SECURITIES & EXCHANGE COMMISSION EDGAR FILING
Nemaura Medical Inc.
Form: 10-K
Date Filed: 2019-06-14
Corporate Issuer CIK: 1602078
© Copyright 2019, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————
FORM 10-K
——————
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2019
OR
For the transition period from _________ to _________
Commission File Number 001-38355
NEMAURA MEDICAL INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
46-5027260
(I.R.S. Employer Identification No.)
Advanced Technology Innovation Centre,
Loughborough University Science and Enterprise Parks
5 Oakwood Drive,
Loughborough, Leicestershire
LE11 3QF
United Kingdom
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: + 44 1509 222912
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.0001 par value
Name of each exchange on which registered
NASDAQ Capital Market
Trading Symbol
NMRD
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 ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
Emerging growth company ☒
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 ☐ No ☒.
The aggregate market value of the registrant’s common stock held by non-affiliates computed based on the closing sales price of such stock on
September 30, 2018 was $151,532,841.
The number of shares outstanding of the registrant's common stock, as of June 9, 2019 was 207,989,304.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
PART III
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accountant Fees and Services.
Item 15.
Exhibits, Financial Statement Schedules.
PART IV
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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
sugarBEAT 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.
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ITEM 1. BUSINESS.
Business Overview
PART I
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.
We announced on May 29, 2019 that we had been awarded CE approval to allow sugarBEAT to be legally sold in the European Union. CE
approval is disclosed by the use of the CE Mark, a manufacturers' declaration that the product meets the requirements of the applicable
European laws. The European clinical trial program for sugarBEAT 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 sugarBEAT 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. We also completed studies required to support a US FDA submission for approval of sugarBEAT as a medical device, and are
currently in the process of compiling the application for submission. 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.
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; 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.
Our Business Strategy
We intend to lead in the discovery, development and commercialization of innovative and targeted diagnostic medical devices 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 with Dallas Burston Pharma (Jersey) Limited, with whom we have
an exclusive marketing rights agreement for these two countries.
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.
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– 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 sugarBEAT
device and have signed commercial agreements with TP MENA for the GCC (Gulf Region), and Al-Danah Medical for Qatar.
– Submit FDA application for approval of sugarBEAT. The application is currently in progress and expected to be submitted in Q2 2019.
– Expand the indications for which the sugarBEAT device may be used. We believe that the sugarBEAT device may offer significant benefits
as 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 Lactate 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,
– 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.
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 are trialed 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 submission to the US FDA. As 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 projected milestones.
The table below provides our current estimate of our timeline:
Product Development Timelines
Milestone
Target Start Date
Target 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.
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.)
Scale up of device (transmitter) manufacturing
CE Mark for body worn transmitter device
Commercial launch in the UK, followed by major territories in Europe
US FDA Submission
July 2017
Completed
January 2017
Completed
January 2017
August 2018
Q3 2019
Q2 2019
Ongoing
Completed
Staggered launch
Q2 2019
Market Opportunity for the Company's Products
According to the International Diabetes Federation Atlas (the "IDF"), there are approximately 425 million people in the world who had diabetes as
of December 2017. The IDF is predicting that by 2035 this will rise to 592 million people. The number of people with Type 2 diabetes is
increasing in every country and currently eighty percent (80%) of people with diabetes live in low- and middle-income countries. The greatest
number of people with diabetes is between 40 and 59 years of age.
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Statistics published by the IDF report that diabetes is a huge and growing problem, and the costs to society are high and escalating. In addition,
Europe has the highest prevalence of children with Type 1 diabetes.
Adult population
(20-79 years, millions)
Regional prevalence (%)
Comparative prevalence (%)
Number of people with diabetes
(millions)
Regional prevalence (%)
Comparative prevalence (%)
Number of people with IGT (millions)
Number of children with Type 1
diabetes (thousands)
Number of newly diagnosed cases per year
(thousands)
Statistical Data for Diabetes in Europe
2013
659
Diabetes (20 – 79 years)
8.5
6.8
56.3
Impaired Glucose Tolerance (20 – 79 years)
9.2
8.1
60.6
Type 1 diabetes (0 – 14 years)
129.4
20.0
Each year approximately 600,000 people die from diabetes in Europe.
Deaths From Diabetes
2035
669
10.3
7.1
68.9
11.0
8.9
73.7
-
-
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/Territories
Russian Federation
Germany
Turkey
Spain
Italy
Millions
10.9
7.6
7.0
3.8
3.6
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
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glucose levels.
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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's no cure for Type 2 diabetes, but it
can be 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.
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 sugarBEAT device may be readily adopted by the medical community for the assessment of a patient continuously.
We believe our non-invasive sugarBEAT 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, we believe the sugarBEAT device may represent a best in
class non-invasive continuous glucose monitoring device to reach those afflicted with diabetes. While we cannot estimate the market share that
our sugarBEAT device may capture, we believe that the sugarBEAT 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
We intend 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 early 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:
– develop and market products that are less expensive or more effective than our future product;
– 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 will compete for market share against large pharmaceutical 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 these 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. Although 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.
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Information relating to our competitors is listed in the table below.
FreeStyle Libre™(1)
Abbott
Inserted Sensor
11.4%
Manufacturer
Technology
Reliability (Overall MARD)
Reliability (Clarke Error Grid
A+B zone)
Patients Studied
Patient Days Studies
Warm-up Time
Daily Calibration
Glucose Display Frequency On manual activation
72
14
1 hour
None
99%
of sensor
14 days
EU
Finger stick
Patch/Senor Life
Regulatory Approvals
Basis for reimbursement
Daily Avg. Reimbursement
Cost
Daily Retail Cost UK (exc.
VAT)
Platinum G6®(2)
Dexcom
Inserted Sensor
9.8%
Not available
324
10
2 hours
None
Platinum G5®(3)
Dexcom
Inserted Sensor
9.0%
Eversense™(4)
Senseonics
Implanted Sensor
11.4%
SugarBEAT®
Nemaura Medical
Non-invasive Sensor
<12%*
97.0%
97
9
2 hours
2x
99.1%
44
90
NA
2x
>95.0%
>75
1 to 4
30-60 min
1x
Every 5 min
Every 5 min
Every 5 min
Every 5 min
10 days
US
Not available
7 days
Worldwide
CGM
90 days
EU
CGM
1 day
EU
Finger stick
$2.50 (Germany)
Not available
$9 (US)
Not available
$2.50**
£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 electrically safety tested, and all biocompatibility conformance also demonstrated, against the relevant European Medical
Device Directives. When new materials are introduced, these 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 include wireless communication from a body
worn/adhered transmitter and also to reduce the device size, and with an enhanced sensor system. This miniaturised wireless device achieved
CE approval in May 2019, and FDA submission is planned in Q2 2019. An application for CE mark approval requires the Company to have a
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 2018 with Nemaura Pharma Limited, Nemaura Medical
has outsourced the CE approval registration process to Nemaura Pharma. 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, whilst 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 SugarBEAT 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,
the formula for the cumulative measurement of an analyte, and the formulation and process for preparation of the enzyme solution used in the
sensor.
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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 further patents were filed in 2018, that will not be published in the public domain for some months, relating to the sensor and device
application, providing further strength to the intellectual property position. Further patents are intended to be filed in the coming months relating to
the device and sensor, providing new intellectual property protection, some of which will supersede previous intellectual property.
Additionally, we retain substantial trade secrets relating to the sensor formulation, which have taken over five years to develop, and will prove
very difficult 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 BEAT and sugarBEAT has been registered in
all major territories globally. Accordingly, all intellectual property essential to the sugarBEAT 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, Trademark
Patent: Cumulative Measurement of
an Analyte*.
