igcpharma20230930

igcpharma20230930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2023

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-32830

IGC PHARMA, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of incorporation or organization)

20-2760393

(I.R.S. Employer Identification No.)

10224 Falls Road, Potomac, Maryland

(Address of principal executive offices)

20854

(Zip Code)

(301) 983-0998

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		IGC		NYSE American LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

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 ☐		Accelerated filer ☐
Non-accelerated filer ☑		Smaller reporting company ☑
		Emerging growth 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

63,734,439 shares of our common stock were outstanding as of November 7, 2023.

| September 30, 2023, Form 10-Q

IGC PHARMA, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Table of Contents

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Changes in Shareholder’s Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	30
Item 6.	Exhibits	30

SIGNATURES		31

| September 30, 2023, Form 10-Q

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain “forward-looking statements.” Additionally, we, or our representatives, may, from time to time, make other written or verbal forward-looking statements and discuss plans, expectations, and objectives regarding our business, financial condition, and results of operations. Without limiting the foregoing, statements that are in the future tense, and all statements accompanied by terms such as “believe,” “project,” “expect,” “trend,” “estimate,” “forecast,” “assume,” “intend,” “plan,” “target,” “anticipate,” “outlook,” “preliminary,” “will likely result,” “will continue,” and variations of them and similar terms are intended to be forward-looking statements” as defined by federal securities laws. Such statements are based on currently available information, which management has assessed but which is dynamic and subject to rapid change due to risks and uncertainties that affect our business.

For the next several years, we believe our success is highly correlated with the outcome of our clinical trials and secondarily with the sale of our products and services. The Company may not be able to complete human trials on our investigational drug candidate, or, once conducted, the results of human trials may not be favorable or as anticipated or may reflect a lack of efficacy in humans or animals. Precautions, including social distancing and travel restrictions, among others could lead to delays or expenses greater than anticipated or projected. Failure or delay with respect to any of the above factors could have a material adverse effect on our business, future results of operations, stock price, and financial condition.

Our projections and investments anticipate certain regulatory changes and stable pricing, which may not hold out over the next several years. We may not be able to protect our intellectual property adequately or receive patents. We may not receive regulatory approval for our products or trials. The patent applications we have licensed may not be granted by the United States Patent and Trademark Office (“USPTO”), even if the Company is in full compliance with USPTO requirements. We may not have adequate resources, including financial resources, to successfully conduct all requisite clinical trials, to bring a product based on the above-referenced patented formulations to market, or to pay applicable maintenance fees over time. We may not be able to successfully commercialize our products even if they are successful and receive regulatory approval, including, but not limited to, based on the Food and Drug Administration’s (“FDA”) current position on hemp and hemp-based products. Failure or delay with respect to any of the factors above could have a material adverse effect on our business, future results of operations, stock price, and financial condition.

This document also contains statements that are not approved by the FDA, including statements on hemp and hemp extracts and their potential efficacy on humans and animals. While these statements and claims are intended to be in compliance with federal and state laws, we cannot guarantee such compliance.

We caution you not to place undue reliance on forward-looking statements, which are based upon assumptions, expectations, plans, and projections subject to risks and uncertainties, including those, if any, identified in the “Risk Factors” set forth in this report or in our annual report on Form 10-K for the fiscal year ended March 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on July 7, 2023, which may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date when they are made. Except as required by federal securities law, we do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements.

| September 30, 2023, Form 10-Q

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

IGC Pharma, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

	September 30, 2023 ($)			March 31, 2023 ($)
ASSETS
Current assets:
Cash and cash equivalents		3,026			3,196
Accounts receivable, net		137			107
Short term investments		98			154
Inventory		2,636			2,651
Deposits and advances		220			358
Total current assets		6,117			6,466

