IGC Pharma Inc

Previous wording

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of IGC Pharma, Inc.’s (“IGC,” the “Company,” “we,” “our,” and/or “us”) consolidated financial condition and results of operations and cash flows. The MD&A 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, 2024, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on June 24, 2024 (the “2024 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 and 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. Accordingly, 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 expressly 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 outlined in the forward-looking statements.

Current wording

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of IGC Pharma, Inc.’s (“IGC,” the “Company,” “we,” “our,” and/or “us”) consolidated financial condition and results of operations and cash flows. The MD&A 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 and six months ended September 30, 2024, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on June 24, 2024 (the “2024 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 and 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. Accordingly, 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 expressly 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 outlined in the forward-looking statements.

Previous wording

IGC Pharma, a clinical-stage company developing treatments for Alzheimer’s disease, is committed to transforming patient care by striving to offer faster acting and more effective solutions. Our lead drug, IGC-AD1, embodies this vision by tackling a critical challenge – managing agitation in Alzheimer’s dementia. Early results from our Phase 2 trial are promising: IGC-AD1 effectively reduced agitation in patients compared to a placebo, and crucially, it did so much faster than traditional medications. While existing anti-psychotics can take a long 6 to 12 weeks to show effects, IGC-AD1 has the potential to act within two weeks. This significantly faster onset of action could significantly improve patient care and represents a potential breakthrough in managing Alzheimer’s-related agitation, although there can be no assurance thereof. In addition, we have created in-house wellness brands, available through online channels that are compliant with relevant federal, state, and local laws and regulations. We derive revenue from our in-house wellness non-pharmaceutical formulations that are manufactured as non-GMO, vegan, products at our facility and are sold over-the-counter (“OTC”).

Current wording

IGC Pharma, a clinical-stage company developing treatments for Alzheimer’s disease, is committed to transforming patient care by striving to offer faster acting and more effective solutions. Our lead drug, IGC-AD1, embodies this vision by tackling a critical challenge – managing agitation in Alzheimer’s dementia. Early results from our Phase 2 trial are promising: IGC-AD1 effectively reduced agitation in patients compared to a placebo, and crucially, it did so much faster than traditional medications. While existing anti-psychotics can take as long as 6 to 12 weeks to show effects, IGC-AD1 has the potential to act within 2 weeks. This significantly faster onset of action could significantly improve patient care and represents a potential breakthrough in managing Alzheimer’s-related agitation, although there can be no assurance thereof. In addition, we have created in-house wellness brands, available through online channels that are compliant with relevant federal, state, and local laws and regulations. We derive revenue from our in-house wellness non-pharmaceutical formulations that are manufactured as non-GMO, vegan, products at our facility and are sold over-the-counter (“OTC”).

Previous wording

Cost of revenue – Cost of revenue amounted to approximately $109 thousand for the three months ended June 30, 2024, compared to $300 thousand in the three months ended June 30, 2023, this represents gross margins of 60% and 46%, respectively. The cost of revenue is primarily attributable to the cost of raw materials, labor, and other direct overheads required to produce our products in the Life Science segment. Typically, the gross margin in the Life Sciences business will fluctuate from one quarter to another based on the mix within the Life Science business between white label, private label, and branded products. There is insufficient revenue to model or project gross margins.

Current wording

Cost of revenue – Cost of revenue amounted to approximately $214 thousand for the three months ended September 30, 2024, compared to $117 thousand in the three months ended September 30, 2023, this represents gross margins of 48% and 60%, respectively. The cost of revenue is primarily attributable to the cost of raw materials, labor, and other direct overheads required to produce our products in the Life Science segment. Typically, the gross margin in the Life Sciences business will fluctuate from one quarter to another based on the mix within the Life Sciences business between white label, private label, and branded products. There is insufficient revenue to model or project gross margins.

Previous wording

Selling, General and Administrative expenses (“SG&A”)– SG&A expenses primarily encompass various costs such as employee-related expenses, sales commissions, professional fees, legal fees, marketing expenses, other corporate expenses, allocated general overhead, provisions, depreciation, and write-offs related to doubtful accounts and advances. During the three months ended June 30, 2024, SG&A expenses increased by approximately $23 thousand or 1% to approximately $1.7 million as compared to the three months ended June 30, 2023.

