See notes to the unaudited condensed consolidated
financial statements.
See notes to the unaudited condensed consolidated
financial statements.
See notes to the unaudited condensed consolidated
financial statements.
See notes to the unaudited condensed consolidated
financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Nemaura Medical Inc. (“Nemaura”
or the “Company”), through its operating subsidiaries, performs medical device research and manufacturing of a continuous
glucose monitoring system (“CGM”), named sugarBEAT®. The sugarBEAT®
device is a non-invasive, wireless device for use by persons with Type I and Type II diabetes and may also be used to screen pre-diabetic
patients. The sugarBEAT® device extracts analytes, such as glucose, to the surface of
the skin in a non-invasive manner where it is measured using unique sensors and interpreted using a unique algorithm.
Nemaura is a Nevada holding company organized
in 2013. Nemaura owns 100% of the stock in Dermal Diagnostic (Holdings) Limited, an England and Wales corporation (“DDHL”)
formed on December 11, 2013, which in turn owns 100% of Dermal Diagnostics Limited, an England and Wales corporation formed on January
20, 2009 (“DDL”), and 100% of Trial Clinic Limited, an England and Wales corporation formed on January 12, 2011 (“TCL”).
DDL is a diagnostic medical device company
headquartered in Loughborough, Leicestershire, England, and is engaged in the discovery, development, and commercialization of diagnostic
medical devices. The Company’s initial focus has been on the development of the sugarBEAT®
device, which consists of a disposable patch containing a sensor, and a non-disposable miniature wireless transmitter with a re-chargeable
power source, which is designed to enable trending or tracking of blood glucose levels. All of the Company’s operations and assets
are located in England.
During the fiscal year ended March 31,
2021, the Board of Directors assessed the adequacy of the group’s organizational structure and concluded that the intermediate holding
company that sat below Nemaura Medical Inc., Region Green Limited (a British Virgin Islands corporation), was no longer required as the
entity had been effectively dormant since inception and no longer represented a requirement to be maintained. It was therefore determined
that Region Green Limited should be unwound, with the intention that the assets held by Region Green Limited be transferred up to Nemaura
Medical Inc. following which Region Green Limited would be dissolved.
The transfer of assets took place on March 5, 2021 and Region Green Limited
was formally dissolved as of April 23, 2021.
The following diagram illustrates Nemaura’s
corporate structure as of September 30, 2022:
The Company was incorporated in 2013 and has reported
recurring losses from operations to date and an accumulated deficit of $45,789,250 as of September 30, 2022. These
operations have resulted in the successful completion of clinical programs to support a CE mark (European Union approval of the product)
approval, as well as a De Novo 510(k) medical device application to the U.S. Food and Drug Administration (“FDA”) submission.
The Company
expects to continue to incur losses from operations until revenues are generated through licensing fees or product sales. However, given
the completion of the requisite clinical programs, these losses are expected to decrease over time. Management has entered into licensing,
supply, or collaboration agreements with unrelated third parties relating to the United Kingdom (“UK”), Europe, Qatar, and
all countries in the Gulf Cooperation Council.
Going Concern
As identified under Item 1A, included in the
Company’s Annual Report on Form 10-K for the year ended March 31, 2022, as filed with the SEC, management is aware of the need
to raise additional funds in order to finance the ongoing commercialization of sugarBEAT®. The Company had $10,109,650 of cash
at September 30, 2022. The Company has debt on its balance sheet which will reach maturity in July 2024.
In evaluating the going concern
position of the Company, management has considered the ability of the Company to raise additional funding in combination with one or
more of the different funding options available to it at this time. Based on current and ongoing engagement with potential funding
providers, management believes that there is a reasonable expectation that funding could be provided by one, or more, of the following
options:
Equity funding – the Company
has immediate access to funds through the ATM facility that is currently in place; in addition to this, there are various alternative
mechanisms available to the Company similar to those used previously e.g. direct sale of shares to interested third parties, similar to
the stake sold to Tiger Trading Partners L.L.C. in February 2022, as well as other mechanisms to sell common stock via an underwritten
agreement or the further exercise of warrants by the current warrant holders etc.