Non-current assets:
Intangible assets, net		1,181			1,170
Property, plant, and equipment, net		7,947			8,213
Claims and advances		998			1,003
Operating lease asset		263			326
Total non-current assets		10,389			10,712
Total assets		16,506			17,178
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		549			530
Accrued liabilities and others		1,557			1,368
Total current liabilities		2,106			1,898

Non-current liabilities:
Long-term loans		139			141
Other liabilities		17			21
Operating lease liability		146			207
Total non-current liabilities		302			369
Total liabilities		2,408			2,267

Commitments and Contingencies – See Note 12

Stockholders’ equity:
Preferred stock, $0.0001 par value: authorized 1,000,000 shares, no shares issued or outstanding as of September 30, 2023, and March 31, 2023.
Common stock and additional paid-in capital, $0.0001 par value: 150,000,000 shares authorized; 63,706,939 and 53,077,436 shares issued and outstanding as of September 30, 2023, and March 31, 2023, respectively.		122,732			118,965
Accumulated other comprehensive loss		(3,443	)		(3,389	)
Accumulated deficit		(105,191	)		(100,665	)
Total stockholders’ equity		14,098			14,911
Total liabilities and stockholders’ equity		16,506			17,178

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| September 30, 2023, Form 10-Q

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IGC Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except loss per share and share data)

(Unaudited)

	Three months ended September 30,						Six months ended September 30,
	2023			2022			2023			2022
	($)			($)			($)			($)

Revenue		291			202			846			414
Cost of revenue		(117	)		(67	)		(417	)		(137	)
Gross profit		174			135			429			277
Selling, General and Administrative expenses		(1,397	)		(1,855	)		(3,044	)		(3,405	)
Research and development expenses		(1,268	)		(768	)		(2,015	)		(2,162	)
Operating loss		(2,491	)		(2,488	)		(4,630	)		(5,290	)
Other income, net		40			46			104			63
Loss before income taxes		(2,451	)		(2,442	)		(4,526	)		(5,227	)
Income tax expense/benefit		-			-			-			-
Net loss attributable to common stockholders		(2,451	)		(2,442	)		(4,526	)		(5,227	)
Foreign currency translation adjustments		(63	)		(182	)		(54	)		(401	)
Comprehensive loss		(2,514	)		(2,624	)		(4,580	)		(5,628	)

Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.05	)		(0.05	)		(0.08	)		(0.10	)
Weighted-average number of shares used in computing net loss per share amounts:		54,301,087			52,194,098			53,695,912			52,082,096

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| September 30, 2023, Form 10-Q

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IGC Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)

Three months ended September 30, 2022	Number of Common Shares			Common Stock and Additional Paid in Capital ($)		Accumulated Deficit ($)			Accumulated Other Comprehensive Loss ($)			Total Stockholders’ Equity ($)
Balances as of June 30, 2022		51,841			117,171		(91,944	)		(3,187	)		22,040
Common stock-based compensation & expenses, net		1,009			624		-			-			624
Issuance of common stock through offering (net of expenses)		208			104		-			-			104
Cancellation/forfeiture of shares		-			-		-			-			-
Net loss		-			-		(2,442	)		-			(2,442	)
Foreign currency translation adjustments		-			-		-			(182	)		(182	)
Balances as of September 30, 2022		53,058			117,899		(94,386	)		(3,369	)		20,144

Three months ended September 30, 2023
Balances as of June 30, 2023		53,077			119,322		(102,740	)		(3,380	)		13,202
Common stock-based compensation & expenses, net		1,130			550		-			-			550
Issuance of common stock through offering (net of expenses)		10,000			2,860		-			-			2,860
Cancellation/forfeiture of shares		(500	)		-		-			-			-
Net loss		-			-		(2,451	)		-			(2,451	)
Foreign currency translation adjustments		-			-		-			(63	)		(63	)
Balances as of September 30, 2023		63,707			122,732		(105,191	)		(3,443	)		14,098

