The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition and results of operations and cash flows, and should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q for the three months ended
June 30, 2022, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2022filed with the SECon June 23, 2022(the "2022 Form 10-K"). The Company's actual results could differ materially from those discussed here. Factors that could cause differences include those discussed in the "Forward-Looking Statements" and "Risk Factors" sections, as well as discussed elsewhere in this report. The risks and uncertainties can cause actual results to differ significantly from those in our forward-looking statements or implied in historical results and trends. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Overview
IGC has two segments: Life Sciences and Infrastructure.
Infrastructure Segment The Infrastructure segment involves the execution of construction contracts and the rental of heavy construction equipment. Since our inception, the Company has operated its Infrastructure segment from
India. Life Sciences Segment
The Life Sciences segment involves our over the counter products (“OTC”) and our
Over the Counter Products: We have created a cannabinoid-based women's wellness brand, Holief™ available through online channels and a CBD-caffeine-infused energy drink, Sunday Seltzer™, available through wholesale channels.
? Holief™ is an all-natural, non-GMO, vegan, line of OTC products aimed
at treating menstrual cramps (dysmenorrhea) and premenstrual symptoms ("PMS"). ? Sunday Seltzer™ is an all-natural, organic, carbonated energy drink with natural caffeine from green tea extract, CBD, vitamins B, vitamin C, no added sugars, and no preservatives. The energy drink is available in two flavors, pomegranate-lemon, and peach-ginger. In addition, Sunday Seltzer™ is also available in four flavors with CBD,
vitamin C, and no caffeine.
Both Holief™ and Sunday Seltzer™ are compliant with relevant federal, state, and
local laws, and regulations.
Biopharmaceutical: Since 2014, this part of our business has focused primarily on the potential uses of phytocannabinoids, including Tetrahydrocannabinol ("THC") and Cannabidiol ("CBD"), in combination with other compounds to treat multiple diseases, including Alzheimer's. As a company engaged in the clinical-stage biopharmaceutical 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. We currently have one investigational new drug candidate, "IGC-AD1", in a Phase 2 clinical trial for agitation in dementia from Alzheimer's. IGC-AD1 is a cannabis-based compound, which is made up of ultra-low doses of THC along with another compound as active ingredients. The second molecule, TGR-63, is an enzyme inhibitor that has been shown, in pre-clinical trials, to reduce neurotoxicity in Alzheimer's cell lines. Neurotoxicity causes cell dysfunction and death in Alzheimer's disease. If shown to be efficacious in halting this process, this inhibitor has the potential to treat Alzheimer's disease by ameliorating A? plaques.[[Image Removed: igc_smlogo1.jpg]] |
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The Company completed all dose escalation studies, and as announced by the Company on
December 2, 2021, the results of the clinical trial have been submitted in the Clinical/Statistical Report ("CSR") filed with U.S. Food and Drug Administration(the "FDA"). The Company is motivated by the potential that, with future successful results from appropriate further trials, IGC-AD1 could contribute to relief for some of the 55 million people around the world expected to be impacted by Alzheimer's disease by 2030 (WHO, 2021). Other Developments Our pipeline of investigational and development cannabinoid formulations also includes pain creams and tinctures for pain relief. We believe that the biopharmaceutical component of our Life Sciences strategy will at least take several more years to mature and involves considerable risk? however, we also believe it may involve greater defensible growth potential and first-to-market advantage. Although there can be no assurance, we believe this strategy has the potential to improve existing products and lead to the creation of new products, which, based on scientific study and research, may offer positive results for the management of certain conditions, symptoms, and side effects. While the bulk of our medium and longer-term focus is on clinical trials and getting IGC-AD1 to be an FDA approved drug, our shorter-term strategy, is to use our resources to provide white label services and market Holief™ and Sunday Seltzer™. We believe this may provide us with several profit opportunities, although there can be no assurance of such profit opportunities. Company Highlights
? The Company has initiated a protocol titled “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 protocol is powered at 146 Alzheimer's patients with half
receiving placebo and is a superiority, parallel group study. While subject to
changes, we expect to conduct the trial at three sites, one in
disease as rated by the Cohen-Mansfield Agitation Inventory (CMAI) over a
“Method and Composition for Treating Seizures Disorders.” The patent relates
to compositions and methods for treating multiple types of seizure disorders
and epilepsy in humans and animals using a combination of the CBD with other