Expiration
Date
May 20,
2032
Jurisdictions in which
Granted/ Issued
Australia, France, Germany,
Italy, Poland, Spain,
Netherlands, UK
Patent: Patches for Reverse
Iontophoresis**
July 1, 2029
Australia, Germany, France,
UK, Italy, Netherlands,
Switzerland, China, Hong Kong,
Japan.
Trade Secret
First filed in UK
N/A
Filed 2018
Jurisdictions in which
Pending
Brazil, Canada, China, India,
Japan, Qatar, United Arab
Emirates, U.S.
None
N/A
All
Know-how: Sensor Formulation
Two Patents: Sensor and device
application.
Trademark: BEAT
Trademark: sugarBEAT
Renewal
due in 2026
Renewal
due in 2025
UK, China, EU, India, Japan
Canada
UK, Australia, Switzerland,
Canada
China, Egypt, EU, Israel, India,
Iran, Japan, North Korea,
Morocco, Mexico, Norway, New
Zealand, Russia, Singapore,
Tunisia, Turkey, USA
Ongoing
Royalty or
Milestone
Payments
None
None
N/A
None
None
None
* 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.
** This patent provides a reverse iontophoresis patch with means for releasing a conductive medium onto the skin during use and means for
transporting analyte to a separate location for analysis.
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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. The study was completed and the FDA submission is in preparation.
In August 2017, we commenced a European three-stage 75 patient clinical study, consisting of 80% Type 1 and 20% Type 2 diabetics. The study
was designed 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. Three 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 study was completed 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.
Research and development
We spent $2,296,668 and $993,833 during the years ended March 31, 2019 and 2018, respectively, on research and development. We
anticipate that for the year ending March 2020, research and development expenditures will increase to further develop the device for
commercial launch in the UK and Europe.
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; sugarBEAT will be manufactured and marketed according to ISO13485 quality standards.
In preparation for our anticipated commercial launch of sugarBEAT in the UK during the second half of 2019 we worked with our manufacturing
partner Nemaura Pharma, to initiate scale-up manufacturing of the various sugarBEAT components alongside facilities for final assembly and
packaging. As part of this process, we are expanding our manufacturing and assembly capabilities by occupying additional space within our
existing headquarters site at Loughborough Science Park 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 enter into the following types of agreements during 2019:
– Manufacturing agreements for the sensor manufacture
– Manufacturing agreements for the patch manufacture
– Manufacturing agreements for the CGM watch device and transmitter device manufacture
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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”) 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 million in return for providing DB Pharma with the exclusive right to sell the sugarBEAT 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.
In addition, a joint venture agreement was entered into with Dallas Burston Ethitronix (Europe) in May 2018, whereby we will share equally the
costs and net profits of the sales of our sugarBEAT system in all territories in Europe, with the exception of the United Kingdom, which is the
subject of a separate agreement with DB Pharma. 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, 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, with the active implantable devices Directive 90/385/EEC or with the in vitro devices Directive 98/79/EC. We must first determine
whether the device we intend to manufacture or import falls under any of these 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, 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. 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.
The CE approval is the process of achieving a mandatory conformity marking for the sugarBEAT 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
sugarBEAT 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), through 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 sugarBEAT 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 sugarBEAT
device. The first CE mark submission was based on literature evaluation of 3rd 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 sugarBEAT device can trend blood glucose levels in a human subject by taking measurements every 5 minutes.
The clinical trial data demonstrates the sugarBEAT 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.
U.S. Food and Drug Administration regulation of medical devices.
The FDCA and FDA regulations establish a comprehensive system for the regulation of medical devices intended for human use. sugarBeat 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. SugarBeat 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, 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,
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") 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 sugarBeat would be a PMA approval.
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 provide 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,
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, 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.
The recent De-Novo and subsequent 510(k) by Dexcom provide evidence that current FDA thinking on invasive 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
compared to invasive CGMs. Moreover, the risks to health are understood, and appropriate general and special controls have been applied
through the ISO 13485:2016 design controls to provide evidence of assurance of safety and effectiveness. Nemaura is exploring the possibility of
submission of a De-Novo application in place of a PMA.
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Clinical trials
Clinical trials of medical devices in the United States 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.
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.
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 our 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
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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.
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 introduces 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 are
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 are 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.
Corporate Information
Our principal executive offices are located at The Advanced Technology Centre, Oakwood Drive, Loughborough, Leicestershire, LE11 3QF, UK.
Our website is located at www.nemauramedical.com and our telephone number is +44 1509 222912. 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
We currently employ 8 personnel. We believe our relationships with our employees and contractors are good.
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Corporate History and Restructuring
We are a holding corporation that owns one hundred percent (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%) 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%) of the stock in Dermal Diagnostics
Limited, an England and Wales corporation formed on January 20, 2009, and one hundred percent (100%) of the stock in Trial Clinic Limited, an
England and Wales corporation formed on January 12, 2011.
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”).
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) device.
RECENT DEVELOPMENT
On March 27, 2019, we filed a new Registration Statement on Form S-3 (Reg. 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-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.
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. 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 for up to 14 days, whereas
with sugarBEAT 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.
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 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 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 oversee the development of sugarBEAT and its
commercialization strategy. Chris is expected to oversee the global operational management, handle investor updates on the technical and
commercial development, as well as help broaden the global market reach 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.
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 any of the following risks actually occur, they could materially adversely affect our business, financial condition or operating results. In that
case, the trading price of our common stock could decline.
Risks Related to Our Product Candidate and Operation
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
sugarBEAT 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
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 device in May 2019.
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; 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 sugarBEAT 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, 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.
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 sugarBEAT 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 sugarBEAT 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 sugarBEAT device and our other potential
products. We do not currently have a dedicated sales force or manufacturing capability, and we have no experience in the sales, marketing and
distribution of medical diagnostic device products. In order to commercialize the sugarBEAT 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
sugarBEAT device;
– receipt of regulatory approval of the sugarBEAT 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 sugarBEAT 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.
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 sugarBEAT 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.
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. 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 claims
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 sugarBEAT 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.
The market may not accept the sugarBEAT device based on any number of the above factors. If the sugarBEAT 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 product 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 sugarBEAT 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
manufactures 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, 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$). Income and
expenditures are translated at the 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, following the UK’s Brexit vote to leave the EU, there has been a weakening of GBP against many currencies. We expect to have to
pay some of our service providers and vendors in USD and we will pay approximately 10% more at present than we would have done prior to the
Brexit vote. 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.
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 sugarBEAT
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.
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. 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 seeking approval from the United Kingdom and the European Union for the sugarBEAT device, we may seek regulatory approval
from Saudi Arabia and the United Arab Emirates, Hong Kong, Australia, and the USA, to market the sugarBEAT 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.
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.
We may be exposed to the risk of product liability claims that is inherent in the diagnostic medical device. 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 if 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 will offset any 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.” 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 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 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 Stock to fluctuate substantially, which may limit or
prevent investors from readily selling their shares of Common Stock and may otherwise negatively affect the liquidity of our 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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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
We have not paid and may not pay any dividends on our Common Stock.
We have paid no dividends on our Common Stock to date and may not pay dividends to holders of our Common 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 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.
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, 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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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 2019 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 be deemed a “penny stock,” which makes it more difficult for our investors to sell their shares.
Our Common 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 Stock may cause the price of our Common Stock to
decline.
If our stockholders sell substantial amounts of our Common 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 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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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
The interests of Dr. D.F. 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 % of the shares eligible to vote in any of our annual or special
meeting. 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.
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.