Six months ended September 30, 2022	Number of Common Shares			Common Stock and Additional Paid in Capital ($)		Accumulated Deficit ($)			Accumulated Other Comprehensive Loss ($)			Total Stockholders’ Equity ($)
Balances as of March 31, 2022		51,054			116,019		(89,159	)		(2,968	)		23,892
Common stock-based compensation & expenses, net		1,796			1,776		-			-			1,776
Issuance of common stock through offering (net of expenses)		208			104		-			-			104
Cancellation/forfeiture of shares		-			-		-			-			-
Net loss		-			-		(5,227	)		-			(5,227	)
Foreign currency translation adjustments		-			-		-			(401	)		(401	)
Balances as of September 30, 2022		53,058			117,899		(94,386	)		(3,369	)		20,144

Six months ended September 30, 2023
Balances as of March 31, 2023		53,077			118,965		(100,665	)		(3,389	)		14,911
Common stock-based compensation & expenses, net		1,130			907		-			-			907
Issuance of common stock through offering (net of expenses)		10,000			2,860		-			-			2,860
Cancellation/forfeiture of shares		(500	)		-		-			-			-
Net loss		-			-		(4,526	)		-			(4,526	)
Foreign currency translation adjustments		-			-		-			(54	)		(54	)
Balances as of September 30, 2023		63,707			122,732		(105,191	)		(3,443	)		14,098

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| September 30, 2023, Form 10-Q

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IGC Pharma, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six months Ended September 30,
	2023 ($)			2022 ($)
Cash flows from operating activities:
Net loss		(4,526	)		(5,227	)
Adjustment to reconcile net loss to net cash:
Depreciation and amortization		313			332
Common stock-based compensation and expenses, net		907			1,776
Other non-cash items		(52	)		45

Changes in:
Accounts receivables, net		(30	)		(65	)
Inventory		15			(202	)
Deposits and advances		76			534
Claims and advances		5			(13	)
Accounts payable		19			(524	)
Accrued and other liabilities		185			(535	)
Operating lease asset		63			63
Operating lease liability		(61	)		(66	)
Net cash used in operating activities		(3,086	)		(3,882	)

Cash flow from investing activities:
Purchase of property, plant, and equipment		(55	)		277
Sale of property, plant, and equipment		42			-
Investment in short term investments		128			(193	)
Acquisition and filing cost of patents and rights		(48	)		(60	)
Net cash provided by investing activities		67			24

Cash flows from financing activities:
Net proceeds from the issuance of common stock		2,860			103
Repayment of long-term loan		(2	)		(2	)
Net cash provided by financing activities		2,858			101

Effects of exchange rate changes on cash and cash equivalents		(9	)		(80	)
Net decrease in cash and cash equivalents		(170	)		(3,837	)
Cash and cash equivalents at the beginning of the period		3,196			10,460
Cash and cash equivalents at the end of the period		3,026			6,623

Supplementary information:
Non-cash items:
Common stock issued/granted for stock-based compensation, including patent acquisition		907			1,776

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| September 30, 2023, Form 10-Q

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IGC Pharma, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2023

(in thousands, except for share data and loss per share, unaudited)

Unless the context requires otherwise, all references in this report to “IGC,” “the Company,” “we,” “our” and/or “us” refer to IGC Pharma, Inc., together with our subsidiaries and beneficially owned subsidiary. Our public filings with the Securities and Exchange Commission, the “SEC,” are available on www.sec.gov. The information contained on our various websites, including www.igcinc.us, is not incorporated by reference in this report, and you should not consider such information to be a part of this report. We exclude our investments and minority non-controlling interests, and any information provided by them is not incorporated by reference in this report, and you should not consider such information to be a part of this report.

NOTE 1 – BUSINESS DESCRIPTION

Overview

IGC Pharma is a clinical-stage pharmaceutical company developing novel therapies for Alzheimer’s disease and conditions related to the central nervous system. The company is pursuing five assets: IGC-AD1, TGR-63, LMP, IGC-1C, and IGC-M3, all of which target Alzheimer’s disease and are at various stages of development.