compounds. Subject to further research and study, the combination is intended
to reduce side effects caused by hydantoin anticonvulsant drugs such as
phenobarbital, by reducing the dosing of anticonvulsant drugs in humans, dogs,
and cats. ? On
May 10, 2022, Hamsa Biopharma India Pvt. Ltd.("Hamsa Biopharma"), a
directly owned subsidiary of the Company, completed outstanding items in the
agreement executed with the
Research (“JNCASR”). The agreement was signed on
global rights corresponding to certain molecules, technology, patent, and
patent filings as discussed herein. Strategy
The Life Sciences segment strategy includes:
1. Subject to FDA approval, developing IGC-AD1 as a drug for treating agitation in dementia due to Alzheimer's and investigating and developing TGR 63 for the potential treatment of Alzheimer's disease. 2. Marketing HoliefTM, Sunday SeltzerTM, and white label services. We believe developing a drug for either symptoms or as a disease modifying agent has considerable risk due to the need for multi-year trials and FDA approval. However, there is considerable upside and significant value creation to the extent we obtain first-to-market advantage, of which there can be no assurance. If we were to obtain first-to-market advantage, such advantage could result in significant growth if and when an approved drug launches. Our HoliefTM strategy includes expanding the line of products and developing online services that connect women with healthcare professionals who can help with PMS and dysmenorrhea. Building an online community that brings women together can create brand equity and loyalty.[[Image Removed: igc_smlogo1.jpg]] |
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We believe that additional investment in clinical trials, R&D, facilities, marketing, advertising, and acquisition of complementary products and businesses will be critical to ongoing growth of the Life Sciences segment. These investments will fuel the development and delivery of innovative products that drive positive patient and customer experiences. We hope to leverage our R&D and intellectual property to develop ground-breaking, science-based products that are proven effective through clinical trials, subject to FDA approval. While there can be no assurance, we believe this strategy can improve our existing products and lead to the creation of new hemp-based products that can provide treatment options for multiple conditions, symptoms, and side effects. Our Infrastructure segment strategy includes winning and executing competitively bid construction contracts, such as building roads, bridges, and other civil works in
Kerala, India. COVID-19 Update Our infrastructure business is based in the state of Kerala, India, which is among the Indian states most affected by COVID-19, and Hong Kongwith strict quarantine and travel restrictions. The restrictions continue to adversely impact our infrastructure business, financial condition, liquidity, and operations. While IGC remains committed to its Infrastructure business line and intends to continue pursuing the execution of construction contracts, the purchase and resale of physical commodities used in infrastructure, and the rental of heavy construction equipment as the pandemic allows, we have limited visibility into when economic conditions will recover in Indiaand Hong Kong.
In response, we have oriented our current focus on a) the human trials on
IGC-AD1 and getting an Alzheimer's drug through trials and to market, subject to
FDA approval; and b) launching a cannabinoid-based women's wellness line of
products designed to assist in managing PMS and Dysmenorrhea.
Results of Operations for the Three Months Ended
The historical results presented below are not necessarily indicative of the results that may be expected for any future period. The following table presents an overview of our results of operations for the three months ended
June 30, 2022, and June 30, 2021:
Statement of Operations (in thousands, unaudited)
Three months ended June 30, 2022 2021 Change Percent ($) ($) ($) Change Revenue 212 77 135 175 % Cost of revenue (70 ) (51 ) (19 ) 37 % Gross profit 142 26 116 446 % Selling, general and administrative expenses (1,550 ) (1,776 ) 226 (13 )% Research and development expenses (1,394 ) (444 ) (950 ) 214 % Operating loss (2,802 ) (2,194 ) (608 ) 28 % Impairment of investment - (37 ) 37 (100 )% Other income, net 17 443 (426 ) (96 )% Loss before income taxes (2,785 ) (1,788 ) (997 ) 56 % Income tax expense/benefit - - - - Net loss (2,785 ) (1,788 ) (997 ) 56 % Revenue - Revenue in the three months ended[[Image Removed: igc_smlogo1.jpg]] |
June 30, 2022, and June 30, 2021, was primarily derived from our Life Sciences segment, which involved sales of products such as lotion, gummies, and alcohol-based hand sanitizers, among others. Revenue was approximately $212 thousandand $77 thousandfor the three months ended June 30, 2022, and June 30, 2021, respectively. The Infrastructure segment had lower revenue during the three months ended June 30, 2022due to the slower recovery from the COVID-19 pandemic, the ensuing disruption, and the onset of the monsoon season in India, which hampers construction activity. We anticipate lower revenue from the Infrastructure segment for the foreseeable future.
