UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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) |
| nevada | 46-5027260 | |||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
|
57 West 57th Street Manhattan, NY 10019 | ||||
| (Address of Principal Executive Offices) (Zip Code) | ||||
| 646-416-8000 | ||||
| (Registrant’s Telephone Number, Including Area Code) | ||||
| N/A | ||||
| (Former name, former address and former fiscal year, if changed since last report) | ||||
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
| Common Stock | NMRD | The Nasdaq Stock Market LLC |
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 o
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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | |
|
Non-accelerated Filer ☒
|
Smaller reporting 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ☒
The number of shares of common stock, par value $0.001 per share, outstanding as of August 9, 2022 was .
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q regarding development of our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management are forward-looking statements. Forward-looking statements may include, but are not limited to, statements about:
- any statements of the plans, strategies and objectives of management for future operations;
- any statements concerning proposed new products, services or developments;
- any statements regarding future economic conditions or performance;
- our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
- our estimates regarding the sufficiency of our cash resources and our need for additional funding;
- any statement that our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the recent COVID-19 pandemic; and
- any statement regarding the effectiveness of our continuous temperature monitoring system to assist with the diagnosis and monitoring of symptoms of COVID-19 or the effectiveness of our continuous lactate monitoring system (CLM) to monitor disease progression in COVID -19 patients.
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. Forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. We cannot guarantee that we actually will achieve the plans, intentions or expectations expressed in our forward-looking statements and you should not place undue reliance on these statements. There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These factors and the other cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all related forward-looking statements whenever they appear herein. 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.
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NEMAURA MEDICAL INC.
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| NEMAURA MEDICAL INC. |
| Condensed Consolidated Balance Sheets |
As of June 30, 2022 (Unaudited) | As of March 31, 2022
| |||||||
| ($) | ($) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | 14,751,833 | 17,749,233 | ||||||
| Prepaid expenses and other receivables | 1,105,496 | 750,167 | ||||||
| Accounts receivable - related party | 217,510 | 101,297 | ||||||
| Inventory | 1,625,156 | 1,487,771 | ||||||
| Total current assets | 17,699,995 | 20,088,468 | ||||||
| Other assets: | ||||||||
| Property and equipment, net of accumulated depreciation | 603,130 | 532,508 | ||||||
| Intangible assets, net of accumulated amortization | 1,411,919 | 1,480,980 | ||||||
| Total other assets | 2,015,049 | 2,013,488 | ||||||
| Total assets | 19,715,044 | 22,101,956 | ||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 92,701 | 136,310 | ||||||
| Other liabilities and accrued expenses | 1,491,498 | 998,622 | ||||||
| Notes payable, current portion | 16,186,387 | 19,188,724 | ||||||
| Deferred revenue | 177,772 | 259,256 | ||||||
| Total current liabilities | 17,948,358 | 20,582,912 | ||||||
| Non-current portion of notes payable | 4,699,660 | — | ||||||
| Non-current portion of deferred revenue | 1,025,176 | 1,052,960 | ||||||
| Total non-current liabilities | 5,724,836 | 1,052,960 | ||||||
| Total liabilities | 23,673,194 | 21,635,872 | ||||||
| Commitments and contingencies: | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ par value, shares authorized and | ||||||||
| shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively | 24,103 | 24,103 | ||||||
| Additional paid-in capital | 38,295,775 | 38,295,775 | ||||||
| Accumulated deficit | (41,710,773 | ) | (37,731,476 | ) | ||||
| Accumulated other comprehensive loss | (567,255 | ) | (122,318 | ) | ||||
| Total stockholders’ (deficit) equity | (3,958,150 | ) | 466,084 | |||||
| Total liabilities and stockholders’ (deficit) equity | 19,715,044 | 22,101,956 | ||||||
See notes to the unaudited condensed consolidated financial statements.
