IGC Pharma, Inc. 10-K

ITEM 1. BUSINESS Company Segments We operate through two segments, Infrastructure and Life Sciences. The Infrastructure segment, based in India involves, the execution of construction projects, the purchase and resale of physical commodities used in infrastructure, and the rental of heavy construction equipment. Our revenue in Fiscal 2020 was primarily derived from this segment. The Life Sciences segment, previously referred to as the Plant and Cannabinoid Business, is based in the United States (“U.S.”) and Colombia South America. It includes a biotech component, and a vertically integrated hemp-cannabinoid based healthcare and wellness business. The Company operates through several subsidiaries and in Fiscal 2020 worked on bringing several brands to market. We are a Maryland corporation established in 2005 with a fiscal year that is the 52- or 53-week period that ends on March 31. Company Background At IGC we are dedicated to pioneering the future of pharmaceuticals and wellness products through groundbreaking, innovative research in cannabinoid and hemp sciences. Devastating diseases such as Alzheimer’s, Parkinson’s, Epilepsy, and chronic pain collectively affect over a billion people worldwide. We believe life-altering solutions are within the reach of the current generation by applying creative concepts, dedicated study, a passion for community, and wellness empowerment, to cutting edge research, technology, and product development. We believe that wellness and access to affordable, naturally derived therapies, and efficacious products and medicines is a human right and that hemp derived cannabinoids are a significantly viable alternative to many current medications. Hemp itself is an impressively sustainable plant, and early anecdotal evidence suggests cannabinoid and hemp sciences may open doors to novel solutions for numerous diseases currently believed to be without a cure or without significant treatment options. At IGC we resolve to not only create and make available cannabinoid-based formulations, but to work towards changing current stigmas around hemp so that these medicines can be made available to the people who need them most. Since 2014, our team has been committed to researching the application of cannabinoids in combination with other compounds to address various ailments, using our research to develop intellectual property, formulations, and multiple wellness and lifestyle brands. In Fiscal 2020, we were awarded a patent for our novel cannabinoid-based formulation addressing cachexia and eating disorders in humans. This followed our Fiscal 2019 award of a patent for our formulation addressing pain. Since 2014, the Company has also filed eight other patents to address various diseases such as seizures, eating disorders, fatigue, and stammering, among others. In Fiscal 2020, we filed an Investigative New Drug Application (“INDA”) with the FDA for a double-blind, placebo-controlled, 100-person trial for treating patients suffering from Alzheimer’s disease with our patent pending cannabinoid formulation Hyalolex™ Drops of Clarity™. In the long term we hope our efforts in cannabinoid-based Life Sciences segment lead to affordable, yet powerful, medications that can change lives; elevating, and empowering the wellbeing of the communities we serve. Our efforts since 2014, combined with the legalization of hemp through the 2018 Farm Bill, have created potentially large opportunities in hemp and cannabinoid science, which we intend to capture by creating a vertically integrated company. In order to ensure trustworthy products of the highest quality, in Fiscal 2020 we took steps to internalize processes including growing hemp from which our cannabinoids are derived and setting up a processing facility that we expect will be operational in Fiscal 2021. Additionally, we established a new production facility where we can make legal, hemp-based, cannabinoid-infused, products. These products are expected to be sold under several of our brands. 5 Table of Contents Patent Activity As part of our intellectual property strategy, we seek appropriate patent protection for applicable product candidates, drug delivery systems, and molecular modifications, as well as other proprietary technologies and their uses, by filing patent applications in the U.S. and select other countries. We intend for these patent applications to cover, where possible, claims for medical uses, processes for preparation, and processes for delivery and formulations. We have also applied for approximately 26 trademarks under various classes. The Company holds all rights to the patents that have been filed by us with the USPTO. In Fiscal 2017, the Company also acquired exclusive rights to the data and the patent filing from University of South Florida (“USF”). Although the