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 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.

Current wording

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of IGC Pharma, Inc.’s (“IGC,” “IGC Pharma,” 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 nine months ended December 31, 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 is on a mission to transform Alzheimer’s treatment. We are attempting to build a robust pipeline comprising five assets, each targeting different facets of Alzheimer’s disease at various stages of development.

Current wording

IGC Pharma is on a mission to transform Alzheimer’s treatment. We are attempting to build a robust pipeline comprising five assets, each targeting different facets of Alzheimer’s disease at various stages of development. The Alzheimer’s targeting molecule from each of our platforms is set forth below, the effects of which are subject to clinical trial and investigation:

Previous wording

Furthermore, IGC controls a total of 26 patent filings reflecting our commitment to innovation and intellectual property protection, including for IGC-AD1. Our patent portfolio underscores our dedication to safeguarding our competitive advantage in the market.

Current wording

Furthermore, IGC controls a total of 30 patent filings reflecting our commitment to innovation and intellectual property protection, including for IGC-AD1. Our patent portfolio underscores our dedication to safeguarding our competitive advantage in the market.

Previous wording

Revenue – Revenue was approximately $412 thousand and $291 thousand for the three 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 increase in revenue is attributed to 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.

Current wording

Revenue– Revenue was approximately $257 thousand and $204 thousand for the three months ended December 31, 2024, and December 31, 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 increase in revenue is attributed to 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

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.

Current wording

Cost of revenue – Cost of revenue amounted to approximately $153 thousand for the three months ended December 31, 2024, compared to $71 thousand in the three months ended December 31, 2023, this represents gross margins of 40% and 65%, 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 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.

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 ended December 31, 2024, SG&A expenses decreased by approximately $1.1 million or 49% to approximately $1.0 million, from approximately $2.2 million recorded for the three months ended December 31, 2023. The decrease of $1.1 million is attributed to a one-time expense of approximately $734 thousand during the three months ended December 31, 2023, and the focus of management on cost efficiency in marketing and corporate expenses during the three months ended December 31, 2024.

Previous 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.

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 $51 thousand or 6% to approximately $852 thousand during the three months ended December 31, 2024, from approximately $903 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.

Previous 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.

Current wording

Other income, net – Other net income increased by approximately $17 thousand or 53% during the thousand months ended December 31, 2024. As a result, the total other income for the three months ended December 31, 2024, and 2023, is approximately $49 thousand and $32 thousand, respectively. Other income includes interest and rental income, profit from the sale of assets, unrealized gains from investments, and one-time awards or prizes, among others.

Previous wording

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 six months ended September 30, 2024, and September 30, 2023:

Current wording

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 nine months ended December 31, 2024, and December 31, 2023:

Previous 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.

Current wording

Revenue– Revenue was approximately $941 thousand and $1.0 million for the nine months ended December 31, 2024, and December 31, 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. Revenue from life science segment increased by approximately by $52 thousand during nine months ended December 31, 2024. 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

Cost of revenue – Cost of revenue amounted to approximately $323 thousand for the six months ended September 30, 2024, compared to $417 thousand in the six months ended September 30, 2023, this represents gross margins of 53% and 51%, 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 $476 thousand for the nine months ended December 31, 2024, compared to $488 thousand in the nine months ended December 31, 2023, this represents gross margins of 49% and 54%, 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.

Previous wording

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 six months that ended September 30, 2024, SG&A expenses decreased by approximately $333 thousand or 11% to approximately $2.7 million during the six months ended September 30, 2024, from approximately $3 million. The decrease of $333 thousand is attributed to a decrease in marketing and corporate expenses.

Current wording

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 nine months ended December 31, 2024, SG&A expenses decreased by approximately $1.4 million or 27% to approximately $3.8 million during the nine months ended December 31, 2024, from approximately $5.3 million. The decrease of $1.4 million is attributed to a one-time expense of approximately $734 thousand during the nine months ended December 31, 2023, and the focus of management on cost efficiency in marketing and corporate expenses during the nine months ended December 31, 2024.

Previous wording

R&D– R&D expenses were attributed to our Life Sciences segment. The R&D expenses decreased by approximately $209 thousand or 10% to approximately $1.8 million during the six months ended September 30, 2024, from approximately $2 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.

Current wording

R&D– R&D expenses were attributed to our Life Sciences segment. The R&D expenses decreased by approximately $260 thousand or 9% to approximately $2.6 million during the nine months ended December 31, 2024, from approximately $2.9 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 $43 thousand or 41% during the thousand six months ended September 30, 2024. As a result, the total other income for the six months ended September 30, 2024, and 2023 is approximately $61 thousand and $104 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.

Current wording

Other income, net – Other net income decreased by approximately $26 thousand or 19% during the thousand nine months ended December 31, 2024. As a result, the total other income for the nine months ended December 31, 2024, and 2023 is approximately $110 thousand and $136 thousand, respectively. Other income includes interest and rental income, profit from the sale of assets, unrealized gains from investments, and one-time awards or prizes, among others.