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NEMAURA MEDICAL INC. |
| Condensed Consolidated Statements of Operations and Comprehensive Loss |
|
(Unaudited) (in Dollars, except Share Amounts) |
| Three Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Sales | — | — | ||||||
| Cost of Sales | — | — | ||||||
| Gross Profit | — | — | ||||||
| Operating expenses: | ||||||||
| Research and development | 330,055 | 288,484 | ||||||
| General and administrative | 1,880,938 | 1,332,185 | ||||||
| Total operating expenses | 2,210,993 | 1,620,669 | ||||||
| Loss from operations | (2,210,993 | ) | (1,620,669 | ) | ||||
| Interest expense | (1,768,304 | ) | (1,723,056 | ) | ||||
| Net loss | (3,979,297 | ) | (3,343,725 | ) | ||||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | (444,937 | ) | (10,706 | ) | ||||
| Comprehensive loss | (4,424,234 | ) | (3,354,431 | ) | ||||
| Net loss per share, basic and diluted | (0.17 | ) | (0.14 | ) | ||||
| Weighted average number of shares outstanding | 24,102,866 | 23,109,897 | ||||||
See notes to the unaudited condensed consolidated financial statements.
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NEMAURA MEDICAL INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (deficit)
Three Months Ended June 30, 2022 and 2021 (Unaudited)
| Common Stock | ||||||||||||||||||||||||
| Shares | Amount ($) | Additional Paid-in Capital ($) | Accumulated Deficit ($) | Accumulated Other Comprehensive (Loss) Income ($) | Total Stockholders’ Equity (Deficit) ($) | |||||||||||||||||||
| Balance at March 31, 2022 | 24,102,866 | 24,103 | 38,295,775 | (37,731,476 | ) | (122,318 | ) | 466,084 | ||||||||||||||||
| Foreign currency translation adjustment | — | (444,937 | ) | (444,937 | ) | |||||||||||||||||||
| Net loss | — | (3,979,297 | ) | (3,979,297 | ) | |||||||||||||||||||
| Balance at June 30, 2022 | 24,102,866 | 24,103 | 38,295,775 | (41,710,773 | ) | (567,255 | ) | (3,958,150 | ) | |||||||||||||||
| Balance at March 31, 2021 | 22,941,157 | 22,941 | 32,044,335 | (23,844,671 | ) | 135,567 | 8,358,172 | |||||||||||||||||
| Exercise of warrants | 366,892 | 367 | 2,963,291 | 2,963,658 | ||||||||||||||||||||
| Foreign currency translation adjustment | — | (10,706 | ) | (10,706 | ) | |||||||||||||||||||
| Net loss | — | (3,343,725 | ) | (3,343,725 | ) | |||||||||||||||||||
| Balance at June 30, 2021 | 23,308,049 | 23,308 | 35,007,626 | (27,188,396 | ) | 124,861 | 7,967,399 | |||||||||||||||||
See notes to the unaudited condensed consolidated financial statements.
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| NEMAURA MEDICAL INC. |
| Condensed Consolidated Statements of Cash Flows |
| (Unaudited) |
| Three Months Ended June 30, | ||||||||
2022 ($) | 2021 ($) | |||||||
| Cash Flows Used in Operating Activities: | ||||||||
| Net loss | (3,979,297 | ) | (3,343,725 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 98,792 | 36,133 | ||||||
| Accretion of debt discount | 1,768,304 | 1,723,056 | ||||||
| Mark-to-market foreign exchange revaluation | 613,687 | — | ||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses and other receivables | (355,329 | ) | (550,211 | ) | ||||
| Inventory | (137,386 | ) | (31,583 | ) | ||||
| Accounts payable | (43,609 | ) | (145,898 | ) | ||||
| Liability due to related parties | (116,214 | ) | (256,583 | ) | ||||
| Other liabilities and accrued expenses | (120,812 | ) | 363,052 | |||||
| Deferred revenue | (112,279 | ) | 515,731 | |||||
| Net cash used in operating activities | (2,384,143 | ) | (1,690,028 | ) | ||||
| Cash Flows Used in Investing Activities: | ||||||||
| Capitalized patent costs | (192,114 | ) | (22,714 | ) | ||||
| Capitalized software development costs | — | (293,285 | ) | |||||
| Purchase of property and equipment | (25,598 | ) | (82,222 | ) | ||||
| Net cash used in investing activities | (217,712 | ) | (398,221 | ) | ||||
| Cash Flows Used in (provided by) Financing Activities: | ||||||||
| Commission paid on note payable | 4,700,000 | — | ||||||
| Proceeds from warrant exercise | — | 2,963,658 | ||||||
| Repayments of note payable | (4,774,282 | ) | (1,500,000 | ) | ||||
| Net cash (used in) provided by financing activities | (74,282 | ) | 1,463,658 | |||||
| Net decrease in cash | (2,676,137 | ) | (624,591 | ) | ||||
| Effect of exchange rate changes on cash | (321,263 | ) | 18,973 | |||||
| Cash at beginning of period | 17,749,233 | 31,865,371 | ||||||
| Cash at end of period | 14,751,833 | 31,259,753 | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Prepayment of equity compensation | — | 25,000 | ||||||
| Monitoring fees added to notes payable | 522,462 | — | ||||||
See notes to the unaudited condensed consolidated financial statements.