Our offices are located at ATIC Building, 5 Oakwood Drive, Loughborough, Leicestershire, United Kingdom. The offices house our headquarters
and offices. The monthly rent is $2,410. The lease is on a three-year term which commenced on August 1, 2017. The terms of the lease provide
a break option 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
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 trading on the NASDAQ Capital Market under its existing trading symbol,
“NMRD”. For 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 bids for our shares of common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
Fiscal Year 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year 2020
First Quarter (through June 1, 2019)
As of June 9, 2019, we had approximately 92 holders on record of our common stock.
Dividends
High Bid
9.00
6.99
6.49
6.80
High Bid
5.00
3.98
2.50
1.93
High Bid
1.48
Low Bid
2.00
4.04
4.20
4.50
Low Bid
2.51
2.05
0.80
0.90
Low Bid
0.80
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.
Securities Authorized for Issuance Under Equity Compensation Plans
We have not adopted an equity compensation plan.
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.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ITEM 6. SELECTED FINANCIAL DATA.
Financial highlights
Year Ended March 31,
2019
2018
2017
2016
2015
Net loss
Diluted loss per share
Cash, cash equivalents, and short-term
investments
Total assets
Long-term obligations
Non-current portion of Deferred Revenue
Stockholders’ equity/(deficit)
$
$
$
$
$
$
$
* less than $0.01
(4,452,797) $ (1,820,449) $ (1,551,266) $ (1,539,637) $ (1,319,840)
*
(0.02) $
(0.01) $
* $
* $
3,740,664 $
4,763,715 $
— $
1,237,850 $
2,226,904 $
5,733,886 $
6,255,402 $
— $
1,333,128 $
4,110,965 $
2,779,309 $
7,401,906 $
— $
1,183,035 $
5,366,500 $
9,403,965 $
9,732,783 $
— $
1,396,005 $
7,678,765 $
354,749
913,108
(170,000)
1,538,300
(917,411)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The discussion and analysis below includes certain forward-looking statements that are subject to risks, uncertainties and other factors, as
described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K, that could cause our actual growth, results of operations,
performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow to differ materially from
those expressed in, or implied by, those forward-looking statements.
Corporate Overview
Since inception we have devoted substantially all of our efforts establishing a new business and while operations have commenced we have
generated no revenue from our limited operations. We are a holding corporation for a diagnostic medical device company and a clinical trial
company specializing in discovering, developing and commercializing diagnostic medical devices with initial applications in the area of diabetes.
We are a holding corporation that owns one hundred percent (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%) 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%) of the stock in DDL, an England and
Wales corporation formed on January 20, 2009, and one hundred percent (100%) of the stock in Trial Clinic Limited, an England and Wales
corporation formed on January 12, 2011.
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
DDL and TCL.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 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 invoices were posted in Pharma and recharges were made 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. This covered the development of SugarBeat under Pharma’s ISO13485 Accreditation. In lieu of these
services, DDL invoices Pharma 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. Full
legal title and beneficial ownership of the CE Mark and all related intellectual property remains with Nemaura Medical under the terms of the
service contract.
Dr. D.F. 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.
Chowdhury will allocate 15%-20% of their time to oversee the current operations at Pharma and the implementation of the new management
team 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 delivery 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. Chowdhury performed/performs for Pharma in his capacity as Manager are not recharged to
Nemaura Medical Inc. and are not included in our financial statements.
RESULTS OF OPERATIONS
Management’s plans and basis of presentation
The Company has experienced recurring losses and negative cash flows from operations. At March 31, 2019, the Company had approximate
cash balances of $3,740,664, working capital of $3,216,199, total stockholders’ equity of $2,226,904 and an accumulated deficit of $13,425,879.
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
product development, regulatory activities, clinical trials and other commercial and product development related expenses are incurred.
Management’s strategic assessment includes the following potential options:
– obtaining regulatory approval for the sugarBEAT device: CE mark review and approval in Europe was received in May 2019, and FDA
submission is planned for Q2 2019.
– pursuing additional capital raising opportunities;
– exploring licensing opportunities; and
– undertaking manufacturing development and scale-up of the sugarBEAT device for commercialization.
Results of Operations
Year Ended March 31, 2019 Compared To The Year Ended March 31, 2018
Revenue
There was no revenue recognized in the years 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.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Research and Development Expenses
Research and development expenses were $2,296,668 and $993,833 for the years ended March 31, 2019 and 2018, respectively. This increase
was driven by the increased level of activity as the Company draws closer to commercialization. This amount related to clinical trials and
improvements made to the sugarBEAT device, and expenditures included sub-contractor activities, and consultant’s 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 $2,180,056 and $915,132 for the years ended March 31, 2019 and 2018, respectively. This increase
is due to higher insurance costs and fees for professional services. 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, 2019 and 2018 other comprehensive income/(loss) was ($299,263) and $564,914, 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 through March 31, 2019. We have historically financed our operations through the issuances of equity, UK government grants and
contributions of services from related entities.
At March 31, 2019, the Company had net working capital of $ 3,216,199 which included cash account balances of $3,740,664. The Company
reported a net loss of $4,452,797 for the year ended March 31, 2019.
We have completed clinical studies required for FDA submission and plan to submit an application to the FDA for approval 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 ability to raise additional
funds. This may include a combination of debt, equity and licensing fees. We are currently in discussions with two of the largest shareholders in
the company with respect to potentially securing non-dilutive conventional interest bearing loans from these shareholders, now that the company
is expected to become revenue generating through licensing and product sales in Europe following the recent CE approval.
We believe the cash position as of March 31, 2019 is adequate for our current level of operations through June 2020, and for the achievement of
certain of our product development milestones. Our plan is to utilize the cash on hand to continue establishing commercial manufacturing
operations for the commercial supply of the sugarBEAT device and patches now that CE mark approval has been received.
Cash Flows
Net cash used by our operating activities for the year ended March 31, 2019 was $3,560,952 which reflected our net loss of $4,452,797,
increased by an increase in prepaid expenses and other receivables of $456,125 and increase in inventory of $37,396. This was offset by stock-
based compensation $429,610, an increase in accounts payable of $98,118, an increase in liability due to related parties $697,182, an increase
in 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.
Net cash used by our operating activities for the year ended March 31, 2018 was $2,136,977 which reflected our net loss of $1,820,449,
increased by an increase in accounts payable, an increase in prepayments, a decrease in liability due to related parties and an increase in
accrued interest receivable of $452,535, and offset by an increase in accruals of $106,751.
Net cash used by our operating activities for 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.
Net cash used in investing activities was $6,306,089 for the year ended March 31, 2017, which reflected the expenditures made in developing
intellectual property, primarily related to patent filings of $73,070, property and equipment of $6,519 and $6,226,500 invested in fixed rate
savings account.
Net cash provided by financing activities for the year ended March 31, 2019 was $2,049,855. Proceeds from the sale 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 a unit purchase option
and $64,311 was raised in connection with the exercise of warrants. Cash costs relating to these offerings were $489,404; $328,302 of cash
costs related to the December public offering and $161,102 related to the ATM.
For the years ended March 31, 2018 and 2017, there were no financing activities.
34
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP)
requires management 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 tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the year 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.
Intangible Assets: Intangible assets consist of licenses and patents associated with the sugarBEAT 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 no impairment indicators present during the years ended March 31 2019, 2018 or 2017.
35
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019 AND 2018
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of March 31, 2019 and 2018
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2019, 2018 and 2017
Consolidated Statements of Changes of Stockholders’ Equity for the years ended March 31, 2019, 2018 and 2017
Consolidated Statement of Cash Flows for the years ended March 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Page
F-2
F-4
F-5
F-6
F-7
F-8-23
F-1
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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, 2019, the related
consolidated statements of comprehensive loss, changes in stockholders’ equity, and cash flows for the year then ended, 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, 2019, 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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, and the results of its operations and its cash
flows for each of the two years in the period ended March 31, 2018, 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 audits. 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 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. 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's internal control over financial reporting. Accordingly, we express no such opinion in
accordance with the standards of the PCAOB.
