers and Directors as a Group  118,812,989   57%
         
Holders of 5% or more of our Common Stock        
Ismail, Sufyan  22,705,250   11%

 

1* Less than 1%.

(1) Based upon 207,655,91624,102,866 shares of our Common Stockcommon stock outstanding at March 31, 2019. 2022.

(2) Includes 8,000 shares the reporting person has the right to acquire within 60 days of March 31, 2022 upon exercise of a vested option to purchase 8,000 shares of common stock.

(3) Represents (i) 2,708,210 shares held directly by the reporting person, (ii) 82,100 shares held by the reporting person’s spouse, and (iii) 8,000 shares the reporting person has the right to acquire within 60 days of March 31, 2022 upon exercise of a vested option to purchase 8,000 shares of common stock.

(4) Represents 8,000 shares the reporting person has the right to acquire within 60 days of March 31, 2022 upon exercise of a vested option to purchase 8,000 shares of common stock.

(5) Includes 40,000 shares the Company’s executive officers and directors have the right to acquire within 60 days of March 31, 2022 upon exercise of vested options to purchase 40,000 shares of common stock.

(6) Mr. Ismail’s address is Hollybank High Bank Lane, Lostock, Bolton, Lancashire BL6 HDT United Kingdom.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Nemaura Pharma Limited (Pharma) and NDM Technologies Limited (NDM) are entities controlled by our Chief Executive Officer, President, Chairman of the Board and majority shareholder, Dr. D.F.H. Chowdhury.

Pharma has invoiced our subsidiaries, Dermal Diagnostics Limited (DDL)DDL and Trial Clinical Limited (TCL)TCL for research and development services. In addition, certain operating expenses of DDL and TCL were incurred and paid by Pharma and NDM which have been invoiced to us. Certain costs incurred by Pharma and NDM are directly attributable to DDL and TCL and such costs were billed to us.

Total costs charged to us by Pharma and NDM were $2,312,412$3,245,985 for the year ended March 31, 2019.2022.

44 

FollowingThe following is a summary of activity between the Company and Pharma and NDM for the years ended March 31, 20192022 and 2018. These amounts are unsecured, interest free, and payable on demand.2021.

     
  

Year Ended March 31,

2019

($)

 

Year Ended March 31,

2018

($)

Balance due from Pharma and NDM at beginning of year  613,818   687,609 
Amounts received from Pharma  —     145,214 
Amounts invoiced by Pharma to DDL, NM and TCL (1)  2,312,412   842,739 
Amounts invoiced by DDL to Pharma  (977)  —   
Amounts repaid by DDL to Pharma  (1,569,496)  (1,096,767)
Amounts paid by DDL on behalf of Pharma  —     (19,889)
Amounts invoiced by B&W to DDL  2,206   —   
Amounts repaid by DDL to B&W  (5,622)  —   
Foreign exchange differences  (84,843)  54,912 
Forgiveness of debt by a related party transferred to APIC  (302,819)  —   
Net balance due to Pharma and NDM at end of the year  964,679   613,818 
  March 31, 
  

2022
($)

  

2021
($)

 
Liability due to related parties at beginning of year  148,795   830,093 
Amounts invoiced by Pharma to DDL, NM and TCL  3,245,985   2,441,108 
Amounts invoiced by DDL to Pharma  (2,495)  (17,213)
Amounts paid by DDL to Pharma  (3,492,962)  (3,209,084)
Foreign exchange differences  (620)  103,891 
(Receivable) / Liability due (from) to related parties at end of year  (101,297)  148,795 

 

(1)       These amounts are included primarily in research and development expenses.

REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS

It is Company policy to not enter any transaction (other than compensation arrangements in the ordinary course) with any director, executive officer, employee, or principal stockholder or party related to them, unless authorized by a majority of the directors having no interest in the transaction, upon a favourablefavorable recommendation by the Audit Committee (or a majority of its disinterested members).

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees billed to us forin the fiscal years ended March 31, 20192022 and 20182021 by Crowe LLP and Mayer Hoffman McCann P.C.