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NEMAURA MEDICAL INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
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®. The sugarBEAT® 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 sugarBEAT® 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 100% of the stock in Dermal Diagnostic (Holdings) Limited, an England and Wales corporation (“DDHL”) formed on December 11, 2013, which in turn owns 100% of Dermal Diagnostics Limited, an England and Wales corporation formed on January 20, 2009 (“DDL”), and 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 sugarBEAT® device, which consists of a disposable patch containing a sensor, and a non-disposable miniature wireless transmitter 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.
During the fiscal year ended March 31, 2021, the Board of Directors assessed the adequacy of the group’s organizational structure and concluded that the intermediate holding company that sat below Nemaura Medical Inc., Region Green Limited (a British Virgin Islands corporation), 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 intention that the assets held by Region Green Limited be 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.
The following diagram illustrates Nemaura’s corporate structure as of June 30, 2022:
The Company was incorporated in 2013 and has reported recurring losses from operations to date and an accumulated deficit of $41,710,773 as of June 30, 2022. These operations have resulted in the successful completion of clinical programs to support a CE mark (European Union approval of the product) approval, as well as a De Novo 510(k) medical device application to the U.S. Food and Drug Administration (“FDA”) submission.
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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 decrease 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.
Going Concern
As identified under Item 1A, Management is aware of the need to raise additional funds in order to finance the ongoing commercialization of sugarBEAT®. The Company had $14,751,833 of cash at June 30, 2022, 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 has 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 believes that there is a reasonable expectation that funding could be provided by one, or more, of the following 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 unaudited condensed consolidated financial statements, ASC 205-40 requires that Management recognize 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 from the date of filing of these unaudited condensed consolidated financial statements.
Following the receipt of the 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 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 sugarBEAT® device in other countries such as the U.S.; |
| – | exploring licensing and partnership opportunities in other territories; |
| – | developing the sugarBEAT® device platform for commercialization across other applications; and |
| – | pursue additional capital raising opportunities as and when required to further enhance our growth plans. |
NOTE 2 – BASIS OF PRESENTATION
(a) Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (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 statement of the financial condition and results of operations for the interim periods. The results for the three months ended June 30, 2022 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, 2022, as filed with the SEC.
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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”).
(b) Recently adopted 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.
This Quarterly Report on Form 10-Q does not discuss recent pronouncements that are not anticipated to have a current and/or future impact on the Company, or are unrelated to the Company’s financial condition, results of operations, cash flows or disclosures.
NOTE 3 – 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 (the “Marketing Rights Agreement”) with an unrelated third party (the “Licensee”), that granted to the Licensee the exclusive right to market and promote the sugarBEAT® device and related patches under its own brand in the UK 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 $1.20 million and $1.31 million as of June 30, 2022 and March 31, 2022, respectively), upon signing the Marketing Rights Agreement. The upfront payment received from the Marketing Rights Agreement has been deferred and will be recorded as income over the term of the Marketing Rights Agreement, which commenced upon the first delivery of the sugarBEAT® device to the Licensee in December 2021. Consequently, approximately $178,000, and $259,000 is included in deferred revenue classified as a current liability as of June 30, 2022 and March 31, 2022, respectively, with the remainder being shown in the non-current portion of deferred revenue.