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Cost of revenue - Cost of revenue amounted to approximately
$70 thousandfor the three months ended June 30, 2022, compared to $51 thousandin the three months ended June 30, 2021. The cost of revenue in the three months ended June 30, 2022, is primarily attributable to raw materials that are required to produce our products. Our gross margin increased from 34% to 67%, which reflects our increased sales from higher-margin Life Sciences segment as opposed to the lower margin infrastructure segment, which has traditionally been a lower margin business. Selling, general and administrative expenses ("SG&A") - SG&A expenses consist primarily of employee-related expenses, sales commission, professional fees, legal fees, marketing, other corporate expenses, allocated general overhead and provisions, depreciation and write-offs relating to doubtful accounts and advances, if any. SG&A expenses decreased by approximately $226 thousandor 13% to approximately $1.5 millionfor the three months ended June 30, 2022, from approximately $1.8 millionfor the three months ended June 30, 2021. The decrease is from decreased marketing and legal expenses. Research and Development expenses - R&D expenses were attributed to our Life Sciences segment. The R&D expenses increased by approximately $950 thousandor 214% to $1.4 millionduring the three months ended June 30, 2022, from approximately $444 thousandduring three month ended June 30, 2021. The increase is primarily attributable to the progression of Phase 2 trials on IGC-AD1 and pre-clinical studies on TGR-63. We anticipate additional increases to R&D expenses as the Phase 2 trial commences with patient sign ups. Impairment of investment - During the three month ended June 30, 2022, there was no impairment of investment. During the three month ended June 30, 2021, the Company decided to dispose of its holding in and exit the acquisition of Evolve I. As a result, Company impaired the investment of $37 thousandin the three months ended June 30, 2021. Other income, net - Other net income decreased by approximately $426 thousandor 96% during the three months ended June 30, 2022. The total other income for the three months ended June 30, 2022, and 2021, is approximately $17 thousandand $443 thousand, respectively. During the three months ended June 30, 2021, the other income included one time income of approximately $430 thousandrelated to forgiveness of PPP Note. Other income includes interest income and rental income, dividend income, and unrealized gains from marketable securities, net, and income from sale of scrap, among others.
Liquidity and Capital Resources
Our sources of liquidity are cash and cash equivalents, funds raised through the ATM offering, cash flows from operations, short-term and long-term borrowings, and short-term liquidity arrangements. The Company continues to evaluate various financing sources and options to raise working capital to help fund current research and development programs and operations. The Company does not have any material long-term debt, capital lease obligations or other long-term liabilities, except as disclosed in this report. Please refer to Note 12, "Commitments and contingencies", Note 11, "Loans and Other Liabilities" and Note 9, "Leases" in Item 1 of this report for further information on Company commitments and contractual obligations. While the Company believes its existing balances of cash, cash equivalents and marketable securities, and other short-term liquidity arrangements will be sufficient to satisfy its working capital needs, capital asset purchases, debt repayments, investments, including but not limited to, mutual funds, treasury bonds, cryptocurrencies, and other asset classes, clinical trials and other liquidity requirements, if any, associated with its existing operations over the next 12 months, it will raise money as and when it is able to do so. The Company continues to utilize the ATM to raise capital. Management is actively monitoring the impact of COVID-19 on the Company's financial condition, liquidity, operations, suppliers, industry, legal expenses, and workforce. Please refer to Item 1A. "Risk Factors" for further information on the risks related to the Company. (in thousands, unaudited) As of As of
June 30, 2022 March 31, 2022($) ($) Change Percent Change
Cash and cash equivalents 8,053 10,460 (2,407 ) (23 )% Working capital 11,068 12,670 (1,602 ) (13 )%[[Image Removed: igc_smlogo1.jpg]] |
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Cash and cash equivalents decreased by approximately
in the three months ended
The major decrease was due to approximately
property, plant, and equipment and acquisition of intangible assets and