Current wording

Selling, general and administrative expenses (“SG&A”)– SG&A expenses primarily encompass various costs such as employee-related expenses, sales commissions, professional fees, legal fees, marketing expenses, other corporate expenses, allocated general overhead, provisions, depreciation, and write-offs related to doubtful accounts and advances. During the three months that ended September 30, 2024, SG&A expenses decreased by approximately $356 thousand or 25% to approximately $ 1 million during the three months ended September 30, 2024. The decrease of $356 thousand is attributed to a decrease in marketing and corporate expenses.

Previous wording

Research and Development expenses (“R&D”)– R&D expenses were attributed to our Life Sciences segment. The R&D expenses increased by approximately $142 thousand or 19% to approximately $889 thousand during the three months ended June 30, 2024, from approximately $747 thousand. It is primarily attributable to the progression of Phase 2 trials on IGC-AD1 and pre-clinical studies on the other small molecule assets. We anticipate increased R&D expenses as the development of our other small molecule assets targeting Alzheimer’s and the Phase 2 trial on Alzheimer’s expand.

Current wording

Research and development expenses (“R&D”)– R&D expenses were attributed to our Life Sciences segment. The R&D expenses decreased by approximately $351 thousand or 28% to approximately $917 thousand during the three months ended September 30, 2024, from approximately $1.3 million. It is primarily attributable to the progression of Phase 2 trials on IGC-AD1 and pre-clinical studies on the other small molecule assets. We anticipate increased R&D expenses as the development of our other small molecule assets targeting Alzheimer’s and the Phase 2 trial on Alzheimer’s expand.

Previous wording

Other income, net – Other net income decreased by approximately $46 thousand or 72% during the thousand months ended June 30, 2024. As a result, the total other income for the three months ended June 30, 2024, and 2023 is approximately $18 thousand and $64 thousand, respectively. The other income for the three months ended June 30, 2023, is attributable to profit from the sale of assets. Other income includes interest and rental income, dividend income, profit from the sale of assets, unrealized gains from investments, net income, and income from scrap sales.

Current wording

Other income, net – Other net income increased by approximately $3 thousand or 8% during the thousand months ended September 30, 2024. As a result, the total other income for the three months ended September 30, 2024, and 2023 is approximately $43 thousand and $40 thousand, respectively. Other income includes interest and rental income, dividend income, profit from the sale of assets, unrealized gains from investments, net income, and income from scrap sales.

Previous wording

Revenue – Revenue was approximately $272 thousand and $555 thousand for the three months ended June 30, 2024, and June 30, 2023, respectively. Revenue in both quarters was primarily derived from our Life Sciences segment, which involved providing white-label manufactured products and sales of holistic health care products, among others. The decrease in revenue is attributed to the completion of our Infrastructure project in India as well as the white-label project in the U.S., both of which comprise approximately 50% of June 2023 revenue. The Company is committed to its current strategy of driving sales in formulations both as branded and white-labeled products in the Life Science segment.

Current wording

Revenue – Revenue was approximately $684 thousand and $846 thousand for the six months ended September 30, 2024, and September 30, 2023, respectively. Revenue in both quarters was primarily derived from our Life Sciences segment, which involved providing white-label manufactured products and sales of holistic health care products, among others. The decrease in revenue is attributed to the completion of our Infrastructure project in India as well as the white-label project in the U.S. The Company is committed to its current strategy of driving sales in formulations both as branded and white-labeled products in the Life Science segment.

Previous wording

Cash and cash equivalents increased by approximately $626 thousand to $1.8 million in the three months ended June 30, 2024, from $1.2 million as of March 31, 2024, an increase of approximately 52%.

Current wording

Cash and cash equivalents increased by approximately $348 thousand to $1.5 million in the six months ended September 30, 2024, from $1.2 million as of March 31, 2024, an increase of approximately 29%. The increase is primarily attributable to the fund raised by the Company during the quarter ended September ended 30, 2024.

Previous wording

Net cash used in operating activities for the three months ended June 30, 2024, was approximately $1.8 million. It consists of a net loss of approximately $2.4 million, a positive impact on cash due to non-cash expenses of approximately $564 thousand, and a positive change in operating assets and liabilities of approximately $62 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $162 thousand and stock-based expenses of approximately $402 thousand. In addition, changes in operating assets and liabilities had a positive impact of approximately $62 thousand on cash, of which a net negative impact of approximately $118 thousand is due to an increase in deposits and advances, and a positive impact of approximately $151 thousand is due to increase in accrued and other liabilities, and net other current assets and liabilities of approximately $29 thousand.