Company believes the registration of patents is an important part of its business strategy and its success depends in part on such registration, the Company cannot guarantee that such patent filings will result in a successful registration with the United States Patent and Trademark office (“USPTO”). Please see Item 1A, Risk Factors- “We may not successfully register the provisional patents with the USPTO”. The table below provides a status of our patent filings: Formulation Indication Provisional Filing PCT Filing Status IGC-501 Pain 09/16/14 09/16/15 Patent issued on 11/06/2018 (#10,117,891) IGC-502 Seizures 01/25/15 01/14/16 Pending IGC-503 Seizures 04/01/15 03/25/16 Pending IGC-504 Eating Disorders 08/12/15 08/11/16 Patent issued on 03/24/2020 (#10,596,159 B2) IGC-505 Seizures 06/15/16 06/15/16 Pending IGC-506 Eating Disorders 02/28/17 02/27/18 Pending IGC-507 IGC-AD1 Alzheimer’s Disease 07/30/15 Anticipated in Fiscal 2021 Pending IGC-508 CNS Disorders 3/29/18 03/29/19 Pending IGC-509 Fatigue and energy restoration 10/4/18 10/04/19 Pending IGC-510 Stammering, Tourette’s syndrome 5/23/19 Anticipated in Fiscal 2021 Pending Products & Services Infrastructure s egment We have been operating the Infrastructure segment since 2008 and our revenue in Fiscal 2020 was primarily derived from this segment: a) Execution of Construction Contracts – The Company is executing a road building contract in Kerala, India valued initially at approximately $0.6 million. Throughout Fiscal 2020, the Company worked on execution of the contract as well as sought approval for an expansion of the contract. The total value of the contract was increased to approximately $1.1 million. The Company estimates that it will take between 12 and 15 months to complete the work. Work on this project has been temporarily suspended due to COVID-19. We expect to re-start the project in the second quarter of Fiscal 2021. b) Purchase and Resale of Physical Commodities Used in Infrastructure – This business line includes the purchase and resale of infrastructure materials including steel, wooden doors, marble, and tiles, among others. This work has been adversely affected due to COVID-19. c) Rental of Heavy Construction Equipment – We own heavy construction equipment such as motor grader, transit mixers and rollers, that we rent to construction contractors. This business is seasonal and had minimal revenue during Fiscal 2020. 6 Table of Contents Life Science s segment This segment is a) dedicated to research on cannabinoids and their efficacy on diseases and ailments, and b) the creation, marketing, and sales of cannabinoid-based wellness and lifestyle brands. In Fiscal 2020, we advanced the development of several brands, building out our “house of brands” that we intend to market online and through retail stores in accordance with applicable laws and regulations. We are enthusiastic about the potential of these concepts to address various segments of the growing cannabinoid wellness and lifestyle product market. In Fiscal 2020, the Company generated $411 thousand revenue from its Life Sciences segment, however COVID-19 has forced the Company to delay the launch of some of the brands and products. In Fiscal 2020 the Company, in response to the COVID-19 pandemic, adapted its manufacturing facility to include FDA-registered alcohol-based hand sanitizers, which go on sale in Fiscal 2021. The Company’s hand sanitizer products are available under the brands: Hyalolex™ and Camas Naturals™. Hyalolex™ In Fiscal 2020, we expanded the Hyalolex™ brand from the original formulation of Hyalolex™ Drops of Clarity™ , to include CBD infused tinctures, intended as aids for sleep disorders, stress, and other ailments, as well as offering traditional and hemp-infused hand sanitizers. Hyalolex™ Drops of Clarity™, which remains our flagship product, is not an FDA-approved pharmaceutical drug. It is currently sold in Puerto Rico through dispensaries. The name Hyalolex™, is based on the Greek roots “hyalo” which can be interpreted as clarity, being clear or glass-like, and “lex” referring to reading or words, respectively. The original formulation of Hyalolex™ Drops of Clarity™ is based on work that was done at USF that filed a patent that we acquired and continued to pursue by responding to queries by the USPTO in Fiscal 2020. The research performed by USF indicated that in Alzheimer’s cell lines, Alzheimer’s animal models, and in some human studies, the active ingredients in Hyalolex™ Drops of Clarity™, may effectively alleviate many of the symptoms associated with Alzheimer’s. The research and cell data indicated a reduction in the aggregation of ® amyloid protein (“A® protein”) that deposits senile plaque between neurons, leading to interference with intra-neuronal signaling1. The research also showed a reduction in Neurofibrillary