Our most clinically advanced investigational new drug for Alzheimer’s, IGC-AD1, has shown significant promise in preclinical studies. In Alzheimer’s cell lines, IGC-AD1 has demonstrated the potential to effectively suppress or ameliorate two key hallmarks of Alzheimer’s disease: plaques and tangles. In animal models, it has shown effectiveness in improving memory. Furthermore, in a Phase 1 multiple ascending dose (MAD) trial, it exhibited potential efficacy in reducing neuropsychiatric symptoms, including agitation, anxiety, and depression. IGC-AD1 is currently in a Phase 2B, multi-center, randomized, double-blind, placebo-controlled trial, specifically designed to address agitation in dementia from Alzheimer’s disease (clinicaltrials.gov, NCT05543681). This condition affects more than 10 million individuals in North America and Europe. The trial is being conducted at 10 sites in the US and Canada.

Our portfolio includes four other small molecule assets, each at distinct stages of development, all with a singular mission — to transform the landscape of Alzheimer's treatment. LMP targets neuroinflammation, Aβ plaques, and neurofibrillary tangles, TGR-63 targets Aβ plaque, where we seek to disrupt the progression of Alzheimer's disease. IGC-M3 targets the inhibition of Aβ plaque aggregation with the potential to create a profound impact on early-stage Alzheimer’s. IGC-1C targets tau and neurofibrillary tangles, IGC-1C represents a forward-thinking approach to Alzheimer's therapy.

Furthermore, IGC controls a total of 36 patent filings. IGC maintains a state-of-the-art manufacturing facility in Washington State, which is poised for potential use in a Phase 3 trial and commercialization of IGC-AD1. In Bogota, Colombia, we also operate an R&D laboratory and an internal Contract Research Organization (CRO) that provides clinical trial services. We are actively expanding our technological capabilities with a primary focus on Generative Artificial Intelligence (AI) to enhance various aspects of clinical trial operations and data analysis. Our Company is investing in and driving AI development with an immediate focus on clinical trial processes, and analysis. Our AI initiatives are centered on informing clinical trials, developing a methodology for early detection of Alzheimer’s, and investigating the interaction of pharmaceuticals with cannabinoids.

Collectively, these core assets and initiatives underscore our commitment to advancing the field of pharmaceuticals, delivering groundbreaking treatments, and creating lasting value for our investors. We remain steadfast in our pursuit of excellence and our mission to improve the lives of those affected by Alzheimer’s and related conditions.

Our manufacturing facility is also utilized to produce women’s wellness products under the brand “Holief.” IGC Pharma is a Maryland corporation established in 2005 with a fiscal year ending on March 31, spanning a 52- or 53-week period. The company operates in two primary business segments: Life Sciences and Infrastructure.

Life Sciences Segment

Pharmaceutical: Since 2014, the Company has focused primarily on the potential uses of phytocannabinoids, in combination with other compounds, to treat multiple diseases, such as Alzheimer’s disease. As a company engaged in the clinical-stage pharmaceutical industry, we focus our research and development efforts, subject to results of future clinical trials, on seeking pharmaceutical solutions that may a) alleviate neuropsychiatric symptoms such as agitation, anxiety, and depression associated with dementia in Alzheimer’s disease; and b) halt the onset, progression, or cure Alzheimer’s disease.

| September 30, 2023, Form 10-Q

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Over-the-Counter Products: We have created a women’s wellness brand, Holief™, available through online channels that are compliant with relevant federal, state, and local laws and regulations. Holief™ is an all-natural, non-GMO, vegan, line of over-the-counter (OTC) products aimed at treating menstrual cramps (dysmenorrhea) and premenstrual syndrome (PMS). The products are available online and through Amazon and other online channels. In addition, we white label our product formulations to other companies that market them under their brand.