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 Transactions
The Company has significant transactions and relationships with related parties that are described in Note 7 to the consolidated financial
statements.
/s/ Crowe LLP.
We have served as the Company's auditor since 2017.
Denver, Colorado
June 12, 2018
F-3
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash
Fixed rate cash account
Prepaid expenses and other receivables
Accrued interest receivable
Inventory
Total current assets
Other assets:
Property and equipment, net of accumulated depreciation
Intangible assets, net of accumulated amortization
As of
March 31,
2019
($)
As of
March 31,
2018
($)
3,740,664
—
736,460
—
38,036
4,515,160
56,871
191,684
248,555
822,335
4,911,551
187,139
77,508
—
5,998,533
5,770
251,099
256,869
Total assets
4,763,715
6,255,402
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
Liability due to related party
Other liabilities and accrued expenses
Deferred revenue
Total current liabilities
Non-current portion of deferred revenue
Total liabilities
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.
Common stock, $0.001 par value, 420,000,000 shares authorized and 207,655,916 shares
issued and outstanding at March 31, 2019 (420,000,000 shares authorized and 67,676,000
shares issued and outstanding at March 31, 2018 )
Additional paid in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to consolidated financial statements
F-4
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
161,348
964,679
107,759
65,175
49,912
613,818
77,414
70,165
1,298,961
811,309
1,237,850
1,333,128
2,536,811
2,144,437
—
137
207,656
67,676
15,785,015
(13,425,879)
(339,888)
2,226,904
4,763,715
13,056,859
(8,973,082)
(40,625)
4,110,965
6,255,402
NEMAURA MEDICAL INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Revenues
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income
Net loss
Other comprehensive income/ (loss)
Foreign currency translation adjustment, net of tax
Comprehensive loss
Loss per share
Basic and diluted
2019
($)
Year Ended March 31,
2018
($)
2017
($)
—
—
—
2,296,668
2,180,056
4,476,724
(4,476,724)
993,833
915,132
1,908,965
(1,908,965)
1,034,605
516,661
1,551,266
(1,551,266)
23,927
88,516
—
(4,452,797)
(1,820,449)
(1,551,266)
(299,263)
(4,752,060)
564,914
(1,255,535)
(760,999)
(2,312,265)
(0.02)
(0.01)
*
Weighted average number of common shares outstanding
180,903,839
150,070,400
205,000,000
* less than $0.01
See notes to consolidated financial statements
F-5
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED MARCH 31, 2019, 2018, 2017
Common Stock
Convertible
preferred
Shares
Amount
($)
stock
($)
Additional
Paid in
Capital
($)
Accumulated
Deficit
($)
Accumulated
Other
Comprehensive
Income
(Loss)
($)
Total
Stockholders’
Equity
($)
205,000,000
—
205,000
—
—
—
12,919,672
—
(5,601,367)
(1,551,266)
155,460
—
7,678,765
(1,551,266)
—
—
—
—
—
(760,999)
(760,999)
205,000,000
205,000
—
12,919,672
(7,152,633)
(605,539)
5,366,500
(137,324,000)
—
(137,324)
—
137
—
137,187
—
—
(1,820,449)
—
—
—
(1,820,449)
—
—
—
—
—
564,914
564,914
67,676,000
67,676
137
13,056,859
(8,973,082)
(40,625)
4,110,965
137,324,000
137,324
(137)
(137,187)
—
—
—
50,000
50
—
450
—
—
500
234,998
235
—
293,768
—
—
294,003
1,942,061
1,942
—
1,689,499
—
—
1,691,441
Balance at
April 1, 2016
Net loss
Other
comprehensive
income -
foreign
currency
translation loss
Balance at
March 31,
2017
Cancellation of
common stock
and issue of
convertible
preferred stock
Net loss
Other
comprehensive
income -
foreign
currency
translation
gain
Balance at
March 31,
2018
Conversion of
preferred stock
into common
stock
Issuance of
stock –
exercise of
Invictus
warrants
Issuance of
common
shares under
ATM financing
net of offering
costs of
$161,102
Issuance of
common
shares and
warrants under
public offering
–net of offering
costs of
$328,302
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Exercise of
warrants under
public offering
Underwriter
purchase of
option to
purchase units
Restricted
shares and
warrants
issued as
stock-based
compensation
to investor
relations and
Management
consultants
Net loss
Other
comprehensive
income -
foreign
currency
translation loss
Forgiveness of
payable by a
related party
Balance at
March 31,
2019
61,357
61
—
63,750
—
—
63,811
—
—
100
—
—
100
367,500
—
368
—
—
—
514,957
—
—
(4,452,797)
—
—
515,325
(4,452,797)
—
—
—
—
—
(299,263)
(299,263)
—
—
—
302,819
—
—
302,819
207,655,916
207,656
—
15,785,015
(13,425,879)
(339,888)
2,226,904
See notes to consolidated financial statements
F-6
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization
Stock Based Compensation
Other non-cash expenses
Changes in assets and liabilities:
Prepaid expenses and other receivables
Accrued interest receivable
Increase in inventory
Accounts payable
Liability due to related party
Other liabilities and accrued expenses
Net cash used in operating activities
Cash Flows from Investing Activities:
Capitalized patent costs
Purchase of property and equipment
Fixed rate savings account
Net cash provided by/ (used in) investing activities
Cash Flows from Financing Activities:
Costs incurred in relation to ATM Financing
Costs incurred in relation to public offering
Gross proceeds from issuance of common stock in relation to
ATM financing
Gross proceeds from public offering
Gross proceeds from warrant exercise
Gross proceeds from unit purchase option
Net cash provided by financing activities
Net increase/(decrease)/ in cash
Effect of exchange rate changes on cash
Cash at beginning of year
Cash at end of year
Supplemental disclosure of non-cash financing activities:
Conversion of Series A preferred stock to common stock
Prepayment of equity compensation
Forgiveness of payable from a related party
2019
($)
Year Ended March 31
2018
($)
2017
($)
(4,452,797)
(1,820,449)
(1,551,266)
33,407
429,610
34,796
(456,125)
70,759
(37,396)
98,118
697,182
21,494
(3,560,952)
(20,331)
(59,666)
4,483,852
4,403,855
(161,102)
(328,302)
455,105
2,019,743
64,311
100
2,049,855
2,892,758
25,571
822,335
3,740,664
137,324
85,715
302,819
29,256
—
—
(138,859)
(73,441)
—
(31,247)
(162,644)
60,407
(2,136,977)
(45,260)
—
1,994,475
1,949,215
—
—
—
—
—
—
—
(187,762)
98,738
911,359
822,335
—
—
—
20,433
—
—
85,367
—
—
2,522
270,975
(20,859)
(1,192,828)
(73,070)
(6,519)
(6,226,500)
(6,306,089)
—
—
—
—
—
—
—
(7,498,917)
(993,689)
9,403,965
911,359
—
—
—
See notes to consolidated financial statements
F-7
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
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. 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 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 sugarBEAT
device, which consists of a disposable patch containing a sensor, and a non-disposable miniature electronic watch with a re-chargeable power
source, which is designed to enable trending or tracking of blood glucose levels. All 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:
F-8
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEMAURA MEDICAL INC.