Tangles (“NFTs”) by reducing the hyperphosphorylation of microtubule-associated protein Tau that leads to neuronal death. Plaques and NFTs are the hallmarks of Alzheimer’s. Patients with Alzheimer’s disease may suffer from a variety of Behavioral and Psychological Symptoms of Dementia (“BPSD”) including anxiety, agitation, dementia, depression, and sleep disorder, among others. These symptoms often result in hard-to-manage patients and caregiver distress. Application of our formulation in animal studies using transgenic Alzheimer’s mice (mice with Alzheimer’s) showed an improvement in memory. These exciting results led our team to create Hyalolex™ Drops of Clarity™ as an oral formulation. As a next step, in Fiscal 2020, the Company filed an INDA with the FDA for a phase II double-blind, placebo-controlled, 100-person trial, for the formulation. The trial will study the efficacy of the formulation on BPSD in patients suffering from Alzheimer’s. The site for the Phase II study is expected to be Puerto Rico, where we purchased space in a hospital building for running the trial. In order to assist with the global response to the COVID-19 pandemic, we created several formulations of hand sanitizers, compliant with the recommendations of the World Health Organization (“WHO”) and the Center for Disease Control (“CDC”) guidelines. Our facility in Vancouver is registered with the FDA as are most of our hand sanitizer formulations. Our liquid WHO formulations are hand rubs that can be used in hospitals and by first responders, while our gel formulations, infused with one or more ingredients including zinc oxide, hemp oil, lavender oil, lemon oil and Aloe Vera, are for commercial use. In Fiscal 2020, we reported no revenue from hand sanitizers, as they went on sale in April 2020. Hyalolex TM brand hand sanitizers are currently available for purchase online at www.hyalolexhandsanitizer.com . Holi Hemp ™ In Fiscal 2020, we prepared our production facility to offer extraction, distillation, tolling, and white labeling services under the brand of Holi Hemp™. However, due to COVID-19, we were unable to complete the commissioning of all the equipment. We expect that when the equipment is commissioned, we will be vertically integrated in the hemp industry, where we can control the growing, processing and production of products. We expect that the facility will also allow us to offer services such as extraction and distillation of biomass to hemp farmers. 1 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2813509/ 7 Table of Contents Update on previously announced products Natrinol™, previously named as a product for Pain, has been folded into the Holief™ brand. The Company’s work on Serosapse™, previously named as a product for Parkinson's, has been put on hold as we work on other products and brands. NO3A™, initially targeting the beverage industry, has been folded into Sunday Seltzer™. Business Strategy Our strategy for the Infrastructure segment is to invest in and competitively bid on construction contracts, for example to build roads, bridges, and other civil works in Kerala India, and to opportunistically buy and sell infrastructure and other commodities. The Company currently lacks visibility into this business because the COVID-19 pandemic and stay-at-home / shelter in place orders have slowed down this industry. We view our desire to be vertically integrated in the hemp industry as providing us with several profit opportunities that we expect to focus on in Fiscal 2021: 1) sale of branded products, under the Herbo™, Hyalolex™, Camas Naturals™, Holief™ and Sunday Seltzer ™ product lines, among others; 2) white labeling of products such as lotions, creams, oils, for other brands; 3) wholesale of hemp extracts including hemp crude extract and hemp isolate, among others; 4) processing of hemp biomass and crude oil for farmers in the Northwest U.S. and Canada; and 5) sale of hand sanitizers. Though the biotech part of our Life Sciences strategy will take longer for investors to see results, and carries more risk, this sector provides significantly greater defensible growth potential. Tackling a disease like Alzheimer’s with cannabinoids may seem to be a bold endeavor, but we believe the evidence we have developed and obtained is compelling and merits exhaustive investigation and research. We are dedicated to the cause, having filed patents, and an INDA with the FDA, as well as having established a trial center under contract with a team of experts in the field. Our approach is to look at the efficacy for BPSD first, and, if successful turn our attention to the hallmarks of Alzheimer’s: plaques and tangles. We also believe that the ongoing and expanded investment in clinical trials, Research and Development (“R&D”), facilities, marketing and advertising, as well and the acquisition of products and businesses supporting our Life Sciences segment, is critical to the development and delivery of innovative products and best in class patient and customer experience. Part of our strategy is to leverage our R&D and our intellectual property, to develop products that are well differentiated and backed by science through planned pre-clinical and clinical trials. 