NOTE 4 – RELATED PARTY TRANSACTIONS
Nemaura Pharma Limited (“Pharma”), NDM Technologies Limited (“NDM”) and Black and White Health Care Limited (“B&W”) are entities controlled by the Company’s Chief Executive Officer, President, interim Chief Financial Officer, director and majority stockholder, Dewan F.H. Chowdhury. While transactions occurred during the period between the Company and Pharma, no transactions were recorded with NDM or B&W.
These unaudited condensed consolidated financial statements are intended to reflect all costs associated with the operations of DDL and TCL. Pharma has a service agreement with DDL to undertake development, manufacture, and regulatory approvals under Pharma’s ISO13485 accreditation. In lieu of these services, Pharma invoices DDL on a periodic basis for said services. Services are provided at cost plus a service surcharge amounting to less than 10% of the total costs incurred.
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The table below provides a summary of activity between the Company and Pharma for the three months ended June 30, 2022 and 2021, and the year ended March 31, 2022.
Three Months Ended June 30, 2022 (unaudited) ($) | Three Months Ended June 30, 2021 (unaudited) ($) | Year Ended March 31, 2022
($) | ||||||||||
| (Receivable)/liability due to related parties at beginning of year | (101,297 | ) | 148,795 | 148,795 | ||||||||
| Amounts invoiced by Pharma to DDL (1) | 949,713 | 597,594 | 3,245,985 | |||||||||
| Amounts invoiced by DDL to Pharma | — | — | (2,495 | ) | ||||||||
| Amounts paid by DDL to Pharma | (1,074,796 | ) | (856,904 | ) | (3,492,962 | ) | ||||||
| Foreign exchange differences | 8,870 | 2,727 | (620 | ) | ||||||||
| Receivable due to related parties at end of period | (217,510 | ) | (107,788 | ) | (101,297 | ) | ||||||
| (1) | These amounts are incurred as a result of research and development expenses combined with costs of manufactured product charged to the Company by Pharma. |
NOTE 5 – 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 Note Purchase Agreement 1, the Company agreed to issue and sell to the Investor, and the Investor agreed to purchase from the Company, a secured promissory note (the “2020 Secured Note”) in the original principal amount of $6,015,000. In consideration thereof, on April 15, 2020, (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 “2020 Investor Notes”), and (ii) the Company delivered the 2020 Secured Note on behalf of the Company, to the Investor, against delivery of the 2020 Purchase Price. For these purposes, the “2020 Purchase Price” means the Investor’s initial cash purchase price, together with the sum of the initial principal amounts of the Investor Notes.
The 2020 Secured Note is secured by the Collateral (as hereinafter defined). The 2020 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 2020 Secured Note (the “Transaction Expense Amount”). In addition to this, a payment of $325,000 was made to Ascendiant Capital Markets, LLC (“Ascendiant”) for structuring the agreement between both parties. The 2020 Purchase Price for the 2020 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 2020 Secured 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 “2020 Security Agreement”). Pursuant to the terms of the 2020 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 (the “Collateral”).
Note 1 was settled in full on April 22, 2022.
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 (the “Secured Note 2”) in the original principal amount of $24,015,000. The Secured Note 2 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.
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In consideration thereof, on February 9, 2021, (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 2021 Purchase Price. For these purposes, the “2021 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 Secured Note 2 using the effective interest rate method.
Security Agreement
On February 8, 2021, the 2020 Security Agreement was extended to include Note Purchase Agreement 2, which is also secured against all of the Company’s assets owned as of February 9, 2021 and extends to any assets acquired at any time that the Company’s obligations under Secured Note 2 are outstanding.
NOTE PURCHASE AGREEMENT 3
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 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 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: $6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.
The borrowing period is 24 months, and the Company shall pay the outstanding balance and all fees on maturity. A monitoring fee equal to 0.833% of the outstanding balance will automatically be added to the outstanding balance on the first day of each month. The debt less the discount and transaction expenses will be accreted over the term of the Note using the effective interest method.
Security Agreement
On May 20, 2022, the Company entered into the Security Agreement by the Company, DDL and TCL, in favor of the Investor (the “Security Agreement”). Pursuant to the terms of the Security Agreement, the Company granted the Investor a first-priority security interest in all rights, title, interest, claims and demands of the Company in and to all of the Company’s patents and all other proprietary rights, and all rights corresponding to the Company’s patents throughout the world, now owned and existing, and all replacements, proceeds, products, and accessions thereof.