  

2022
($)

  

2021
($)

 
   Audit Fees  87,500   123,385 
Audit Related Fees  80,000   83,500 
Tax Fees  10,000   10,000 
Other Fees  10,000   28,250 
Totals  187,500   245,135 

Fees relating to Crowe LLP

     
   2019   2018 
Audit Fees $40,000  $106,000 
Audit Related Fees $107,719  $—   
Tax Fees $—    $6,765 
Other Fees $—    $—   
Totals $147,719  $112,765 

Fees relating to Mayer Hoffman McCann P.C.

  2019 2018
Audit Fees $98,000  $—   
Audit Related Fees $88,850  $—   
Tax Fees $10,000  $—   
Other Fees $—    $—   
Totals $196,850  $—   

Audit fees represent amounts billed for professional services rendered or expected to be rendered for the audit of our annual consolidated financial statements.

Audit-related fees represent professional services rendered or expected to be rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our consolidated financial statements that are not reported under audit fees.

Tax fees represent professional services rendered by the accounting firm for tax compliance.compliance and this includes preparing our annual tax filings.

Other fees represent charges made for the provision of a comfort letter in relation to the ATM Offering made on July 23, 2021.

The Audit Committee approves all auditing services and the terms thereof and non-audit services (other than non-audit services published under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Pubic Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the “de minimus” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied.

Audit Committee Pre-Approval Policy

Under provisions of the Sarbanes-Oxley Act of 2002, our principal accountant may not be engaged to provide non-audit services that are prohibited by law or regulation to be provided by it, and the Audit Committee must pre-approve the engagement of the our principalindependent accountant to provide audit and permissible non-audit services. The Audit Committee has not established any policies or procedures other than those required by applicable laws and regulations.

Our independent auditors,auditor, Mayer Hoffman McCann P.C., leases substantially all of its personnel who work under the control of Mayer Hoffman McCann P.CP.C. shareholders, from wholly owned subsidiaries of CBIZ, Inc., in an alternative practice structure.

 

 

 

 

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41 
 

 

PART IV

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a)  Exhibits:

 

Exhibit No.Description
Exhibit No.3.1Description
3.1Articles of Incorporation December 24, 2013 (Incorporated by reference from the registrant’s registration statement on Form S-1 (File No. 333-194857))
3.1(a)
3.1(a)Certificate of Amendment to the Articles of Incorporation Incorporated(Incorporated by reference from the registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed June 12, 2018)
3.2
3.2Certificate of Designation for Series A Convertible Preferred Stock (Incorporated by reference from the registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the SEC on June 12, 2018 )
3.3
3.3Bylaws (incorporated by reference from the Registrant’s Registration Statement on Form S-1 (File No. 333-194857), filed March 28, 2014)
3.4
3.4Amended and Restated Company By-laws (Incorporated by reference from the registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed June 12, 2018)
4.1
4.1Form of Subscription Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on December 2, 2015)
4.2

Common Stock Purchase Warrant by and between Nemaura Medical Inc. and Dr. Dallas John Burston, dated November 26, 2015 (Incorporated by reference from the registrant’s Current Report on Form 8-K filed with the SEC on December 2, 20152015) 

4.3
4.3*Description of Registrant’s Securities (Incorporated by reference from the registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed June 29, 2021)
10.1
10.1Employment Agreement dated November 1, 2013, between the Company and Dewan F.H. Chowdhury (incorporated by reference from the Registrant’s Registration Statement on Form S-1 (File No. 333-194857), filed March 28, 2014)
10.2
10.2Exclusive Rights License Agreement between Dallas Burston Pharma (DBP) Jersey Limited and Dermal Diagnostics Limited, dated March 31, 2014 (incorporated by reference from the Registrant’s Registration Statement on Form S-1S-1/A (File No. 333-194857), filed July 11, 2014)
10.3
10.3Assignment Agreement between NDM Technologies Limited and Dermal Diagnostics Limited, dated May 8, 2014 (incorporated by reference from the Registrant’s Registration Statement on Form S-1S-1/A (File No. 333-194857), filed July 30, 2014)
10.4
10.4Assignment Agreement between Nemaura Pharma Limited and Dermal Diagnostics Limited, dated May 8, 2014 (incorporated by reference from the Registrant’s Registration Statement on Form S-1S-1/A (File No. 333-194857), filed July 30, 2014)
10.5+

License, Supply and Distribution Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on December 2, 2015)