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, in turn may offer positive results for the treatment of certain conditions, symptoms and/or side effects. 8 Table of Contents Fiscal 2020 Highlights • The Company is executing a road building contract in Kerala, India valued initially at approximately $0.6 million. Throughout Fiscal 2020, the Company worked on execution of the contract as well as sought approval for an expansion of the contract. The total value of the contract was increased to approximately $1.1 million. The Company estimates that it will take between 12 and 15 months to complete the work. Work on this project has been temporarily suspended due to COVID-19. We expect to re-start the project in second quarter of Fiscal 2021. • The Company filed an INDA with the FDA for a double-blind, placebo-controlled, 100-person trial, for its proprietary patent pending formulation based on IGC-AD1 that uses ultra-low doses of tetrahydrocannabinol (“THC”) with other natural compounds intended to assist in the management of the care of patients suffering from Alzheimer’s disease. • IGC filed a provisional patent, IGC 510, Compositions and Methods using CBD for treating stammering and symptoms of Tourette syndrome with the USPTO. • The Company established an approximately $0.5 million facility in San Juan, Puerto Rico to house and conduct trials. • As part of an out-reach and marketing campaign, we distributed samples of Hyalolex™ Drops of Clarity™, to dispensaries in Puerto Rico. The formulation is currently available in about 51 dispensaries in Puerto Rico. While this is a small market penetration, it allows us to collect data. Based on feedback received from customers and dispensaries in Puerto Rico, the Company has expanded the scope of the Hyalolex™ formulation to potentially target other ailments, such as anxiety and sleep disorders, and has introduced a line of products including tinctures, among others. These will all be branded under Hyalolex™, with the original formulation branded as Hyalolex™ Drops of Clarity™. Post COVID-19 based stay-in-place restrictions we expect to manufacture and distribute these products initially in Puerto Rico and subsequently online and in other states. • In Fiscal 2020 the Company in response to the COVID-19 pandemic adapted its manufacturing facility to include FDA-registered alcohol-based hand sanitizers, which go on sale in Fiscal 2021. • The Company advanced its branding and product strategy with the development of several brands aimed at various sectors of the market. The progress includes filing trademark applications and intent to use applications; securing URLs; creating product formulations, labelling, and packaging; obtaining product insurance; securing product development teams; conducting focus groups; performing quality and taste testing; and organizing and registering limited liability companies to mitigate risk, among others. • The Company grows hemp in Arizona. The crop has passed inspection by the Arizona Department of Agriculture (“AZDA”) and has been certified as legal by AZDA. However, the harvest is delayed due to of the difficulty in finding workers because of the social distancing rules brought on by COVID-19. • We prepared our facilities in Washington for the dual purpose of manufacturing finished products as well as for extraction and distillation. Most of our hemp processing and distillation equipment is sourced from China. Currently, due to COVID-19 the commissioning and certification of the equipment is delayed as the technicians are unable to travel from China to the U.S. • On February 15, 2020, the Company signed a Share Subscription Agreement (“SSA”) with Evolve I, to acquire 20% of Evolve I. As of March 31, 2020, the Company has not completed its due diligence. • IGC recently received notification that on March 24, 2020, the USPTO issued a method and composition patent (#10,596,159 B2) for the Company’s cannabinoid formulation for the treatment of cachexia and eating disorders in humans and veterinary animals. IGC filed this application for its IGC-504 formulation (#15/751,901) on August 11, 2016. 