The Company was incorporated in 2013 since which period there has been recurring losses from operations and an accumulated deficit of
$13,425,879 as of March 31, 2019. These operations have resulted in the successful completion of clinical programs to support a European CE
mark approval, as well as a US Food and Drug Administration 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 reduced over time. Management has entered into licensing agreements with unrelated third parties relating to the
United Kingdom, Europe, Qatar, all countries in the Gulf Cooperation Council, Management has evaluated the expected expenses to be incurred
along with its available cash and has determined that the Company has the ability to continue as a going concern for at least one year
subsequent to the date of issuance of these consolidated financial statements. The Company has $3,740,664 of readily available cash on hand at
March 31, 2019.
Management's strategic plans include the following:
– obtaining further regulatory approval for the sugarBEAT device in other countries such as the USA;
– pursuing additional capital raising opportunities, in addition 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.
– 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, 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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and cash equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and
cash equivalents consist 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.
(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 payable 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. The
fair value of amounts payable to related parties are not practicable to estimate due to the related party nature of the underlying transactions.
(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 years. This is charged to operating expenses.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
F-9
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(e) Intangible assets
Intangible assets consist of licenses and patents associated with the sugarBEAT 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 no impairment indicators present during the years ended March 31 2019, 2018 or 2017.
(f) Revenue Recognition
While the Company is not currently recognizing revenue, we have considered the guidelines within ASC Topic 606, Revenue from Contracts with
Customers, which is effective 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 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.
(g) 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. The CE mark has now been granted and the FDA submission is planned 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 submission is imminent.
(h) Inventory
Inventories are 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.
F-10
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(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
not 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.
In December 2017, the US Tax Cuts and Jobs Act was signed into law. Generally, this Act reduces corporate rates from a top rate of 35% to a
top rate of 21%, effective January 1, 2018. As the Company’s US 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 year ended March 31, 2019.
(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 years ended March 31, 2019, 2018, and 2017, warrants to purchase 10 million shares of
common stock were anti-dilutive and were excluded from the calculation of diluted loss per share. For the year ended March 31, 2019, warrants
to purchase 1,880,704 shares of common stock and a unit purchase option to purchase 97,103 shares of common stock as well as 97,103
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 financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the periods presented. Actual
results may differ from those estimates.
F-11
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(l) Foreign currency translation
The functional currency of the Company is the Great Britain Pound Sterling ("GBP"). The reporting currency is the United States dollar (US$).
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. Income and expenses are translated at the average exchange rates prevailing during the reporting
period.
The translation rates are as follows:
Year end GBP : US$ exchange rate
Average period/yearly GBP : US$ exchange rate
2019
1:1.3030
1:1.3026
2018
1:1.4033
1:1.3305
2017
1:1.2453
1:1.3146
Adjustments resulting from translating the financial statements into the United States dollar are recorded as a separate component of
accumulated other comprehensive loss in stockholders’ equity.
(m) 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.
(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.
F-12
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 Framework – Changes 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(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 common stock. 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CE Approval
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 sugarBEAT 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 million and $1.403 million as of March 31, 2019 and 2018, 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 will be recorded as income over the term of the commercial licensing agreement beginning from the date of clinical evaluation
approval. As the Company expects commercialization of the sugarBEAT device to occur in the year ending March 31, 2020, approximately
$65,000 of the deferred revenue has been classified as a current liability as of March 31, 2019.
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 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.
NOTE 5 – PROPERTY AND EQUIPMENT
As of March 31, 2019, and March 31, 2018 property and equipment is summarized as follows.
Property and equipment
Less accumulated depreciation
March 31, 2019
($)
March 31, 2018
($)
77,597
(20,726)
56,871
18,213
(12,443)
5,770
Depreciation expense related to property and equipment for the years ended March 31, 2019, 2018 and 2017 was approximately $9,000, $4,000
and $4,000 respectively.
NOTE 6 - INTANGIBLE ASSETS
As of March 31, 2019, and March 31, 2018 intangible assets are summarized as follows:
Patents and licenses
Less accumulated amortization
Estimated amortization expense is approximately $19,000 for each of the next five years.
NOTE 7 – RELATED PARTY TRANSACTIONS
March 31, 2019
($)
March 31, 2018
($)
261,938
(70,254)
191,684
323,987
(72,888)
251,099
Nemaura Pharma Limited (Pharma), Black and White Health Care Limited (B&W) and NDM Technologies Limited (NDM) are entities controlled
by the Company’s chief executive officer, interim chief financial officer, and majority shareholder, Dewan F.H. Chowdhury.
In accordance with the United States Securities and Exchange Commission (SEC) Staff Accounting Bulletin 55, these financial statements are
intended to reflect all costs associated with all operations of Nemaura Medical and its subsidiaries Pharma has a service agreement with DDL, to
undertake development, manufacture and regulatory approvals under Pharma’s ISO13485 Accreditation. In lieu of these services, Pharma
invoices DDL on a periodic basis for said services. Services are provided at cost plus a service surcharge amounting to less than 10% of the total
costs incurred.
F-17
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of activity between the Company and Pharma, B&W and NDM for the years ended March 31, 2019, 2018 and 2017.
These amounts are unsecured, interest free, and payable on demand.
Balance due to Pharma and NDM at beginning of period
Amounts received from Pharma
Amounts invoiced by Pharma to DDL, NM and TCL (1)
Amounts invoiced by DDL to Pharma
Amounts repaid by DDL to Pharma
Amounts paid by DDL on behalf of Pharma
Amounts invoiced by B&W to DDL
Amounts repaid by DDL to B&W
Foreign exchange differences
Forgiveness of payable accounted for as equity contribution
Net balance due to Pharma and NDM at end of the period
Year Ended
March 31,
2019
($)
613,818
—
2,312,412
(977)
(1,569,496)
—
2,206
(5,622)
(84,843)
(302,819)
964,679
Year Ended
March 31,
2018
($)
687,609
145,214
842,739
—
(1,096,767)
(19,889)
—
—
54,912
—
613,818
Year Ended
March 31,
2017
($)
494,145
2,480
577,481
(15,305)
(249,060)
(42,403)
—
—
(79,729)
—
687,609
(1) These amounts are included primarily in research and development expenses.
All related party transactions relate to operating activities in the years ended March 31, 2019, 2018 and 2017.
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 8 – INCOME TAXES
The Company and its subsidiaries file separate income tax returns.
The United States of America
The Company is incorporated in the US and is subject to a US federal corporate income tax rate of 21% for the year ended March 31, 2019. As a
result of the US Tax Cuts 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, 2018 and 35% for the year ended March 31, 2017.
British Virgin Islands
RGL is incorporated in the British Virgin Islands (“BVI”). Under the current laws of the BVI, RGL is not subject to tax on income or capital gains.
In addition, upon payments of dividends by RGL, no BVI withholding tax is imposed. During the years ended March 31, 2019, 2018 and 2017,
there was no income or expenses in the BVI.
UK
DDL, TCL and DDHL are all incorporated in the United Kingdom (UK) and the applicable UK statutory income tax rate for these companies is
19%.