10.6
10.6Form of Common Stock Exchange Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on November 7, 2017)
10.7+
10.7+Joint Collaboration Agreement’,Agreement, between Dallas Burston Ethitronix (Europe) Limited and Nemaura Medical Inc., dated May 21, , 2018 (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on May 25, 2018)
10.8+Employment Agreement dated September 15, 2020 between Dermal Diagnostics Limited and Justin Mclarney (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 21, 2020).
14.110.9Healthimation License Agreement dated as of September 16, 2020 by and between Healthimation, LLC and the registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 2, 2020).
10.10Amendment, dated as of October 23, 2020, to Healthimation License Agreement by and between Healthimation, LLC and the registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 2, 2020).
10.11Note Purchase Agreement between the Registrant and Uptown Capital, LLC dated February 8, 2021 (Please note that portions of this exhibit have been omitted) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 11, 2021).
10.12Secured Promissory Note of the Registrant issued to Uptown Capital, LLC dated February 8, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 11, 2021).
10.13Security Agreement between the Registrant and Uptown Capital, LLC dated February 8, 2021 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 11, 2021).
10.14License, Supply and Distribution Agreement, entered into on September 24, 2021 and dated as of September 17, 2021, by and between Nemaura Medical Inc. and MySugarWatch Duopack Limited (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on September 30, 2021).
10.15†Statement of Main Terms of Employment dated January 5, 2022 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 10, 2022).
14.1Code of Ethics adopted by the Board of Directors (incorporated by reference from the Registrant’s Registration Statement on Form S-1 (File No. 333-194857), filed March 28, 2014)
21.1*Subsidiaries
21.1*23.1*Subsidiaries
23.1*Consent of Crowe LLP
23.2*Consent of Mayer Hoffman McCann P.C.
31.1*Rule 13a-14(a)/15d-14(a) – Certification of Principal Executive Officer
31.1*31.2*Rule 13a-14(a)/15d-14(a) - Certification of Chief ExecutiveFinancial Officer
32.1*
31.2*Rule 13a-14(a)/15d-14(a) - Certification of Interim Chief Financial Officer
32.1*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*Inline XBRL Instance Document
32.2*101.SCH*Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase 
101    101.DEF*

Interactive data files pursuant to Rule 405 of Regulation S-T:  (i) the Balance Sheets, (ii) the Statements of Comprehensive Loss, (iii) Statements of Stockholders Equity, (iv) the Statement of Cash Flows and (v) the Notes to the Financial Statements

Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase
104*·*Filed herewithCover Page Interactive Data File (embedded within the Inline XBRL document)

·+Portions of this Exhibit have been omitted pursuant to a request for confidential treatment.

*Filed herewith.

** Furnished herewith.

+Portions of this Exhibit have been omitted pursuant to a request for confidential treatment.

† Management contract or compensatory plan or arrangement.

 

ITEM 16. FORM 10-K SUMMARY.

47 

None

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on June 14, 201929, 2022, by the undersigned thereunto duly authorized.

 

 NEMAURA MEDICAL INC.
  
 By:/s/ Dr D.F.H,Dr. D.F.H. Chowdhury
 

Dr D.F.H,Dr. D.F.H. Chowdhury


President and Chief Executive Officer (Principal Executive Officer) and Interim Chief Financial Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant on xxx , 2019, in the capacities and on the dates indicated.

Signature Title Date
/s/ D.F.H, ChowdhuryPresident, Chief Executive Officer (Principal Executive Officer) Interim Chief Financial OfficerJune 14, 2019
D.F.H, Chowdhury
     
/s/ B. TimolDr. D.F.H. Chowdhury President, Chief Executive Officer and Director June 14, 201929, 2022
B. TimolDr. D.F.H.Chowdhury(Principal Executive Officer)

    
/s/ Justin MclarneyChief Financial OfficerJune 29, 2022
Justin Mclarney(Principal Financial Officer and Principal Accounting Officer)

    
/s/ T. JohnsonBashir Timol Independent Director June 14, 201929, 2022
T. JohnsonBashir Timol    

    
/s/ S. NathaTimothy Johnson Independent Director June 14, 201929, 2022
S. NathaTimothy Johnson    

    
/s/ Salim NathaDirectorJune 29, 2022
Salim Natha

/s/ Thomas Moore Independent Director June 14, 201929, 2022
Thomas Moore    

 

 

 

48 
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