Debt funding – the Company continues
to be in ongoing discussions with third party debt providers, including the incumbent, to enable the existing debt facility to be restructured
or renewed, should management feel that this route offers a more attractive option compared to the sale of equity that is dependent on
the current market conditions.
Alternative funding as used in the
past such as the sale of licenses. As product development is now at a significant more advanced stage then it was, it is management’s
belief that the sufficient funding could be provided through the sale of licenses or a large-scale partnership that could bring in additional
funds and infrastructure to support the commercial growth ambitions of the company.
However, as a consequence of this funding
requirement being triggered without the funding bridge having been put in place by the filing date of these unaudited condensed consolidated
financial statements, Accounting Standards Codification (“ASC”) 205-40: Going Concern, requires that management recognize
and disclose this point as an event which creates a substantial doubt as to the Company’s ability to continue as a going concern
for at least one year from the date of filing of these unaudited condensed consolidated financial statements.
Following
the receipt of the CE mark approval in the EU, and in support of our plans for similar certification with the FDA in the U.S., our plan
is to utilize the cash on hand to continue establishing commercial manufacturing operations for the commercial supply of the sugarBEAT®
device and sensor patches in our target markets.
Management's
strategic plans include the following:
|
– |
support the UK and EU launch of sugarBEAT®; |
|
– |
obtaining further regulatory approval for the sugarBEAT® device in other countries such as the U.S.; |
|
– |
exploring licensing and partnership opportunities in other territories; |
|
– |
developing the sugarBEAT® device platform for commercialization across other applications; and |
|
– |
pursue additional capital raising opportunities as and when required to further enhance our growth plans. |
NOTE 2 – BASIS OF PRESENTATION
(a)
Basis of presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”),
and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”)
for complete financial statements. However, such information reflects all adjustments consisting of normal recurring accruals which are,
in the opinion of management, necessary for a fair statement of the financial condition and results of operations for the interim periods.
The results for the three- and six- months ended September 30, 2022 are not indicative of annual results. The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X. These unaudited condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year
ended March 31, 2022, as filed with the SEC.
The accompanying unaudited condensed consolidated
financial statements include the accounts of the Company and the Company’s subsidiaries. References to “we”, “us”,
“our”, or the “Company” refer to Nemaura Medical Inc. and its consolidated subsidiaries. The unaudited condensed
consolidated financial statements are prepared in accordance with U.S. GAAP, and all significant intercompany balances and transactions
have been eliminated in consolidation.
The functional currency for the majority
of the Company’s operations is the Great Britain Pound Sterling (“GBP”), and the reporting currency is the U.S. Dollar
(“USD”).
(b) – Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying Notes. Actual results could differ materially from those estimates. The Company’s most significant estimates include
the useful life of intangible assets, valuation of foreign currency contract and valuation allowance
on deferred tax assets.
Our
estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are
inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and
circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting
policies, see the “Critical Accounting Policies” section of the Management’s Discussion & Analysis in our 2022 Form
10-K.
Cash and Cash Equivalents
Cash includes cash deposited in major financial institutions
in the United Kingdom. The Company’s cash balances exceed amounts covered by the Financial Services Compensation scheme. The Company
has never suffered a loss due to such excess balances.
The Company considers highly liquid investments with
maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates
fair value. As of September 30, 2022 and March 31, 2022, the Company had no cash equivalents.
Revenue Recognition
The Company recognizes revenue when obligations under
the terms of a contract with a customer are satisfied; generally this occurs with the transfer of control or access of the Company’s
licenses or performance of services. Revenue is measured as the amount of consideration the company expects to receive in exchange for
transferring goods or providing services. A performance obligation is a promise in a contract to transfer a distinct good or service to
the customer, and is the unit of account in the contract. A contract’s transaction price is allocated to each distinct performance
obligation and recognized as revenue when, or as, the performance obligation is satisfied.
