SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nemaura Medical Inc. (“Nemaura” or the “Company”), through its operating subsidiaries, performs medical device research and manufacturing of a continuous glucose monitoring system (“CGM”), named sugarBEAT®. 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 and support obesity and weight-loss programs. 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.

Going Concern

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited financial statements, for the six months ended September 30, 2023, the Company recorded a net loss of $3,806,608 and used cash in operations of $5,724,109. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm in its report on the Company’s March 31, 2023 financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

In evaluating the going concern position of the company, management has considered potential funding providers and believes that financing to fund future operations could be provided by equity and/or debt financing. There can be no assurance that funding would be available, or that the terms of such funding would be on favorable terms if available. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. However, such information reflects all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair presentation of the financial condition and results of operations for the interim periods. The results for the three and six months ended September 30, 2023 are not indicative of annual results. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023, as the same may be amended from time to time as filed with the SEC.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and the Company’s subsidiaries. References to “we”, “us”, “our”, or the “Company” refer to Nemaura Medical Inc. and its consolidated subsidiaries. The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, and all significant intercompany balances and transactions have been eliminated in consolidation.

The functional currency for the majority of the Company’s operations is the Great Britain Pound Sterling (“GBP”), and the reporting currency is the U.S. Dollar (“USD”). Financial statements for foreign subsidiaries are translated into USD using period end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant estimates include the assumptions used in the accrual for potential liabilities, the net realizable value of inventory, the valuation of debt and equity instruments, the fair value of derivative liabilities, valuation of stock options issued for services, and deferred tax valuation allowances. Actual results may differ from those estimates. 

Revenue Recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

Deferred Revenues

In March 2014, the Company executed an Exclusive Marketing Rights agreement with Dallas Burston Pharma (“DB Pharma”)(now known as MySugarWatch Limited “MSW”), a Jersey (Channel Island) based company for the exclusive right to sell the Company’s SugarBEAT® device in the UK and Republic of Ireland, both direct to consumer and through prescriptions by general practitioners. The agreement has a term of five years and automatically renewed for another five years unless terminated by either party. As part of the agreement, the Company received a non-refundable upfront fee of £1 million ($1.6 million). Pursuant to current accounting guidelines, the Company recorded the upfront fee of £1 million as a deferred revenue (i.e. liability) and is being amortized to revenues based upon the corresponding sale of the Company’s SugarBEAT devices. As of March 31, 2023, the outstanding deferred revenues amounted to £875,000 ($1,068,000).

During the period ended September 30, 2023, there was no transaction or revenues recognized from the deferred revenues ($74,027 in September 30, 2022). As of September 30, 2023, the outstanding deferred revenues amounted to £875,000 ($1,068,000). As of September 30, 2022 the outstanding balance amounted to £966,667 ($1,080,000).

The agreement is scheduled to expire in March 2024, however, the Company expects that it will be renewed for another five years based upon the ongoing relationship with MSW.

Cash and cash equivalents

Cash and cash equivalents consists primarily of cash deposits maintained in the United Kingdom (“UK”). We maintain cash balances in U.S. Dollar (“USD”), Great Britain Pound Sterling (“GBP”), and the Euro. The following table, reported in USD, disaggregates our cash balances by currency denomination:

	September 30, 2023		March 31, 2023 (audited)
Cash denominated in:
USD	$	167,701	$	5,606,972
GBP		1,154,614		4,446,720
Euro		55,904		51,443
Total		1,378,219		10,105,135
Escrow Account USD (see Note 5)		3,000,000		—
Total with restricted cash	$	4,378,219	$	10,105,135

The escrow account was funded by the loan notes (#4, #5) raised in August 2023. Access is restricted as certain of the proceeds received are required to be used for paying down the loan notes #2 and #3.

Inventory

As of September 30, 2023 and March 31, 2023, inventory consisted of the following:

	September 30, 2023		March 31, 2023, (audited)
Raw materials	$	2,745,499	$	1,586,777
Finished goods		165,891		168,075
Total Inventories	$	2,911,390	$	1,754,852

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. For the six-months ended September 30, 2023, there were an additional general write-downs of inventory of $150,000.

Research and development expenses

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

Loss per share

Basic loss per share is computed by dividing the loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects the potential dilution that could occur if convertible debentures, options and warrants were to be exercised or converted or otherwise resulted in the issuance of common stock that then shared in the earnings of the entity.

Since the effects of outstanding options and warrants are anti-dilutive for the six months ended September 30, 2023 and 2022, shares of common stock underlying these instruments have been excluded from the computation of loss per common share.

The following sets forth the number of shares of common stock underlying outstanding options and warrants as of September 30, 2023 and 2022:

	September 30,		September 30,
	2023		2022
Warrants		5,369,304		1,573,098
Stock options		40,000		40,000
		5,409,304		1,613,098

Stock-Based Compensation

The Company periodically issues share-based awards to employees and non-employees and consultants for services rendered. Stock options vest and expire according to terms established at the issuance date of each grant. Stock grants are measured at the grant date fair value. Stock-based compensation cost is measured at fair value on the grant date and is generally recognized as a charge to operations ratably over the requisite service, or vesting, period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.

The Company values its equity awards using the Black-Scholes option-pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions, including expected volatility, expected term, and a risk-free interest rate. The expected volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The risk-free interest rate is estimated using comparable published federal funds rates.

Fair Value of Financial Instruments

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required. Fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The three levels of the fair value hierarchy are as follows:

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Foreign exchange contract derivative liability is valued using Level 2 fair values while the warrant liability are valued using Level 3 fair values.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets and liabilities at fair value as of September 30, 2023 and March 31, 2023:

	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets	$	—	$	—	$	—	$	—
Total assets	$	—	$	—	$	—	$	—
Liabilities
Foreign exchange contract derivative liability	$	—	$	544,748	$	—	$	544,748
Warrant derivative liability		—		—		1,495,000		1,495,000
Total liabilities	$	—	$	544,748	$	1,495,000	$	2,039,748

	March 31, 2023 (audited)
	Level 1		Level 2		Level 3		Total
Assets	$	—	$	—	$	—	$	—
Total assets	$	—	$	—	$	—	$	—
Liabilities
Foreign exchange contract derivative liability	$	—	$	731,730	$	—	$	731,730
Warrant derivative liability		—		—		3,092,000		3,092,000
Total liabilities	$	—	$	731,730	$	3,092,000	$	3,823,730

The following table provides a roll-forward of the warrant derivative liability measured at fair value on a recurring basis using unobservable level 3 inputs for the six months ended September 30, 2023:

Warrant derivative liability
Balance as of beginning of period – March 31, 2023	$	3,092,000
Change in fair value of warrant derivative liability	$	(1,597,000	)
Balance as of end of period – September 30, 2023	$	1,495,000

As of September 30, 2023 and March 31, 2023, the Company’s outstanding warrants were treated as derivative liabilities and changes in the fair value were recognized in earnings (see Note 3).

The Company believes the carrying amounts of certain financial instruments, including cash, accounts receivable, and accounts payable and accrued liabilities, approximate fair value due to the short-term nature of such instruments and are excluded from the fair value tables above.

Inflation

The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that the Company’s operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing the Company’s operating costs (including, specifically, clinical trial costs in countries where the Company is applying to sell it’s products), and which would put additional stress on the Company’s working capital resources.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.