As of June 30, 2022, long-term debt matures as follows:
Notes Payable ($) | ||||||
| Within 12 months | 16,186,387 | |||||
| Within 24 months | 4,699,660 | |||||
| 20,886,047 | ||||||
NOTE 6 – STOCKHOLDERS’ (DEFICIT) EQUITY
During the three month period ended June 30, 2022, no warrants were exercised, and shares were issued.
During the three month period ended June 30, 2021, 366,892 warrants were exercised generating gross proceeds of $2,963,658. There was a total of 1,573,098 warrants outstanding at this date. other shares were issued in the period.
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Loss per share
The following table sets forth the computation of basic and diluted loss per share for the periods indicated.
| Three Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (in Dollars, except Share Amounts) | ||||||||
| Net loss attributable to common stockholders | (3,979,297 | ) | (3,343,725 | ) | ||||
| Weighted average basic and diluted shares outstanding | 24,102,866 | 23,109,897 | ||||||
| Basic and diluted loss per share: | (0.17 | ) | (0.14 | ) | ||||
The Company excludes warrants outstanding, which are anti-dilutive given the Company is in a loss position, from the basic and diluted loss per share calculation.
Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding during the period. For the three month periods ended June 30, 2022, warrants to purchase 1,573,098 shares of common stock and a unit purchase option to purchase 9,710 shares of common stock, as well as warrants to purchase 9,710 shares of common stock, were considered anti-dilutive and were excluded from the calculation of diluted loss per share. For the three month periods ended June 30, 2021, warrants to purchase 1,940,740 shares of common stock and a unit purchase option to purchase shares of common stock, as well as warrants to purchase shares of common stock, were considered anti-dilutive and were also excluded from the calculation of diluted loss per share.
NOTE 7 – OTHER ITEMS
COVID-19 Pandemic
The outbreak of COVID-19 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 impact of COVID-19 on our own operations and are working with our employees, suppliers and other stakeholders to mitigate the risks posed by its spread, but 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 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 monitoring of patients and patient self-monitoring, which potentially enhances the prospects for the Company, its CGM product and its planned digital healthcare offering.
NOTE 8 – SUBSEQUENT EVENTS
Derivative Financial Instruments
On August 1, 2022 under the terms of the Company’s forward currency exchange contract, the Company was obligated to convert $500,000 to GBP at the fixed rate of $1.359. The full details of our forward contract in place to sell up to $12.5 million are disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, as filed with the SEC.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the Condensed Consolidated Financial Statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those made, projected, or implied in the forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Statements" below, and "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, as filed with the Securities and Exchange Commission, as the same may be updated from time to time, for a discussion of the uncertainties, risks and assumptions associated with these statements.
Overview
We are a medical technology company developing sugarBEAT®, a non-invasive, affordable, and flexible continuous glucose monitoring system for adjunctive use by persons with diabetes. sugarBEAT® consists of a disposable adhesive skin-patch connected to a rechargeable wireless transmitter that displays glucose readings at regular five minute intervals via a mobile app. 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 sends the raw data to a mobile app where it is processed 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 persons with diabetes alongside insulin-injecting persons with diabetes, who all perform multiple daily finger sticks to manage their disease.
CE approval was granted by the European Notified Body BSI in May 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. In conjunction with the UK Licensee, the Company commenced a phase 1 launch whereby devices were made available to limited cohorts of users to gauge their feedback so that any fine-tuning could be completed prior to a mass market launch. The UK Licensee has also confirmed that it will undertake two Key Opinion Leader (“KOL”) studies in the UK for its white-labelled service offering that is supported by sugarBEAT®. The KOL studies are intended to provide additional support for the UK Licensee’s broader ongoing marketing plans.