Current wording

Net cash used in operating activities for the six months ended September 30, 2024, was approximately $2.7 million. It consists of a net loss of approximately $4.1 million, a positive impact on cash due to non-cash expenses of approximately $1.1 million, and a positive change in operating assets and liabilities of approximately $249 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $307 thousand and stock-based expenses of approximately $804 thousand. In addition, changes in operating assets and liabilities had a positive impact of approximately $249 thousand on cash, of which a net negative impact of approximately $227 thousand is due to an increase in deposits and advances, and a positive impact of approximately $467 thousand is due to increase in accrued and other liabilities, a net negative impact of approximately $5 thousand is due to an increase in accounts payable and net other current assets and liabilities of approximately $14 thousand.

Previous wording

Net cash used in operating activities for the three months ended June 30, 2023, was approximately $1.5 million. It consists of a net loss of approximately $2.1 million, a positive impact on cash due to non-cash expenses of approximately $459 thousand, and a positive change in operating assets and liabilities of approximately $148 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $155 thousand, stock-based expenses of approximately $357 thousand, and an approximately $53 thousand decrease in other non-cash items. In addition, changes in operating assets and liabilities had a positive impact of approximately $148 thousand on cash, of which a net negative impact of approximately $118 thousand is due to an increase in accounts receivables, a positive impact of approximately $142 thousand is due to increase in accounts payable, a positive impact of approximately $91 thousand is due to increase in accrued and other liabilities and net other current assets and liabilities of approximately $33 thousand.

Current wording

Net cash used in operating activities for the six months ended September 30, 2023, was approximately $3.1 million. It consists of a net loss of approximately $4.5 million, a positive impact on cash due to non-cash expenses of approximately $1.1 million, and a positive change in operating assets and liabilities of approximately $272 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $313 thousand, stock-based expenses of approximately $907 thousand, and an approximately $52 thousand decrease in other non-cash items and approximately $42 thousand decrease in profit on sale of assets. In addition, changes in operating assets and liabilities had a positive impact of approximately $272 thousand on cash, of which approximately $30 thousand is due to a decrease in accounts receivables, approximately $19 thousand increase in accounts payable, approximately $185 thousand increase in accrued and other liabilities and approximately $98 thousand increase in other net current assets and liabilities.

Previous wording

Net cash used in investing activities for the three months ended June 30, 2024, was approximately $131 thousand, which comprised of expenses of approximately $93 thousand for the acquisition and development of intangible assets, and approximately $38 thousand for the net purchase of property, plant, and equipment.

Current wording

Net cash used in investing activities for the six months ended September 30, 2024, was approximately $196 thousand, which is comprised of expenses of approximately $145 thousand for the acquisition, and development of intangible assets, and approximately $51 thousand for the net purchase of property, plant, and equipment.

Previous wording

Net cash used in investing activities for the three months ended June 30, 2023, was approximately $5 thousand, which comprised of expenses of approximately $28 thousand for the acquisition and filing expenses related to intellectual property, approximately $23 thousand for the purchase of property, plant, and equipment.

Current wording

Net cash provided by investing activities for the six months ended September 30, 2023, was approximately $67 thousand, which is comprised of expenses of approximately $48 thousand for the acquisition filing expenses related to intellectual property, approximately $13 thousand for the net purchase of property, plant, and equipment and approximately $128 thousand of investment in marketable securities.

Previous wording

Net cash provided by financing activities was approximately $2.5 million for the three months ended June 30, 2024, which is comprised of net proceeds from issuance of equity stock of approximately $2.5 million and re-payment of the loan of approximately $1 thousand. Please refer to Note 13 – “Securities”, for more information.

Current wording

Net cash provided by financing activities was approximately $3.3 million for the six months ended September 30, 2024, which is comprised of net proceeds from issuance of equity stock of approximately $3.3 million, and re-payment of the loan of approximately $2 thousand. Please refer to Note 13 – “Securities”, for more information.

Previous wording

Net cash used in financing activities was approximately $1 thousand for the three months ended June 30, 2023, which is comprised of re-payment of loan.

Current wording

Net cash provided by financing activities was approximately $2.8 million for the six months ended September 30, 2023, which is comprised of net proceeds from issuance of equity stock of approximately $2.8 million and re-payment of the loan of approximately $2 thousand.