F-18
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2019, 2018 and 2017 loss before income tax expense (benefit) arose in the UK and U.S. as follows:
Loss before income taxes arising in UK
Loss before income taxes arising in United States
Total loss before income tax
2019
$
(2,726,862)
(1,725,935)
(4,452,797)
Year Ended March 31,
2018
$
(1,353,243)
(467,206)
(1,820,449)
2017
$
(1,251,870)
(299,396)
(1,551,266)
Reconciliation of our effective tax rate to loss to the statutory U.S federal tax rate is as follows:
Loss before income taxes
Expected tax benefit
Foreign tax differential
Enhanced research and development
Other
Change in valuation allowance
Actual income tax benefit
2019
$
(4,452,797)
(935,000)
55,000
(297,000)
1,000
1,176,000
—
Year Ended March 31,
2018
$
(1,820,449)
(561,000)
36,000
(215,000)
35,000
705,000
—
(21%)
1%
(7%)
0%
26%
—
2017
$
(1,551,266)
(527,000)
270,000
(198,000)
—
455,000
—
(31%)
2%
(12%)
2%
39%
—
(34%)
17%
(13%)
—
29%
—
The tax effects of the temporary differences that give rise to significant portions of deferred income tax assets are presented below:
Net operating tax loss carried forwards
Research and development enhancement
Other items
Valuation allowance
Year Ended March 31,
2019
$
2,641,000
867,000
(103,000)
(3,405,000)
2018
$
1,627,000
602,000
—
(2,229,000)
Net deferred tax assets
—
—
F-19
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For each of the years ended March 31, 2019, 2018 and 2017, 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 States and the UK. The Company is subject to U.S. federal income tax
examination by tax authorities for tax years beginning in 2015. 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.
As of March 31, 2019, the Company has net operating losses (NOLs) of approximately $3.2 million in the U.S. and $11.5 million 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 for purposes of UK income tax filings.
NOTE 9 – STOCKHOLDERS’ EQUITY
In November 2015, the Company issued 5 million shares of common stock and warrants to purchase 10 million shares 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.
On October 19, 2018, the Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) 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 $20,000,000
in shares of its common stock (the “Shares”). Between October 31, 2018, and March 31, 2019, the Company issued 234,998 shares of its
common stock through the Distribution Agreement and received gross proceeds of $455,105. $161,102 of costs were incurred in relation to this
transaction. As of 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 respect 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 of 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 warrants had been exercised, generating $63,811 of additional funds. At the end of March 31, 2019, there were
1,880,704 warrants outstanding.
Effective December 18, 2018, the Company issued a unit purchase option to the placement agent to purchase 97,103 shares and 97,103
warrants. 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.
F-20
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
NEMAURA MEDICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of consolidated quarterly financial information:
$
$
$
$
$
$
$
$
$
$
$
$
June 30
—
(771,963)
(763,154)
(0.01)
105,821,556
June 30
—
(417,320)
(407,787)
*
205,000,000
June 30
—
(494,183)
(494,183)
*
205,000,000
Quarter Ended
Sept. 30
—
(1,147,357)
(1,139,275)
(0.01)
205,003,261
$
$
$
$
Dec. 31
—
(932,925)
(925,889)
*
205,407,088
Quarter Ended
Sept. 30
—
(447,516)
(393,031)
*
205,000,000
$
$
$
$
Dec. 31
—
(476,353)
(466,365)
*
121,411,478
Quarter Ended
Sept. 30
—
(322,482)
(322,482)
*
205,000,000
$
$
$
$
Dec. 31
—
(375,366)
(375,366)
*
205,000,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
March 31
—
(1,624,479)
(1,624,479)
(0.01)
207,561,482
March 31
—
(567,776)
(553,266)
*
150,070,400
March 31
—
(359,235)
(359,235)
*
205,000,000
2019
Total revenue
Loss from operations
Net loss
Basic and diluted loss per share
Weighted average number of shares outstanding
2018
Total revenue
Loss from operations
Net loss
Basic and diluted loss per share
Weighted average number of shares outstanding
2017
Total revenue
Loss from operations
Net loss
Basic and diluted loss per share
Weighted average number of shares outstanding
* less than $0.01
NOTE 11 – OTHER ITEMS
(a)
Investor relations agreements
The Company currently has contracts with several investor relations specialists to help support the ongoing financing activities of the business.
On June 27, 2018, the Company entered into a Master Services Agreement with investor relations company 1, pursuant to which for an initial
three month term, the third party shall provide services related to advising 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 of stock-based compensation expense related to 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. At 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 liabilities in relation to this agreement and as of November 30, 2018 the
agreement was terminated.
On December 1, 2018 a new agreement was entered into to receive investor relations services from investor relations company 2. The term of the
agreement is 1 year, although cancellable at the end of each three-month period if certain performance obligations 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. A
cash payment of $22,500 will be made at the beginning of each quarter and 12,500 shares of restricted common stock will be issued at the end of
each quarter dependent on the performance obligations being met.
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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, 2019 the Company entered into a six-month contract with management consulting company 2 for the provision of specialist
consulting services. Compensation is wholly through the issue of 250,000 restricted shares of common stock which will be issued on
commencement of the contract and 150,000 additional restricted shares which will be issued on the fourth month after commencement of the
contract. If the contract has been terminated prior 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. $61,875 of the total $247,500 expense was treated as a
pre-payment at March 31, 2019.
During the year ended March 31, 2019, the Company issued a total of 367,500 restricted common shares and warrants to purchase 50,000
common shares to investor relations and management consultants. The equity instruments were valued at $515,325 of which $429,610 was
expensed and $85,715 is included in prepaid expenses as at March 31, 2019.
F-23
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 our 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 information required to be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that 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's
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible
controls and procedures. Based on this evaluation, management 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.
Management’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 Exchange Act
Rule 13a-15(f). Our internal control system is a process designed by, or under the supervision of, our principal executive and principal financial
officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of 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.
Because of our 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 risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2019. In making this assessment we used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework (2013). As a result of its assessment, management identified material weaknesses in 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.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that, there is a reasonable
possibility that a material misstatement of 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.
37
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
· 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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.
None.
38
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
PART III
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
Dewan Fazlul Hoque
Chowdhury
Bashir Timol
Thomas Moore
Dr. Salim Natha
Timothy Johnson
Age
46
44
55
52
35
Position
Chief Executive Officer,
Interim Chief Financial
Officer, President and
Director
Director
Chief Business Officer
Independent Director
Independent Director
Independent Director
Date of Appointment
December 24, 2013
December 24, 2013
April 9, 2018
August 3, 2017
July 26, 2017
July 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. Chowdhury has been our President, Chief Executive Officer and a member of our board of directors
since our incorporation 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. 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. Dr. D.F.
Chowdhury has been responsible for negotiating licensing deals for a transdermal patch to treat Alzheimer’s disease. Additionally, he was
involved in negotiations for out-licensing patches to treat Parkinson’s and Hypertension, and in-licensing complementary technologies.
Dr. D.F. 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.
Bashir Timol. Mr. Timol has been a Director since Nemaura Medical Inc. was organized on December 24, 2013. He has been a director of
Dermal Diagnostics Limited from October 30, 2013. On April 9, 2018 Mr Timol was appointed to the role of Chief Business Officer. 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 operation 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 bachelor 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 Masters of Science in Mathematics and Physics from the University of Manchester, UK.
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 honors 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
including Grant Thornton, KPMG
decades of experience
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.
in accounting and consulting
leading accounting
fields at
firms
39
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
– Review and discuss with management the Company’s audited financial statements and review with management and the Company’s
independent registered public accounting firm the Company’s financial statements prior to the filing with the SEC of any report containing
such financial statements.
– Recommend to the board that the Company’s audited 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.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Material Changes to Procedures by which Security Holders May Recommend Board Nominees
None.
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. The board
believes that Dr. Chowdhury’s services as both chief executive officer, 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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
This table provides disclosure, for fiscal years 2019 and 2018, of the compensation paid to our named executive officers.
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)
Iain Anderson
Chief Financial Officer (Principal Financial
Officer)*
2019
2018
104,208
106,440
2019
2018
52,178
57,938
—
—
—
—
1,050
390
105,208
106,830
737
297
52,915
58,235
* Mr. Anderson resigned effective immediately on February 8, 2019.