The UK Licensee placed an initial order for sugarBEAT® in April 2021 and provided a forecast for its post-launch volume expectations, which the Company has used to establish both a short and medium term view to inform the Company’s commercial operational requirements. In line with this view, the Company has taken the following actions during the fiscal year to date:
| · | Entered into a new leased facility to provide the additional space requirements for commercial product assembly. |
| · | Increased headcount of production operatives; this will be phased in line with the volume forecasts currently available, however the Company has also factored in an ability to scale further and faster should this be required. |
| · | Moved forward with placing phased orders for raw materials to ensure future product availability to support both our UK Licensee while also providing for capacity to flex up further as other routes to market materialize in line with management’s commercialization program. |
| · | Commenced phased deliveries in December 2021 to the UK Licensee of its continuous glucose monitor. |
In July 2020, Nemaura filed a PMA application with the FDA to 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 process was currently subject to delays as a result of the FDA’s Center for Devices and Radiological Health (“CDRH”) being actively engaged in responding to the current pandemic caused by COVID-19 which resulted in staff being reallocated to other approval requests associated with COVID-19. During April 2021 the FDA confirmed that they would recommence their 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 scheduled a pre-market inspection for during 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). This audit was conducted in Q1 of this year and the company reported that a single 483 observation was raised to which the company responded in a timely manner, and dialogue with the FDA continues with respect to the pMA application.
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In addition to this, Nemaura established that proBEAT™, 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. During the quarter ended December 31, 2020, Nemaura 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 proBEAT™, forms the BEATdiabetes.life program that is currently being developed for commercialization in the U.S. KOL studies are being conducted to provide additional marketing support of the program in preparation for a broader U.S.-wide roll-out. While still in the relatively early stages, we are pleased with initial results and feedback received from these user-groups.
We believe there are additional applications for sugarBEAT® 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; |
| · | 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; |
| · | 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). |
During this period of product development, the Company has experienced recurring losses and negative cash flows from operations. As of June 30, 2022, the Company had cash balances of $14,751,833, working capital of ($465,873) (deficit), total stockholders' equity of $3,958,150 (deficit) and an accumulated deficit of $41,710,773.
While the Company expects to continue to incur losses from operations for the near-term and these losses could be significant as product development, regulatory activities, clinical trials, and other commercial and product development related expenses are incurred, the Company reached a significant milestone during the three month period ended December 31, 2021, as the Company commenced commercial delivery of its sugarBEAT® device to its UK Licensee.
Management's strategic assessment continues to include the following potential options:
| · | obtaining further regulatory approval for the sugarBEAT® device in other global territories, including the U.S., Europe and the Middle East; |
| · | signing new/additional licensing and collaboration opportunities beyond our existing licensee partners; |
| · | pursuing further capital raising opportunities to support and accelerate the commercialization strategy; |
| · | developing the sugarBEAT® device platform for commercialization for other applications. |
Recent Developments
December 2021 marked a significant milestone in the Company’s evolutionary journey with the first two commercial deliveries of the sugarBEAT® non-invasive glucose monitor (“CGM”) being 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.
The deliveries reflect the phased delivery schedule agreed upon with MSW in relation to MSW’s initial order that was placed earlier in 2021, as a result of which the Company is now able to recognize revenue for the first time in its corporate history.
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 U.S. The agreed sale price of sensors to MSW-DP under the terms of the agreement is $20 per box of 5 sensors for the U.S. 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.
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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. This includes expansion of the consumer metabolic health offering Miboko, launched in late 2021, to employers and insurers across the U.S.
ATM Offering
In July 2021, the 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. On April 1, 2022, the Company and Agent entered into an amendment (the “Amendment”) to the ATM Agreement, pursuant to which the parties agreed to expand the meaning of the defined term “Registration Statement” in the ATM Agreement to include, for the period from April 1, 2022 and thereafter, a new shelf registration statement (File Number 333-263618) on Form S-3 (“New Registration Statement”) that was filed on March 16, 2022 with the SEC and declared effective by the SEC on March 28, 2022. No other changes to the ATM Agreement were made by the Amendment.
The offer and sale of shares of Common Stock through the Agent will be made pursuant to the New Registration Statement, and a related prospectus supplement filed with the SEC pursuant to which the Company is offering shares of its common stock having an aggregate offering price of up to $3,000,000.