Contracts with customers consist of licensing arrangements
and, to a lesser extent, research and development related services. Revenues from licensing and royalty fees are received from the granting
of exclusive sales, marketing, manufacturing and distribution rights associated with the Company’s functional intellectual property
(IP). The Company’s performance obligation is satisfied at a point in time (upon delivery to the customer), where the Company has
no remaining obligation to support or maintain the intellectual property licensed to the customer. The Company typically requires a non-refundable
license fee, paid upfront.
Revenue from license fees are recognized at a point
in time when the Company transfers the functional IP to the customer as long as management believes the total consideration owed by the
customer for the license fee is probable of being received.
The Company’s contracts do not include multiple performance obligations
or variable consideration. Since the Company’s revenue is generated from a small number of customer contracts, the Company does
not have material contract assets or liabilities.
Intangible Assets
The Company’s intangible assets consist of five
U.S. patents (US 9,352,021, US 9,498,514, US 7,709,215, US 8,338,572, and US 8,841,079), three U.K. patents (GB2501611, GB2503131 and
GB252256), and one patent issued each in Europe, China and Australia. The Company also has a significant number of additional patents
pending and in development. The cost of issued patents are capitalized and amortized over the life of the patents which is 17 years. The
costs of patents in development are expensed as incurred. Any unamortized costs previously capitalized associated with patents that have
expired or have been abandoned are written off as an impairment loss. The company has also capitalized certain software development costs
which are regularly reviewed to ensure that if development has been abandoned, costs are written off as an impairment loss.
Share-Based Payments
The Company measures the cost of services received
in exchange for an award of equity instruments to employees and nonemployees based on the grant date fair value of the award, which is
recognized as compensation expense over the vesting term.
Income Taxes
The Company accounts for income taxes under the asset
and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the
basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities
is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the
extent that management believes these assets are more likely than not to be realized. In making such a determination, management considers
all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable
income, tax-planning strategies, and results of recent operations. If we determine that the Company would be able to realize deferred
tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes.
(c) Recently adopted accounting pronouncements
The Company continually assesses any new accounting
pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial
reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures
that there are proper controls in place to ascertain that the Company's consolidated financial statements properly reflect the change.
This Quarterly Report on Form 10-Q does not discuss
recent pronouncements that are not anticipated to have a current and/or future impact on the Company, or are unrelated to the Company’s
financial condition, results of operations, cash flows or disclosures.
NOTE 3 – LICENSING AGREEMENTS
United Kingdom and the Republic of Ireland,
the Channel Islands, and the Isle of Man
In March 2014, the Company entered into an Exclusive
Marketing Rights Agreement (the “Marketing Rights Agreement”) with an unrelated third party (the “Licensee”),
that granted to the Licensee the exclusive right to market and promote the sugarBEAT®
device and related patches under its own brand in the UK and the Republic of Ireland, the Channel Islands, and the Isle of Man. The Company
received a non-refundable, up-front cash payment of GBP 1,000,000 (approximately $1.12 million and $1.31 million as of September 30, 2022
and March 31, 2022, respectively), upon signing the Marketing Rights Agreement. The upfront payment received from the Marketing Rights
Agreement has been deferred and will be recorded as income over the term of the Marketing Rights Agreement, which commenced upon the first
delivery of the sugarBEAT® device to the Licensee in December 2021. Consequently, approximately
$71,000, and $259,000 is included in deferred revenue classified as a current liability as of September 30, 2022 and March 31, 2022, respectively,
with the remainder being shown in the non-current portion of deferred revenue.
NOTE 4 – RELATED PARTY TRANSACTIONS
DDL has a service agreement with Nemaura Pharma
Limited (“Pharma”), an entity controlled by the Company’s President and Chief Executive officer, to provide development,
manufacture, and regulatory approval process under Pharma’s ISO13485 accreditation. Pharma invoices DDL for these services on a
cost-plus basis.
The table below provides a summary of activity
between the Company and Pharma for the six months ended September 30, 2022 and 2021, and the year ended March 31, 2022.