Phase 2 Clinical Trial Update

In this document, we use the terms Phase 2 and Phase 2B interchangeably, though typically, a Phase 2 trial is divided into a Phase 2A and a Phase 2B trial. Phase 2A is designed to assess dosing requirements, while Phase 2B is intended to establish efficacy. Our company has started a Phase 2B protocol called “A Phase 2, Multi-Center, Double-Blind, Randomized, Placebo-controlled trial of the safety and efficacy of IGC-AD1 on agitation in participants with dementia due to Alzheimer’s disease.” The trial is powered at 146 Alzheimer’s patients, with half receiving a placebo, and is a superior, parallel-group study.

The primary end point is agitation in dementia due to Alzheimer’s disease, as rated by the Cohen-Mansfield Agitation Inventory (CMAI) over a six-week period. The Phase 2 trial will also look at eleven exploratory objectives, including changes in anxiety, changes in cognitive processes such as attention, orientation, language, and visual spatial skills as well as memory, changes in depression, delusions, hallucinations, euphoria/elation, apathy, disinhibition, irritability, aberrant motor behavior, sleep disorder, appetite, quality of life, and caregiver burden. In addition, the trial will evaluate the impact of CYP450 polymorphisms and specifically CYP2C9 on each of the NPS and assess any reductions in psychotropic drugs, among others. CYP2C9 ranks amongst the most important drug metabolizing enzymes in humans, as it breaks down over 100 drugs, including nonsteroidal anti-inflammatory drugs. We seek to understand how various versions of the enzyme act on IGC-AD1. Each participant will receive two doses of IGC-AD1 (b.i.d.) or two doses of placebo per day for six weeks.

Infrastructure Segment

The Company’s infrastructure business has been operating since 2008. It includes (i) execution of construction contracts and (ii) rental of heavy construction equipment.

Business Organization

As of September 30, 2023, the Company had the following operating subsidiaries: Techni Bharathi Private Limited (TBL), IGCare LLC, Holi Hemp LLC, IGC Pharma LLC, SAN Holdings LLC, Sunday Seltzer LLC, Hamsa Biopharma India Pvt. Ltd., Colombia-based beneficially-owned subsidiary IGC Pharma SAS (formerly Hamsa Biopharma Colombia SAS) and IGC Pharma IP LLC. The Company’s fiscal year is the 52- or 53-week period that ends on March 31. The Company’s principal office is in Maryland. Additionally, the Company has offices in Washington state, Colombia, and India. The Company’s filings are available on www.sec.gov. IGC Pharma, Inc. was incorporated in 2005.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated Balance Sheet as of September 30, 2023, and March 31, 2023, condensed consolidated statements of operations for the three months and six months ended September 30, 2023, and 2022, and condensed consolidated statements of cash flows for the six months ended September 30, 2023, and 2022, are unaudited. The consolidated balance sheet as of March 31, 2023, has been derived from audited financial statements, and the accompanying as of September 30, 2023 unaudited condensed consolidated financial statements (“interim statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (the “FASB”) within its Accounting Standards Codification (“ASC”) and under the rules and regulations of the SEC.

Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2023 (“Fiscal 2023”) contained in the Company’s Form 10-K for Fiscal 2023, filed with the SEC on July 7, 2023, specifically in Note 2 to the consolidated financial statements.

| September 30, 2023, Form 10-Q

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Principles of consolidation

The interim statements include the consolidated accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated. In the opinion of Management, the interim statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Transactions between the Company and its subsidiaries are eliminated in the consolidated financial statements.

Presentation and functional currencies

The Company operates in India, the U.S., Colombia, and Hong Kong, and a portion of the Company’s financials are denominated in the Indian Rupee (“INR”), the Hong Kong Dollar (“HKD”), or the Colombian Peso (“COP”). As a result, changes in the relative values of the U.S. Dollar (“USD”), the INR, the HKD, or the COP affect our financial statements.