Summary of Cash flows (in thousands, unaudited) Three months ended June 30, 2022 2021 Change Percent Change Cash used in operating activities (2,196 ) (1,851 ) (345 ) 19 % Cash used in investing activities (158 ) (95 ) (62 ) 65 % Cash (used in)/provided by financing activities (1 ) 726 (727 ) (100 )% Effects of exchange rate changes on cash and cash equivalents (52 ) (9 ) (44 ) 505 % Net decrease in cash and cash equivalents (2,407 ) (1,229 ) (1,178 ) 96 % Cash and cash equivalents at the beginning of period 10,460 14,548 (4,088 ) (28 )% Cash and cash equivalents at the end of the period 8,053 13,319 (5,266 ) (40 )% Operating Activities Net cash used in operating activities for the three months ended
June 30, 2022, was approximately $2.2 million. It consists of a net loss of approximately $2.8 million, a positive impact on cash due to non-cash expenses of approximately $1.4 million, and a negative changes in operating assets and liabilities of approximately $793 thousand. Non-cash expenses consist of an amortization/depreciation charge of approximately $162 thousandand stock-based expenses of approximately $1.2 million. In addition, changes in operating assets and liabilities had a negative impact of approximately $793 thousandon cash, of which approximately $258 thousandis due to decrease in accrued and other liabilities and approximately $524 thousanddecrease in accounts payable. Net cash used in operating activities for the three months ended June 30, 2021, was approximately $1.9 million. It consists of a net loss of approximately $1.8 million, a negative impact on cash due to non-cash expenses of approximately $110 thousand, and changes in operating assets and liabilities of approximately $48 thousand. Non-cash expenses consist of an amortization/depreciation charge of approximately $157 thousand, stock-based expenses of approximately $125 thousand, and a gain due to forgiveness of PPP Note of $430 thousand. In addition, changes in operating assets and liabilities had a positive impact of approximately $48 thousandon cash, of which approximately $46 thousandis due to decrease in accrued and other liabilities and operating lease assets. Investing Activities Net cash used in investing activities for the three months ended June 30, 2022, was approximately $158 thousand, which comprised of expenses of approximately $31 thousandfor the acquisition and filing expenses related to patents and purchase of property, plant, and equipment of approximately $127 thousand. Net cash used in investing activities for the three months ended June 30, 2021, was approximately $95 thousand, which comprised of expenses of approximately $2 thousandfor the acquisition and filing expenses related to patents and purchase of property, plant, and equipment of approximately $93 thousand. Financing Activities
Net cash used by financing activities was approximately
three months ended
Net cash provided by financing activities was approximately[[Image Removed: igc_smlogo1.jpg]] |
$726 thousandfor the three months ended June 30, 2021, which is comprised of net proceeds from issuance of equity stock through ATM offering, net of all expenses related to issuance of stock.
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Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
Critical Accounting Policies
While all accounting policies impact the financial statements, certain policies may be viewed as critical. Critical accounting policies are those that are both most important to the portrayal of financial condition and results of operations and that require Management's most subjective or complex judgments and estimates. Our Management believes the policies that fall within this category are the policies on revenue recognition, inventory, accounts receivable, foreign currency translation, impairment of long-lived assets and investments, stock-based compensation, and cybersecurity. We have a cybersecurity policy in place and have taken cybersecurity measures that, although there can be no assurance, we expect are likely to safeguard the Company against breaches. There were no impactful breaches in cybersecurity during the three months ended
June 30, 2022. Please see our disclosures in Note 2 - Summary of Significant Accounting Policies to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report, in the Notes to the Audited Consolidated Financial Statements in the 2021 Form 10-K, as well as Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Form 10-K, for a discussion of all our critical and significant accounting policies.
Recent Accounting Pronouncements
Changes to[[Image Removed: igc_smlogo1.jpg]] |
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. Recent accounting pronouncements which may be applicable to us are described in Note 2, "Significant Accounting Policies" to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report and in the Notes to the Audited Consolidated Financial Statements in Part II of our 2022 Form 10-K.
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