Dr. D.F. Chowdhury
We entered into an employment agreement with Dr. D.F. Chowdhury on November 2, 2013. Dr. D.F. 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. Chowdhury receives an annual salary of £80,000 pounds sterling or $104,000 USD. Our contract with Dr. D.F. Chowdhury does
not include any provision for stock options or equity incentives.
Under the executive employment agreement Dr. D.F. 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 through March 31,
2019.
Mr. Anderson
We did not have a written employment contract with our Chief Financial Officer, Iain Anderson. Mr Anderson had an annual salary of £100,000
(approximately $143,000). These amounts have been prorated for the 2018 and 2019 fiscal years based on actual time working for the
Company. Our contract with Mr. Anderson did not include any provision for stock options or equity incentives. Mr. Anderson resigned from his
position as Chief Financial Officer on February 8, 2019 and left the company with immediate effect.
Outstanding Equity Awards for 2019
We have not currently granted any stock based compensation to employees of the Company.
Potential payments upon termination or change-in-control.
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.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Director Compensation
Each of our independent directors receive annual fees of £5,000 pounds sterling or $6,513 USD for their service on our board of directors and
committees. We currently have no plan for compensating our executive directors for their services in their capacity as directors. Although we
have agreements with each of our independent directors to serve on our board, in which we provide for the grant of options, at this time no such
option grants have been made and no equity compensation plan has been approved.
Name
Timothy Johnson
Dr. Salim Natha
Thomas Moore
Fees Earned
or paid in
Cash
($US)
Non-Equity
Incentive Plan
Compensation
($US)
6,513
6,513
6,513
—
—
—
All other
Compensation
($US)
—
—
—
Total
($US)
6,513
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 and the Board of Directors or Compensation Committee of any other
company, nor has any interlocking relationship existed in the past.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER
MATTERS.
The following tables set forth certain information as of March 31, 2019 regarding the beneficial ownership of our Common Stock, by (i) each
person or entity who, to our knowledge, owns more than 5% of our Common Stock; (ii) our 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.
Beneficial Ownership
Name of Beneficial Owner
Dr. D.F.H. Chowdhury
Bashir Timol
Timothy Johnson
Dr. Salim Natha
Thomas Moore
Total Officers and Directors as a Group
Holders of 5% or more of our Common Stock
Ismail, Sufyan
Shares Beneficially Owned
87,537,000
27,082,100
—
4,193,889
—
118,812,989
22,705,250
Percentage
Total Voting Power1
42%
13%
—
2%
—
57%
11%
1 Based upon 207,655,916 shares of our Common Stock outstanding at March 31, 2019.
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) and Trial Clinical Limited (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 $2,312,412 for the year ended March 31, 2019.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
44
Following is a summary of activity between the Company and Pharma and NDM for the years ended March 31, 2019 and 2018. These amounts
are unsecured, interest free, and payable on demand.
Balance due from Pharma and NDM at beginning of year
Amounts received from Pharma
Amounts invoiced by Pharma to DDL, NM and TCL (1)
Amounts invoiced by DDL to Pharma
Amounts repaid by DDL to Pharma
Amounts paid by DDL on behalf of Pharma
Amounts invoiced by B&W to DDL
Amounts repaid by DDL to B&W
Foreign exchange differences
Forgiveness of debt by a related party transferred to APIC
Net balance due to Pharma and NDM at end of the year
Year Ended March
31,
2019
($)
Year Ended March
31,
2018
($)
613,818
—
2,312,412
(977)
(1,569,496)
—
2,206
(5,622)
(84,843)
(302,819)
964,679
687,609
145,214
842,739
—
(1,096,767)
(19,889)
—
—
54,912
—
613,818
(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 favourable 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 for the fiscal years ended March 31, 2019 and 2018 by Crowe LLP and Mayer
Hoffman McCann P.C.
Fees relating to Crowe LLP
Audit Fees
Audit Related Fees
Tax Fees
Other Fees
Totals
Fees relating to Mayer Hoffman McCann P.C.
Audit Fees
Audit Related Fees
Tax Fees
Other Fees
Totals
$
$
$
$
$
$
$
$
$
$
2019
2018
40,000 $
107,719 $
— $
— $
147,719 $
106,000
—
6,765
—
112,765
2019
2018
98,000 $
88,850 $
10,000 $
— $
196,850 $
—
—
—
—
—
Audit fees represent amounts billed for professional services rendered or expected to be rendered for the audit of our annual 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 financial statements that are not reported under audit fees.
Tax fees represent professional services rendered by the accounting firm for tax compliance.
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
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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 principal 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, Mayer Hoffman McCann P.C., leases substantially all of its personnel who work under the control of Mayer Hoffman
McCann P.C shareholders, from wholly owned subsidiaries of CBIZ, Inc., in an alternative practice structure.
45
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)
Exhibits:
Exhibit No.
3.1
3.1(a)
3.2
3.3
3.4
4.1
4.2
4.3*
10.1
10.2
10.3
10.4
10.5+
10.6
10.7+
14.1
21.1*
23.1*
23.2*
Description
Articles of Incorporation December 24, 2013 (Incorporated by reference from the registrant’s registration statement on
Form S-1 (File No. 333-194857))
Certificate of Amendment to the Articles of Incorporation 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)
Certificate 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 )
Bylaws (incorporated by reference from the Registrant’s Registration Statement on Form S-1 (File No. 333-194857), filed
March 28, 2014)
Amended 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)
Form of Subscription Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K filed on
December 2, 2015)
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,
2015
Description of Registrant’s Securities
Employment 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)
Exclusive 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-1 (File
No. 333-194857), filed July 11, 2014)
Assignment 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-1 (File No. 333-194857), filed July 30,
2014)
Assignment 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-1 (File No. 333-194857), filed July 30,
2014)
License, Supply and Distribution Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-K
filed on December 2, 2015)
Form of Common Stock Exchange Agreement (incorporated by reference from the Registrant’s Current Report on Form 8-
K filed on November 7, 2017)
Joint Collaboration 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)
Code 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)
Subsidiaries
Consent of Crowe LLP
Consent of Mayer Hoffman McCann P.C.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Rule 13a-14(a)/15d-14(a) - Certification of Chief Executive Officer
Rule 13a-14(a)/15d-14(a) - Certification of Interim Chief Financial Officer
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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
31.1*
31.2*
32.1*
32.2*
101
· *Filed herewith
· +Portions of this Exhibit have been omitted pursuant to a request for confidential treatment.
47
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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, 2019 by the undersigned thereunto duly authorized.
SIGNATURES
NEMAURA MEDICAL INC.
By:
/s/ Dr D.F.H, Chowdhury
Dr D.F.H, Chowdhury
President, 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 indicated.
Signature
Title
Date
/s/ D.F.H, Chowdhury
D.F.H, Chowdhury
/s/ B. Timol
B. Timol
/s/ T. Johnson
T. Johnson
/s/ S. Natha
S. Natha
/s/ Thomas Moore
Thomas Moore
President, Chief Executive Officer
(Principal Executive Officer) Interim Chief
Financial Officer
June 14, 2019
Director
June 14, 2019
Independent Director
June 14, 2019
Independent Director
June 14, 2019
Independent Director
June 14, 2019
48
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Description of Registrant’s Securities.
EXHIBIT 4.3
Capital Stock
General
The following descriptions of common and preferred stock summarizes the material terms and provisions of our common stock and preferred
stock, but is not intended to be complete. For the full terms of our common and preferred stock, please refer to our articles of incorporation, as
amended from time to time, and our bylaws, as amended from time to time. The Nevada Revised Statutes may also affect the terms of these
securities.