The accompanying financial statements are reported in USD. INR, HKD, and COP are the functional currencies for certain subsidiaries of the Company. The translation of the functional currencies into USD is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues and expenses using average exchange rates prevailing during the reporting periods. Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive (loss), a separate component of shareholders’ equity. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of operations.

Going Concern

The Company assesses and determines its ability to continue as a going concern in accordance with the provisions of ASC Subtopic 205-40, “Presentation of Financial Statements—Going Concern”, which requires the Company to evaluate whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern.

The Company is currently in a clinical trial stage and, thus, has not yet achieved profitability. The Company expects to continue to incur significant operating and net losses and negative cash flows from operations in the near future.

The Company estimates that its current cash and cash equivalents balance with working capital credit facility and equity investment is sufficient to support operations beyond the twelve months following the date these consolidated financial statements and footnotes were issued. These estimates are based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects.

Accounts receivable

We make estimates of the collectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness, and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. We had $137 thousand of accounts receivable, net of provision for the doubtful debt of $12 thousand as of September 30, 2023, as compared to $107 thousand of accounts receivable, net of provision for the doubtful debt of $17 thousand as of March 31, 2023.

Loss per share

The computation of basic loss per share for the six months ended September 30, 2023, excludes potentially dilutive securities of approximately 9 million shares, which includes share options, unvested shares such as restricted shares and restricted share units, granted to employees, non-employees, and advisors, and shares from the conversion of outstanding units, if any because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for the six months ended September 30, 2023, and 2022, used for the computation of basic earnings per share (“EPS”) is 53,695,912 and 52,082,096, respectively, as compared to 54,301,087 and 52,194,098 for the three months ended September 30, 2023, and 2022, respectively. Due to the loss incurred by the Company during the six months ended September 30, 2023, and 2022, all the potential equity shares are anti-dilutive, and accordingly, the fully diluted EPS is equal to the basic EPS.

| September 30, 2023, Form 10-Q

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Cybersecurity

We have a cybersecurity policy in place and have taken cybersecurity measures to safeguard against hackers, however, there can be no assurance thereof. During the six months ended September 30, 2023, there were no impactful breaches in cybersecurity.

Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (ASC 606). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 prescribes a 5-step process to achieve its core principle. The Company recognizes revenue from trading, rental, or product sales as follows:

I. Identify the contract with the customer.

II. Identify the contractual performance obligations.

III. Determine the amount of consideration/price for the transaction.

IV. Allocate the determined amount of consideration/price to the performance obligations.

V. Recognize revenue when or as the performing party satisfies performance obligations.

The consideration/price for the transaction (performance obligation(s)) is determined as per the agreement or invoice (contract) for the services and products in the Infrastructure and Life Sciences segment.

Revenue in the Infrastructure segment is recognized for the renting business when the equipment is rented, and the terms of the agreement have been fulfilled during the period. Revenue from the execution of infrastructure contracts is recognized based on the output method as and when part of the performance obligation has been completed, and approval from the contracting agency has been obtained after survey of the performance completion as of that date. In the Life Sciences segment, the revenue from the wellness and lifestyle business is recognized once goods have been sold to the customer and the performance obligation has been completed. In retail sales, we offer consumer products through our online stores. Revenue is recognized when control of the goods is transferred to the customer. This generally occurs upon our delivery to a third-party carrier or to the customer directly. Revenue from white label services is recognized when the performance obligation has been completed, and output material has been transferred to the customer.

Net sales disaggregated by significant products and services for the three months and six months ended September 30, 2023, and 2022 are as follows:

	*(in thousands)* *Three months ended* *September 30, 2023* *($)*		*(in thousands)* *Three months* *ended* *September 30, 2022* *($)*		*(in thousands)* *Six months ended* *September 30, 2023* *($)*		*(in thousands)* *Six months ended* *September 30, 2022* *($)*
Infrastructure segment (1)		-		7		166		17

Life Sciences segment
Wellness and lifestyle (2)		69		150		113		230
White labeling services (3)		222		45		567		167
Total		291		202		846		414

(1) Infrastructure segment consists of income from the rental of heavy construction equipment and construction contracts.