Schedule of Related Party Transactions | |
| | |
| | |
| |
| |
Six
Months Ended September
30, 2022 (unaudited) | | |
Six
Months Ended September
30, 2021 (unaudited) | | |
Year
Ended March
31, 2022 | |
Due to (from) related parties at beginning of year | |
$ | (101,297 | ) | |
$ | 148,795 | | |
$ | 148,795 | |
Amounts invoiced by Pharma to DDL | |
| 1,833,706 | | |
| 1,115,748 | | |
| 3,245,985 | |
Amounts invoiced by DDL to Pharma | |
| (2,437 | ) | |
| (2,495 | ) | |
| (2,495 | ) |
Amounts paid by DDL to Pharma | |
| (1,695,999 | ) | |
| (1,770,942 | ) | |
| (3,492,962 | ) |
Foreign exchange differences | |
| 88,408 | | |
| 5,340 | | |
| (620 | ) |
Liability /(receivable) due to related parties at end of period | |
$ | 122,381 | | |
$ | (503,554 | ) | |
$ | (101,297 | ) |
NOTE 5 – NOTES PAYABLE
NOTE PURCHASE AGREEMENT 1
On April 15, 2020, the Company entered into a note
purchase agreement (the “Note Purchase Agreement 1”) by and among the Company, DDL, TCL and a third-party investor (the “Investor”).
Pursuant to the terms of Note Purchase Agreement 1,
the Company agreed to issue and sell to the Investor, and the Investor agreed to purchase from the Company, a secured promissory note
(the “2020 Secured Note”) in the original principal amount of $6,015,000. In consideration thereof, on April 15, 2020, (i)
the Investor (a) paid $1,000,000 in cash, (b) issued to the Company (1) Investor Note #1 in the principal amount of $2,000,000 (“Investor
Note #1”), and (2) Investor Note #2 in the principal amount of $2,000,000 (“Investor Note #2” and together with Investor
Note #1, the “2020 Investor Notes”), and (ii) the Company delivered the 2020 Secured Note on behalf of the Company, to the
Investor, against delivery of the 2020 Purchase Price. For these purposes, the “2020 Purchase Price” means the Investor’s
initial cash purchase price, together with the sum of the initial principal amounts of the Investor Notes.
The 2020 Secured Note is secured by the Collateral
(as hereinafter defined). The 2020 Secured Note carries an original issue discount (“OID”) of $1,000,000 (16.7%). In addition,
the Company agreed to pay $15,000 to the Investor to cover the Investor’s legal fees, accounting costs, due diligence, monitoring
and other transaction costs incurred in connection with the purchase and sale of the 2020 Secured Note (the “Transaction Expense
Amount”). In addition to this, a payment of $325,000 was made to Ascendiant Capital Markets, LLC (“Ascendiant”) for
structuring the agreement between both parties. The 2020 Purchase Price for the 2020 Secured Note is $4,675,000, computed as follows:
$6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.
The borrowing period is 24 months, and the Company
shall pay the outstanding balance and all fees on maturity. A monitoring fee equal to 0.833% of the outstanding balance will automatically
be added to the outstanding balance on the first day of each month. The debt less the discount and transaction expenses will be accreted
over the term of the 2020 Secured Note using the effective interest method.
Security Agreement
On April 15, 2020, the Company entered into the Security
Agreement by the Company, DDL and TCL, in favor of the Investor (the “2020 Security Agreement”). Pursuant to the terms of
the 2020 Security Agreement, the Company granted the Investor a first-priority security interest in all rights, title, interest, claims
and demands of the Company in and to all of the Company’s patents and all other proprietary rights, and all rights corresponding
to the Company’s patents throughout the world, now owned and existing, and all replacements, proceeds, products, and accessions
thereof (the “Collateral”).
Note Purchase Agreement 1 was settled in full on April
22, 2022.