Previous wording

Pursuant to the signed Master Loan and Security Agreement (the “Credit Agreement”) with O-Bank, CO., LTD., the Company successfully obtained a working capital credit facility totaling $12 million and, in addition, signed two SPAs to raise $6 million in exchange for approximately 18.8 million shares. Out of $6 million, the Company received $2.5 million during the quarter ended June 30, 2024. The equity and the credit facility serve to minimize ongoing liquidity requirements and ensure the Company’s ability to sustain its operations. Furthermore, the Company intends to raise additional funds through private placement and ATM offerings, subject to market conditions, although there can be no assurance that such financing efforts will be successful. Please refer to Note 13 – “Securities”, for more information.

Current wording

Pursuant to the signed Master Loan and Security Agreement (the “Credit Agreement”) with O-Bank, Co., Ltd., the Company successfully obtained a working capital credit facility totaling $12 million and, in addition, signed two SPAs to raise $6 million in exchange for approximately 18.8 million shares. The equity and the credit facility serve to minimize ongoing liquidity requirements and ensure the Company’s ability to sustain its operations. Furthermore, the Company intends to raise additional funds through private placement and ATM offerings, subject to market conditions, although there can be no assurance that such financing efforts will be successful or as to any private placement the of terms of such offering. Please refer to Note 13 – “Securities”, for more information.

Previous wording

On September 25, 2024, the Company entered into the 2024 Share Purchase Agreement (the “September 2024 SPA”) with Moran Global Strategies, Inc., a Virginia corporation (“MGS”), which is owned by James Moran, a director of IGC, relating to the sale and issuance by our company to the investors of an aggregate of 588,235 shares of our common stock, for a total purchase price of $200,000, or $0.34 per share, subject to the terms and conditions set forth in the September 2024 SPA. The investment is subject to customary closing conditions, including NYSE approval. As per the September 2024 SPA, the investor will receive piggyback registration rights subject to certain restrictions.

Current wording

On September 25, 2024, the Company entered into the 2024 Share Purchase Agreement (the “September 2024 SPA”) with Moran Global Strategies, Inc., a Virginia corporation (“MGS”), which is owned by James Moran, a director of IGC, relating to the sale and issuance by our company to the investors of an aggregate of 588,235 shares of our common stock, for a total purchase price of $200,000, or $0.34 per share, subject to the terms and conditions set forth in the September 2024 SPA. The investment is subject to customary closing conditions, including NYSE approval. As per the September 2024 SPA, the investor received piggyback registration rights subject to certain restrictions.

Previous 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.

Current wording

Net cash used in operating activities for the nine months ended December 31, 2024, was approximately $4.1 million. It consists of a net loss of approximately $5.9 million, a positive impact on cash due to non-cash expenses of approximately $1.6 million, and a positive change in operating assets and liabilities of approximately $224 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $464 thousand and stock-based expenses of approximately $1.2 million. In addition, changes in operating assets and liabilities had a positive impact of approximately $224 thousand on cash, of which a net negative impact of approximately $190 thousand is due to an increase in deposits and advances, and a positive impact of approximately $251 thousand is due to increase in accrued and other liabilities, a net positive impact of approximately $107 thousand is due to an increase in inventory and net other current assets and liabilities of approximately $56 thousand.

Previous 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.

Current wording

Net cash used in operating activities for the nine months ended December 31, 2023, was approximately $4.6 million. It consists of a net loss of approximately $10.1 million, a positive impact on cash due to non-cash expenses of approximately $5.2 million, and a positive change in operating assets and liabilities of approximately $220 thousand. Non-cash expenses consist of an amortization and depreciation charge of approximately $473 thousand, stock-based expenses of approximately $1.4 million, impairment loss of approximately $3.3 million and an approximately $42 thousand decrease in other non-cash items. In addition, changes in operating assets and liabilities had a positive impact of approximately $220 thousand on cash, of which approximately $169 thousand is due to a decrease in deposits and advances, approximately $117 thousand increase in accounts payable, approximately $83 thousand decrease in accrued and other liabilities and approximately $20 thousand increase in other net current assets and liabilities.

Previous 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.

Current wording

Net cash used in investing activities for the nine months ended December 31, 2024, was approximately $300 thousand, which is comprised of expenses of approximately $252 thousand for the acquisition, and development of intangible assets, and approximately $78 thousand for the net purchase of property, plant, and equipment.

Previous 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.

Current wording

Net cash provided by investing activities for the nine months ended December 31, 2023, was approximately $6 thousand, which comprised of expenses of approximately $67 thousand for the acquisition filing expenses related to intellectual property, approximately $81 thousand for the net purchase of property, plant, and equipment and approximately $154 thousand of investment in marketable securities.

Previous 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.

Current wording

Net cash provided by financing activities was approximately $3.6 million for the nine months ended December 31, 2024, which is comprised of net proceeds from issuance of equity stock of approximately $3.6 million, and offset by the re-payment of the loan of approximately $3 thousand. Please refer to Note 13 – “Securities”, for more information.

Previous 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.

Current wording

Net cash provided by financing activities was approximately $2.9 million for the nine months ended December 31, 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 $3 thousand.