(2) Revenue from wellness and lifestyle consists of the sale of products such as gummies, hand sanitizers, bath bombs, lotions, beverages, hemp crude extract, hemp isolate, and hemp distillate.

(3) Revenue from white label services consists of rebranding our formulations or the customer’s products as per the customer’s requirement.

Recently issued accounting pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASUs) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Newly issued ASUs not listed are expected to have no impact on the Company’s consolidated financial position and results of operations, because either the ASU is not applicable, or the impact is expected to be immaterial.

| September 30, 2023, Form 10-Q

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NOTE 3 – INVENTORY

	*(in thousands)*
	As of September 30, 2023 ($)		As of March 31, 2023 ($)
Raw materials		2,127		2,100
Work-in-Progress		11		18
Finished goods		498		533
Total		2,636		2,651

During the six months ended September 30, 2023, and 2022, the Company wrote off approximately $3 thousand and $40 thousand of inventory due to abnormal loss due to idle facility expense, freight, handling costs, scrap, and wasted material (spoilage). This charge was recorded in Selling, General, and Administrative Expenses.

We capitalize inventory costs related to our investigational drug, provided that management determines there is a potential alternative use for the inventory in future research and development projects or other purposes. As of September 30, 2023, and March 31, 2023, our consolidated balance sheet reported approximately $397 thousand and $407 thousand clinical trial-related inventory, respectively.

NOTE 4 – DEPOSITS AND ADVANCES

	*(in thousands)*
	As of September 30, 2023 ($)		As of March 31, 2023 ($)
Advances to suppliers and consultants		62		72
Other receivables and deposits		15		24
Prepaid expenses and other current assets		143		262
Total		220		358

The Advances to suppliers and consultants primarily relate to advances to vendors. Prepaid expenses and other current assets include approximately $25 thousand of statutory advances as of September 30, 2023, and March 31, 2023, respectively.

NOTE 5 – INTANGIBLE ASSETS

	*(in thousands)*
	As of September 30, 2023 ($)			As of March 31, 2023 ($)
*Amortized intangible assets*
Patents		730			709
Other intangibles		34			34
Accumulated amortization		(144	)		(107	)
Total amortized intangible assets		620			636

*Other intangible assets*
Patents		561			534
Other intangibles		-			-
Total unamortized intangible assets		561			534
Total intangible assets		1,181			1,170

| September 30, 2023, Form 10-Q

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The value of intangible assets includes the cost of acquiring patent rights, supporting data, and the expense associated with filing of patent applications. It also includes acquisition costs related to domains and licenses.

The intangible with finite life is up to 20 years are amortized on straight-line basis, commencing from the date of grant or acquisition. The amortization expense in the three months ended September 30, 2023, and 2022, amounted to approximately $18 thousand and $14 thousand, respectively, whereas the amortization expense in the six months ended September 30, 2023, and 2022 amounted to approximately $36 thousand and $24 thousand, respectively.

The Company regularly reviews its intangible assets to determine if any intangible asset is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period and concluded that, as of September 30, 2023, there was no impairment.

Estimated annual amortization expense	*(in thousands)* *($)*
For the year ended 2025		80
For the year ended 2026		89
For the year ended 2027		97
For the year ended 2028		107
For the year ended 2029		118

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

	*(in thousands, except useful life)*
	Useful Life (years)	As of September 30, 2023 ($)			As of March 31, 2023 ($)
Land	N/A		4,051			4,100
Buildings and facilities	25		2,303			2,298
Plant and machinery	5-20		3,332			3,335
Computer equipment	3		155			138
Office equipment	3-5		99			84
Furniture and fixtures	5		93			92
Vehicles	5		101			102
Total gross value			10,134			10,149
Less: Accumulated depreciation			(2,187	)		(1,936	)
Total property, plant, and equipment, net			7,947			8,213