NOTE PURCHASE AGREEMENT 2
On February 8, 2021, the Company entered
into an additional note purchase agreement (“Note Purchase Agreement 2”) with the Investor. Pursuant to the terms of
Note Purchase Agreement 2, the Company agreed to issue and sell to the Investor, and the Investor agreed to purchase from the Company,
a secured promissory note (the “Secured Note 2”) in the original principal amount of $24,015,000. The Secured Note 2 carries
an OID of $4,000,000 (16.7%), and the Company agreed to pay $15,000 to the Investor to cover the Investor’s transaction expenses.
In addition to this, a commission of $1,200,000 was also payable to Ascendiant.
In consideration thereof, on February
9, 2021, (i) the Investor paid $20,000,000 in cash to the Company, and (ii) the Company delivered Secured Note 2 on behalf of the Company,
to the Investor, against the delivery of the 2021 Purchase Price. For these purposes, the “2021 Purchase Price” means
the Investor’s initial cash purchase price. After adjusting for transaction expenses of $1,200,000, cash proceeds received
were $18,800,000.
The borrowing terms for Note Purchase
Agreement 2 are consistent with those of Note Purchase Agreement 1, with the borrowing period being 24 months from the date of the agreement,
the Company being required to pay the outstanding balance and all fees on maturity, and a monitoring fee equal to 0.833% of the outstanding
balance being automatically added to the outstanding balance on the first day of each month. The debt less discount and transaction expenses
will be accreted over the term of the Secured Note 2 using the effective interest rate method.
Security Agreement
On February 8, 2021, the 2020 Security Agreement was
extended to include Note Purchase Agreement 2, which is also secured against all of the Company’s assets owned as of February 9,
2021 and extends to any assets acquired at any time that the Company’s obligations under Secured Note 2 are outstanding.
NOTE PURCHASE AGREEMENT 3
On
May 20, 2022, the Company entered into a new note purchase agreement (“Note Purchase Agreement 3”) by and among the Company,
DDL, TCL and a third-party investor.
Pursuant
to the terms of the Note Purchase Agreement 3, the Company agreed to issue and sell to the Investor and the Investor agreed to purchase
from the Company a secured promissory note (the “Secured Note”) in the original principal amount of $6,015,000. In consideration
thereof, on May 20, 2022 (the closing date), (i) the Investor paid $5,000,000 in cash, and (ii) the Company delivered the Secured
Note on behalf of the Company, to the Investor, against delivery of the Purchase Price. For these purposes, the “Purchase Price”
means the Investor’s initial cash purchase price.
The
Secured Note is secured by the Collateral (as hereinafter defined). The Secured Note carries an original issue discount (“OID”)
of $1,000,000 (16.7%). In addition, the Company agreed to pay $15,000 to the Investor to cover the Investor’s legal fees,
accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Secured
Note (the “Transaction Expense Amount”). In addition to this, a payment of $300,000 was made to Ascendiant Capital Markets,
LLC, (the “Commission”) for structuring the agreement between both parties. The Purchase Price for the Secured Note is $4,700,000,
computed as follows: $6,015,000 original principal balance, less: OID, Transaction Expense Amount, and commission paid.
The
borrowing period is 24 months, and the Company shall pay the outstanding balance and all fees on maturity. A monitoring fee
equal to 0.833% of the outstanding balance will automatically be added to the outstanding balance on the first day of each month.
The debt less the discount and transaction expenses will be accreted over the term of the Note using the effective interest method.
Security
Agreement
On
May 20, 2022, the Company entered into the Security Agreement by the Company, DDL and TCL, in favor of the Investor (the “Security
Agreement”). Pursuant to the terms of the Security Agreement, the Company granted the Investor a first-priority security interest
in all rights, title, interest, claims and demands of the Company in and to all of the Company’s patents and all other proprietary
rights, and all rights corresponding to the Company’s patents throughout the world, now owned and existing, and all replacements,
proceeds, products, and accessions thereof. As of September 30, 2022, long-term debt matures as follows:
Schedule of long term debt |
|
|
|
|
|
|
|
Notes Payable
($) |
|
|
Within 12 months |
|
|
|
17,398,654 |
|
|
Within 24 months |
|
|
|
3,490,589 |
|
|
|
|
|
|
20,889,243 |
|
NOTE 6 – STOCKHOLDERS’
(DEFICIT) EQUITY
During the six month period ended September 30, 2022,
no warrants were exercised, and no shares were issued.