As of March 31, 2019, our authorized capital stock consists of 420,000,000 shares of common stock, par value $0.001 per share, of which
207,655,916 shares were issued and outstanding as of March 31, 2019, and 200,000 shares of preferred stock, par value $0.01, of which no
shares were issued and outstanding as of March 31, 2019. The authorized and unissued shares of both common and preferred stock are available
for issuance without further action by our stockholders, unless such action is required by applicable law, the NASDAQ Capital Market, or the rules
of any other stock exchange on which our securities may be listed. Unless approval of our stockholders is so required, our board of directors will
not seek stockholder approval for the issuance and sale of either our common stock or preferred stock.
Common Stock
The holders of our common stock are entitled to one vote per share. Any action required to be taken by the holders of our common stock at a
meeting may, without prior notice, by taken by written consent in lieu of a meeting if the consent has been signed by the minimum number of
holders of common stock required to approve such action.
In addition, the holders of our common stock will be entitled to receive ratably such dividends, if any, as may be declared by our board of directors
out of legally available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth. Upon
liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in all assets that are legally available for
distribution. The holders of our common stock will have no pre-emptive, subscription, redemption or conversion rights. The holders of our common
stock do not have cumulative rights in the election of directors. The rights, preferences and privileges of holders of our common stock are subject
to, and may be adversely affected by, the rights of the holders of our preferred stock.
Our common stock is listed on the NASDAQ Capital Market under the symbol “NMRD.” The transfer agent and registrar for our common stock is
Island Stock Transfer, Inc. Its address is 15500 Roosevelt Blvd., Suite 301, Clearwater, FL 33760, and its telephone number is 727-289-0010.
Preferred Stock
Our board of directors may determine, in its sole discretion, the powers, designations, preferences, and relative participation, optional or other
rights, if any, and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, redemption rights,
liquidation preference, sinking fund terms and the number of shares. The rights, preferences, privileges and restrictions of the preferred stock of
each series will be fixed by the certificate of designation relating to that series.
In October 2017, we filed with the Nevada Secretary of State a Certificate of Designation for up to 200,000 shares of Series A convertible
preferred stock. The holders of the Series A preferred stock have rights superior to the holders of our common stock as to the distributions of
assets upon our liquidation, dissolution or winding up, whether voluntary or involuntary. The Series A convertible preferred stock shall
automatically convert to shares of common stock at a ratio of 1000-for-1, i.e. each share of Series A preferred stock shall convert into 1000 shares
of common stock, when the following conditions are met: (a) the sugarBEAT® device has received CE regulatory approval; (b) retail sales of
sugarBEAT® have commenced and (c) such retail sales have exceeded $5 million. Holders of Series A preferred stock may voluntarily convert
their shares after February 7, 2018 at the conversion ratio then in effect, subject to adjustment for any stock splits, combinations, dividends,
distributions, or mergers and acquisitions.
The holders of the Series A convertible preferred stock are entitled to vote, as a class, on matters on all matters voted on by the holders of our
common stock. Each share of Series A convertible preferred stock is entitled to that number of votes equal to the number of shares of common
stock the Series A preferred stock is convertible into at the time the vote is taken. The holders of the Series A convertible preferred stock shall also
vote, as a class, on all matters that may adversely impact their rights and preferences. The Series A convertible preferred stock is not eligible for
dividend payments and we have no right to redeem these preferred shares. Holders of the Series A convertible preferred stock may transfer their
shares without our consent.
As of March 31, 2019, there were no shares of Series A convertible preferred stock issued and outstanding.
With respect to any future series of preferred stock to be authorized, we will file a certificate of designation with the Secretary of State of the State
of Nevada that will specify the following: the maximum number of shares; the designation of the shares; the annual dividend rate, if any, and
whether the dividend is fixed or variable; the price and terms and conditions for redemption, if any; the liquidation preference, if any; any sinking
fund or similar provision; the terms and conditions, if any, for conversion and exchange of the preferred stock into any other class or classes of
our capital stock or any other of our securities or assets; and voting rights.
The future issuance of shares of preferred stock will affect, perhaps adversely, the rights of holders of our common stock. While we cannot state
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
the actual effects of such issuance until our board of directors determines the specific rights attached to the preferred stock to be issued, these
effects could include: restricting dividends on the common stock; diluting the voting power of the common stock; impairing the liquidation rights of
our common stock; and delaying or preventing changes in our control or management.
As of March 31, 2019, we had warrants outstanding to purchase 10,000,000 and 1,880,704 shares of our common stock at exercise prices of
$0.50 per share and $1.04 per share, respectively. The warrants will terminate on the five-year anniversary of the date of issuance.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
SUBSIDIARIES
EXHIBIT 21.1
Region Green Limited
Dermal Diagnostics (Holdings) Limited
Dermal Diagnostics Limited
Trial Clinic Limited
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement #333-230535 on Form S-3 of Nemaura Medical Inc. of our report dated
June 12, 2018, on the consolidated balance sheet of Nemaura Medical Inc. as of March 31, 2018 and 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, which
appears in this Annual Report on Form 10-K.
Exhibit 23.1
Oak Brook, Illinois
June 14, 2019
/s/ Crowe LLP
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Exhibit 23.2
4600 South Ulster Street, Suite 900 • Denver, CO 80237
Main: 720.200.7000 • Fax: 720.200.7002 • www.mhmcpa.com
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As an independent registered public accounting firm, we hereby consent to the incorporation by reference in Nemaura Medical Inc.’s Registration
Statement on Form S-3 (File No. 333-230535) of our report dated June 14, 2019, with respect to the consolidated financial statements of Nemaura
Medical Inc., as of March 31, 2019 and for the year then ended included in this Annual Report on Form 10-K of Nemaura Medical Inc. for the year
ended March 31, 2019.
/s/ Mayer Hoffman McCann P.C.
June 14, 2019
Denver, Colorado
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CERTIFICATION
EXHIBIT 31.1
I, Dr. D.F.H. Chowdhury, certify that:
1. I have reviewed this Annual Report on Form 10-K of Nemaura Medical Inc. and its subsidiaries;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: June 14, 2019
By:
Name:
Title:
/s/ Dr. D.F.H. Chowdhury
Dr. D.F.H. Chowdhury
Chief Executive Officer (Principal Executive Officer)
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CERTIFICATION
EXHIBIT 31.2
I, Dr. D.F.H Chowdhury, certify that:
1. I have reviewed this Annual Report on Form 10-K of Nemaura Medical Inc. and its subsidiaries;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: June 14, 2019
By:
Name:
Title:
/s/ Dr. D.F.H. Chowdhury
Dr. D.F.H. Chowdhury
Interim Chief Financial Officer (Principal Financial and Accounting
Officer)
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350
EXHIBIT 32.1
In connection with Annual Report of Nemaura Medical Inc. and its subsidiaries (the “ Company ”) on Form 10-K for the year ended March 31,
2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Dr. D.F.H. Chowdhury, Chief
Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: June 14, 2019
/s/ Dr. D.F.H. Chowdhury
By:
Name: Dr. D.F.H. Chowdhury
Title: Chief Executive Officer (Principal Executive Officer)
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350
EXHIBIT 32.2
In connection with Annual Report of Nemaura Medical Inc. and its subsidiaries (the “ Company ”) on Form 10-K for the year ended March 31,
2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Dr. D.F.H. Chowdhury, Interim
Chief Financial Officer (Principal Financial Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
/s/ Dr. D. F.H. Chowdhury
By:
Name: Dr. D. F.H. Chowdhury
Title:
Interim Chief Financial Officer (Principal Financial Officer)
Company.
Dated: June 14, 2019
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.