| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES 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 ® ®
® Going
Concern The accompanying unaudited financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying unaudited financial statements, for the nine months ended December
31, 2023, the Company recorded a net loss of $ 5,968,086
7,203,676 In evaluating the going concern position of
the company, management has considered potential funding providers and believes that financing to fund future operations could be provided
by equity and/or debt financing. There can be no assurance that funding would be available, or that the terms of such funding would be
on favorable terms if available. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our
operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. Basis of Presentation The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules and regulations of the SEC, and do not include all of the information and
footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. However,
such information reflects all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for
a fair presentation of the financial condition and results of operations for the interim periods. The results for the three and nine months
ended December 31, 2023 are not indicative of annual results. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023. The accompanying unaudited condensed consolidated
financial statements include the accounts of the Company and the Company’s subsidiaries. References to “we”, “us”,
“our”, or the “Company” refer to Nemaura Medical Inc. and its consolidated subsidiaries. The unaudited condensed
consolidated financial statements are prepared in accordance with 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 U.S. Dollar
(“USD”). Financial statements for foreign subsidiaries are translated into USD using period end exchange rates for assets
and liabilities and average exchange rates for each period for revenue, costs and expenses. Use of Estimates The preparation of consolidated financial statements
in conformity with U.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. Significant estimates include the assumptions used in the accrual for potential liabilities,
the net realizable value of inventory, the valuation of debt and equity instruments, the fair value of derivative liabilities, valuation
of stock options issued for services, and deferred tax valuation allowances. Actual results may differ from those estimates. Revenue Recognition The Company recognizes revenue in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from
Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of
goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise
judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying
our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price
to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Deferred Revenues In March 2014, the Company executed an Exclusive
Marketing Rights agreement with Dallas Burston Pharma (“DB Pharma”)(now known as MySugarWatch Limited “MSW”),
a Jersey (Channel Island) based company for the exclusive right to sell the Company’s SugarBEAT® device in the UK and Republic
of Ireland, both direct to consumer and through prescriptions by general practitioners. The agreement has a term of five years and automatically
renewed for another five years unless terminated by either party. As part of the agreement, the Company received a non-refundable upfront
fee of £1 million ($1.6 million). Pursuant to current accounting guidelines, the Company recorded the upfront fee of £1 million
as a deferred revenue (i.e. liability) and is being amortized to revenues based upon the corresponding sale of the Company’s SugarBEAT
devices. As of December 31, 2023 and March 31, 2023, the outstanding deferred revenues amounted to $1,184,412 and $1,145,451, respectively
or approximately £875,000GBP. The agreement is scheduled to expire in March
2024, however, the Company expects that it will be renewed for another five years based upon the ongoing relationship with MSW. Cash and cash equivalents Cash and cash equivalents consists primarily of cash
deposits maintained in the United Kingdom (“UK”). We maintain cash balances in U.S. Dollar (“USD”), Great Britain
Pound Sterling (“GBP”), and the Euro. The following table, reported in USD, disaggregates our cash balances by currency denomination:
Schedule of cash and cash equivalents
December 31, March 31, 2023 (audited)
Cash denominated in:
USD $ 13,169 $ 5,606,972
GBP 65,925 4,446,720
Euro 58,322 51,443
Total $ 137,416 $ 10,105,135 Inventory As of December 31, 2023 and March 31, 2023, inventory
consisted of the following:
Schedule of inventory
December 31, 2023 March 31, 2023, (audited)
Raw materials $ 3,553,811 $ 1,586,777
Finished goods 117,722 168,075
Total Inventories $ 3,671,533 $ 1,754,852 Inventories are stated at the lower of cost or net
realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. For the nine months ended December 31, 2023,
there were additional general write-downs of inventory of approximately $ 104,000 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. Loss per share Basic loss per share is computed by dividing
the loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss
per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
Diluted loss per common share reflects the potential dilution that could occur if convertible debentures, options and warrants were to
be exercised or converted or otherwise resulted in the issuance of common stock that then shared in the earnings of the entity. Since the effects of outstanding options and
warrants are anti-dilutive for the nine months ended December 31, 2023 and 2022, shares of common stock underlying these instruments have
been excluded from the computation of loss per common share. The following sets forth the number of shares of common
stock underlying outstanding options and warrants as of December 31, 2023 and 2022:
Schedule of common stock underlying outstanding options
December 31, December 31,
2023 2022
Stock Warrants 5,233,551 1,573,098
Stock options 40,000 40,000
5,273,551 1,613,098 Stock-Based Compensation The Company periodically issues share-based awards
to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at
the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at
fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period.
Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company values its equity awards using the Black-Scholes
option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of
subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based
on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual
life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period
and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal
funds rates. Fair Value of Financial Instruments The authoritative guidance with respect to fair value
established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and
requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below.
Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required. Fair value
of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing
parties. The three levels of the fair value hierarchy are as
follows: Level 1 - Valuations based on unadjusted quoted prices
in active markets for identical assets or liabilities that the entity has the ability to access. Level 2 - Valuations based on quoted prices for similar
assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable
data for substantially the full term of the assets or liabilities. Level 3 - Valuations based on inputs that are unobservable,
supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Foreign exchange contract derivative liability
is valued using Level 2 fair values while the warrant liability is valued using Level 3 fair values. The following table sets forth by level, within the
fair value hierarchy, the Company’s financial assets and liabilities at fair value as of December 31, 2023 and March 31, 2023:
Schedule of assets and liabilities at fair value
December 31, 2023
Level 1 Level 2 Level 3 Total
Assets
Total assets $ — $ — $ — $ —
Liabilities
Foreign exchange contract derivative liability $ — $ 242,295 $ — $ 242,295
Warrant derivative liability — — 492,000 492,000
Total liabilities $ — $ 242,295 $ 492,000 $ 734,295
March 31, 2023 (audited)
Level 1 Level 2 Level 3 Total
Assets
Total assets $ — $ — $ — $ —
Liabilities
Foreign exchange contract derivative liability $ — $ 731,730 $ — $ 731,730
Warrant derivative liability — — 3,092,000 3,092,000
Total liabilities $ — $ 731,730 $ 3,092,000 $ 3,823,730 The following table provides a roll-forward of the
warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the nine months ended December
31, 2023:
Schedule of warrant derivative liability measured
at fair value on a recurring basis
Warrant derivative liability
Balance as of beginning of period – March 31, 2023 $ 3,092,000
Change in fair value of warrant derivative liability (2,600,000 )
Balance as of end of period – December 31, 2023 $ 492,000 As of December 31, 2023 and March 31, 2023, the Company’s
outstanding warrants were treated as derivative liabilities and changes in the fair value were recognized in earnings (see Note 3). The Company believes the carrying amounts of certain
financial instruments, including cash, accounts receivable, and accounts payable and accrued liabilities, approximate fair value due to
the short-term nature of such instruments and are excluded from the fair value tables above. Inflation The Company does not believe that inflation has had
a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that the Company’s
operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing
the Company’s operating costs (including, specifically, clinical trial costs in countries where the Company is applying to sell
its products), and which would put additional stress on the Company’s working capital resources. Recent accounting pronouncements Management believes that any recently issued, but
not yet effective, accounting pronouncements, if currently adopted, would not have a material effect on the Company’s unaudited
condensed consolidated financial statements. |