The depreciation expense in the three months ended September 30, 2023, and 2022 amounted to approximately $140 thousand and $156 thousand, respectively. The depreciation expense in the six months ended September 30, 2023, and 2022 amounted to approximately $277 thousand and $308 thousand, respectively. The net decrease in Total property, plant, and equipment is primarily due to depreciation. During the six months ended September 2023, the Company sold a fully depreciated property in India for net proceeds of approximately $43 thousand and accounted the same in other income. For more information, please refer to Note 16 – “Segment Information” for the non-current assets other than financial instruments held in the country of domicile and foreign countries.

NOTE 7 – LEFT BLANK INTENTIONALLY

| September 30, 2023, Form 10-Q

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NOTE 8 – CLAIMS AND ADVANCES

	*(in thousands)*
	As of September 30, 2023 ($)		As of March 31, 2023 ($)
Claims receivable (1)		947		951
Non-current deposits		26		27
Non-current advances		25		25
Total		998		1,003

(1)	The claims receivable is due from different vendors. While the Company has initiated collection proceedings internally or with the appropriate authorities, it believes receiving the amount in the next 12 months will be challenging because of the time required for collection proceedings. It includes $140 thousand owed to the company by one of our manufacturers for the equipment purchase.

NOTE 9 – LEFT BLANK INTENTIONALLY

NOTE 10 – ACCRUED AND OTHER LIABILITIES

	*(in thousands)*
	As of September 30, 2023 ($)		As of March 31, 2023 ($)
Compensation and other contributions		749		619
Provision for expenses		378		258
Short-term lease liability		130		133
Other current liability		300		358
Total		1,557		1,368

Compensation and other contribution-related liabilities consist of accrued salaries to employees. In addition, provision for expenses includes provision for legal, professional, and marketing expenses. Other current liability also includes statutory payables of approximately $37 thousand and $31 thousand as of September 30, 2023, and March 31, 2023, respectively, and approximately $3 thousand of short-term loans as of September 30, 2023, and March 31, 2023, respectively.

NOTE 11 – LOANS AND OTHER LIABILITIES

Loan as of September 30, 2023:

On June 11, 2020, the Company received an Economic Injury Disaster Loan (“EIDL”) for approximately $150 thousand at an annual interest rate of 3.75%. The Company must pay principal and interest payments of $731 every month beginning June 5, 2021. The SBA will apply each installment payment first to pay interest accrued to the day the SBA receives the payment and will then apply any remaining balance to reduce the principal. All remaining principal and accrued interest is due and payable 30 years from the date of the loan. For the six months ended September 30, 2023, the interest expense and principal payment for the EIDL were approximately $3 thousand and $2 thousand, respectively. For the six months ended September 30, 2022, the interest expense and principal payment for the EIDL were approximately $2 thousand each. As of September 30, 2023, approximately $139 thousand of the loan is classified as Long-term loans and approximately $3 thousand as Short-term loans.

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On June 30, 2023, the Company entered into a Master Loan and Security Agreement with O-Bank, CO., LTD. (the “Credit Agreement”), pursuant to which the Company may borrow up to $12 million, which will be used to fulfill liquidity requirements and ensure the Company’s ability to sustain its operations. The Credit Agreement matures June 30, 2024, with an option to renew. Interest on borrowings will be calculated according to the interest rate stated in the Certificate of Deposit (as defined in the Credit Agreement), plus an applicable margin of 1%, and the Company will bear the tax. The Company must pay the interest in full on the last business day of each interest period. As of September 30, 2023, the Company has not yet used any of the $12 million available under the Credit Agreement.

Other Liability:

(in thousands)

As of

September 30, 2023

($)

SEC Form 10-Q filed by IGC Pharma Inc.