Termination of Chief Financial Officer
Effective July 1, 2022, Justin Mclarney was terminated as the Company’s Chief Financial Officer. The Company has commenced a search for a U.S.-based replacement Chief Financial Officer. In the meantime, the Company’s finance team, which has significant experience with the Company, will continue to support the Company with respect to its accounting and financial reporting requirements, and Dewan Fazlul Hoque Chowdhury, Chief Executive Officer, President, member of the Board of Directors and significant stockholder of the Company, will act as principal financial officer and principal accounting officer of the Company.
COVID-19 Pandemic
The outbreak of COVID-19 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 impact of COVID-19 on our own operations and are working with our employees, suppliers, and other stakeholders to mitigate the risks posed by its spread, but COVID-19 is not expected to have any long-term detrimental effect on the Company’s success. While key suppliers have not always been accessible throughout the whole period of the outbreak, we have been able to be flexible in our priorities and respond favorably to the challenges faced during this period. We also recognize that one of the consequences of this pandemic has been a surge in the uptake of technologies for remote monitoring of patients and patient self-monitoring, which potentially enhances the prospects for the Company, its CGM product and its planned digital healthcare offering.
Results of Operations
Comparative Results for the Three Months Ended June 30, 2022 and 2021
Revenue
There was no revenue recognized in the three month period ended June 30, 2022 or June 30, 2021. Revenue is generally recognized as goods are dispatched and invoiced to our customer. Given lead times on manufacture, no goods were dispatched during the quarter ended June 30, 2022. This resulted in no revenue recognized this quarter.
Research and Development Expenses
Research and development (“R&D”) expenses were $330,055 and $288,484 for the three months ended June 30, 2022 and 2021, respectively. This amount consisted primarily of expenditures on wages and sub-contractor activities incurred for improvements made to the sugarBEAT® device. The increase of $41,571 was driven by further improvements made to our device.
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General and Administrative Expenses
General and administrative expenses were $1,880,938 and $1,332,185 for the three months ended June 30, 2022 and 2021, respectively. These expenses consisted of fees for legal, professional, consultancy, audit services, investor relations, insurance, advertising and general and operational wages. As with prior quarters, the increase in expenses was being driven predominantly by increased wages, as additional headcount has been added to support the operational scale up process across both our UK and U.S. teams. Increases have also been seen in insurance and advertising costs, which are considered to be directly related to the commercialization steps taken during the period. In addition to this, a non-cash item charge of $613,687 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.
As the Company continues to scale up to service its existing order book, it is expected that general and administrative expenses will continue to increase in a similar way moving forward, as the business transitions to a more operational focused base that will encompass an increase in functional expenses relating to production, sales, marketing, customer service, as well as enhancements to other existing functions.
Other Comprehensive Loss
For the three months ended June 30, 2022 and 2021, other comprehensive loss was $444,937 and$10,706, respectively. Currently all transactions recorded through other comprehensive loss arise from fluctuations in the USD:GBP exchange rate and the impact that this has on consolidation of the Company’s non-USD denominated assets and liabilities.
Liquidity and Capital Resources
We have experienced net losses and negative cash flows from operations since our inception. We have sustained cumulative losses of $41,710,773 through June 30, 2022. We have historically financed our operations through a combination of debt and equity funding.
As of June 30, 2022, the Company had a net working deficit of $465,873, which included cash balances of $14,751,833. The Company reported a net loss for the three month periods ended June 30, 2022 and 2021 of $3,979,297 and $3,343,725, respectively. This loss is after taking account of interest and debt accretion charges arising from the note purchase agreements for the three month periods ended June 30, 2022 and 2021 of $1,768,304 and $1,723,056, respectively.
Having reviewed the Company’s forward looking cashflow requirements in relation to the cash balance held at June 30, 2022, management is aware of the need to raise additional funds in order to finance the ongoing commercialization of sugarBEAT®. The Company had $14,751,833 of cash at June 30, 2022, 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 has 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 believes that there is a reasonable expectation that funding could be provided by one, or more, of the following 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 unaudited condensed consolidated financial statements, ASC 205-40 requires that Management recognize 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 from the date of filing of these unaudited condensed consolidated financial statements.