During the six month period ended September 30, 2021,
366,892 warrants were exercised generating gross proceeds of $2,963,658. There were a total of 1,573,098 warrants outstanding at this
date. No other shares were issued in the period.
Loss per share
The following table sets forth the computation
of basic and diluted loss per share for the periods indicated.
Schedule of earnings (loss) per share | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended September 30, | | |
Six Months Ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| (in Dollars, except Share Amounts) | | |
| (in Dollars, except Share Amounts) | |
Net loss attributable to common stockholders | |
| (4,078,477 | ) | |
| (3,494,264 | ) | |
| (8,057,774 | ) | |
| (6,837,989 | ) |
Weighted average basic and diluted shares outstanding | |
| 24,102,866 | | |
| 23,308,049 | | |
| 24,102,866 | | |
| 23,209,514 | |
Basic and diluted loss per share: | |
| (0.17 | ) | |
| (0.15 | ) | |
| (0.33 | ) | |
| (0.29 | ) |
The Company excludes warrants outstanding,
which are anti-dilutive given the Company is in a loss position, from the basic and diluted loss per share calculation.
Basic loss per share is computed by dividing
loss available to common stockholders by the weighted-average number of common shares outstanding during the period. For the three and
six month periods ended September 30, 2022, warrants to purchase 1,573,098 shares of common stock and a unit purchase option to purchase
9,710 shares of common stock, as well as warrants to purchase 9,710 shares of common stock, were considered anti-dilutive and were excluded
from the calculation of diluted loss per share. For the three and six month periods ended September 30, 2021, warrants to purchase 1,940,740
shares of common stock and a unit purchase option to purchase 9,710 shares of common stock, as well as warrants to purchase 9,710 shares
of common stock, were considered anti-dilutive and were also excluded from the calculation of diluted loss per share.
NOTE 7 – OTHER ITEMS
The outbreak of COVID-19 in December 2019 has
since rapidly increased its exposure globally. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. We continue
to monitor the impact of COVID-19 on our own operations and are working with our employees, suppliers and other stakeholders to mitigate
the risks posed by its spread, but COVID-19 is not expected to have any long-term detrimental effect on the Company’s success. While
key suppliers have not been accessible throughout the whole period of the outbreak, we have been able to be flexible in our priorities
and respond favorably to the challenges faced during the outbreak. We have also seen a surge in the uptake of technologies for remote
monitoring of patients and patient self-monitoring, which potentially enhances the prospects for the Company, its CGM product and its
planned digital healthcare offering.
NOTE 8 – SUBSEQUENT EVENTS
Management has evaluated subsequent events and transactions
for potential recognition or disclosure in the financial statements through November 14, 2022, the date these financial statements were
available to be issued.
|
(a) |
On October 21, 2022, the Company entered into an amendment to Note Purchase Agreement 2. Pursuant to the terms of the amendment, the Company and Investor agreed to extend the maturity date of Note Purchase Agreement 2 to July 1, 2024. In consideration thereof, the Company agreed to pay to the Investor an extension fee in the amount of 5% of the outstanding balance of Note Purchase Agreement 2, which results in $813,834 being added onto the liability due to the Investor. |
The Company and the Investor previously
agreed to reduce the maximum monthly redemption amount from $2,000,000 to $500,000 from June 2022 to February 2023, which reduction remains
in force. Pursuant to the terms of the amendment, the Company and Investor agreed to reduce the maximum monthly redemption amount during
the period beginning March 2023 until Note Purchase Agreement 2 is paid in full from $2,000,000 to $1,000,000; provided, however, that
upon the occurrence of an event of default under the Note Purchase Agreement 2, the maximum monthly redemption amount will automatically
be increased back to $2,000,000.