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Cash Flows
Net cash used in operating activities for the three months ended June 30, 2022 was $2,384,143, reflecting a net loss of $3,979,297, adjusted for the add back of the accretion of debt discount expense of $1,768,304, the mark-to-market charge booked in relation to the revaluation of the foreign currency forward contracts of $613,687 and the depreciation and amortization charge of $98,792. Cash was also impacted by increases in inventory of $137,386, which was directly driven as a result of commercial scale up.
Prepayments increased by $355,329, which was as a result of an increase in amount paid to Hamilton Court ($600,000), our forward contract provider, partially offset by a movement on value added tax debtor of $143,000.
There was also a $43,609 decrease in accounts payable during the fiscal period, with decreases seen in both other liabilities and accrued expenses of $120,812.
Net cash used in operating activities for the three months ended June 30, 2021 was $1,690,028, with the key drivers being driven by the net loss of $3,343,725, which includes non-cash charges of $36,133 in relation to depreciation and amortization, $1,723,056 in relation to the accretion of debt discount. In addition, we saw an increase in prepaid expenses of $550,211. An increase of $31,583 was also seen in inventory as the business moved to prepare its capacity to support of the imminent expectation of product launch. The Company also saw reductions in accounts payable of $145,898, as well as increases in accruals of $363,052 and deferred revenue of $515,731 and reduction in the liability due to related parties of $256,583.
Net cash used in investing activities for the three months ended June 30, 2022, was $217,712, which reflected patent filing costs of $25,598, the purchase of property and equipment of $192,114 driven by the procurement to support the transition to operational production.
Net cash used in investing activities was $398,221 for the three months ended June 30, 2021, which reflects $293,285 in software development that is being treated as work-in-progress for the BEATdiabetes.life platform. The Company also spent $22,714 on patent filing costs and $82,222 on the purchase of property and equipment to support future production and sensor development.
Net cash used in financing activities for the three months ended June 30, 2022 was $74,282, comprising $4,700,000 from proceeds of long term debt offset by $4,774,282 for the scheduled repayments of notes payable.
Net cash provided by financing activities for the three months ended June 30, 2021 was $1,463,658. $2,963,658 was raised in relation to the exercise of warrants offset by scheduled repayments against debt facilities of $1,500,000.
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.
Critical Accounting Policies and Estimates
When we prepare our unaudited condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), we must make estimates and assumptions about future events that affect the amounts we report. Certain of these estimates result from judgements that can be subjective and complex. As a result of that subjectivity and complexity, and because we continuously evaluate these estimates and assumptions based on a variety of factors, actual results could materially differ from our estimates and assumptions if changes in one or more factors require us to make accounting adjustments. We believe our critical accounting policies affect our more significant judgments and estimates used in the preparation of the unaudited condensed consolidated financial statements. During the three month period ended June 30, 2022, we have made no material changes or additions with regard to such policies and estimates.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4. 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 our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation as of June 30, 2022, the Company’s Chief Executive Officer and interim Chief Financial Officer has concluded that, as of June 30, 2022, the Company’s disclosure controls and procedures (as defined in Rules 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were not effective due to a material weakness in the Company’s internal control over financial reporting.
As of June 30, 2022, our management, with the participation of our Chief Executive Officer, who is also serving as our Interim Chief Financial Officer, evaluated our internal control over financial reporting. This assessment included the impact the departure of the Chief Financial Officer had on the internal control over financial reporting. As a result of our assessment, management identified the following material weaknesses in internal control over financial reporting as of June 30, 2022:
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.
Remediation of Material Weaknesses
We are in the process of implementing improvements and remedial measures in response to the material weakness. We are currently in the process of hiring a replacement CFO with US public company experience and expertise.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 under the Exchange Act during the fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on June 29, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
The exhibits listed on the Exhibit Index below are filed as part of this report.
| Exhibit No. | Document Description |
| 10.1 | Amendment, dated April 1, 2022, by and between Nemaura Medical Inc. and H.C. Wainwright & Co., LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 1, 2022). |
| 31.1 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase |
| 104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEMAURA MEDICAL INC. | |
| Date: August 12, 2022 By: | /s/ Dewan F.H. Chowdhury |
| Dewan F.H. Chowdhury Chief Executive Officer, Interim Chief Financial Officer, and President (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |
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