9 Table of Contents Markets and Distribution Infrastructure segment The state of Kerala and the National Highway Authority of India publish Request for Proposals (RFP) with a Statement of Work (SOW) for the building of various infrastructure projects such as roads, bridges, by-passes, etc. In Fiscal 2020, we focused on executing a construction project in the state of Kerala. We also purchase and resell physical commodities that are used in the construction business by constructions companies. In addition, we maintain a small fleet of heavy construction equipment in Kerala consisting of motor grader, transit mixers and rollers, etc., that is leased out to construction companies. In Fiscal 2020, we have a total of 5 customers and 3 suppliers of infrastructure materials, which account for over 10% of sales and cost of sales. For the level of business, and the value of each trade, we believe that the number of customers we have does not constitute inordinate customer risk. However, there has been a marked disruption of the Hong Kong economy which combined with the impact of COVID-19 on our operations is reflected in reduced revenue and increased expenses in our infrastructure business in last quarter of Fiscal 2020. The total revenue from our Infrastructure Business is less than 1% of the global revenue of the rental, construction, and infrastructure commodities markets. Life Science s segment s Our brands are designed to address different demographics and segments of the market. For example, Sunday Seltzer™ addresses the infused seltzer market. Herbo™ addresses the spa and wellness market. Holief™ addresses the pain market. Hyalolex™ began as a single product brand and now has several products that address specific conditions and diseases and in Fiscal 2020, the original Hyalolex™ formulation, now known as Hyalolex™ Drops of Clarity™, was available through licensed dispensaries in Puerto Rico. The Company filed an INDA with the FDA for a double-blind, placebo-controlled, 100-person trial, for its proprietary patent pending formulation based on IGC-AD1 that uses ultra-low doses of THC with other natural compounds intended to assist in the management of the care of patients suffering from Alzheimer’s disease. In Fiscal 2020, we have one supplier of raw materials and no customers, which accounts for over 10% of sales and cost of sales. In Fiscal 2020, our suppliers are companies based in the U.S. and Hong Kong. Since the legal hemp industry in the U.S. is new, we neither have a major supplier nor dependence on a major customer. The COVID-19 pandemic has and might continue to affect our operations and that could be reflected in reduced revenue and increased costs in our Life Sciences segment. Revenue from our Life Sciences is less than 1% based on revenue of global markets. Overall U.S. sales of cannabis and hemp-derived CBD products are expected to increase from $1.9 billion in 2018 to $20 billion by 2024, a compound annual growth rate (“CAGR”) of 49%. When combined with THC products, the CBD market is expected to create a total market of $45 billion for cannabinoids by 2024 2 . The global CBD skin care market size was valued at $234.1 million in 2018 and is expected to expand at a CAGR of 32.9% from 2019 to 2025 3 . Overall revenue in the Skin Care segment amounts to about $18 billion in the U.S. in 2020 4 . The market is expected to grow annually by 3.5% (CAGR 2020-2023). The market is primarily driven by growing awareness with respect to the benefits of CBD infused personal care products. The U.S. Cannabis infused drink market is also expected to reach $1.4 billion by 2024. 5 Further, it is estimated that 535,000 acres of land was licensed for hemp production in the U.S. in 2019, leading to an estimate of between 96 and 120 million pounds of CBD rich hemp biomass suitable for extraction. 6 Business Seasonality The Company has historically experienced seasonality in the Infrastructure segment based on low work in construction during the monsoon season. As most of the harvest in America occurs in the fall, there tends to be pricing pressure based on the volume of hemp biomass being harvested. 2 https://bdsa.com/u-s-cbd-market-anticipated-to-reach-20-billion-in-sales-by-2024/ 3 https://www.grandviewresearch.com/industry-analysis/cbd-skin-care-market?utm_source=prnewswire.com&utm_medium=referral&utm_campaign=PRN_Aug29_cbdskincare_CMFE_RD2&utm_content=Content 4 https://www.statista.com/outlook/70020000/109/skin-care/united-states 5 https://www.cannabisbusinesstimes.com/article/us-cannabis-drinks-market-2024/ 6 U.S. Wholesale Hemp Price Benchmarks 10 Table of Contents Research and Development Our success is based on our ability to innovate and bring unique products to market that address specific needs. We spent about $1 million and $1.3 million in Fiscal 2020 and Fiscal 2019, respectively. In Fiscal 2020 our R&D included products such as Sunday Seltzer™, FDA trials for Hyalolex™ Drops of Clarity™ and several new products for pain, among others. We expect to spend resources on R&D as we conduct research on the benefits of various cannabinoids. Competition Some of the markets for the Company’s products and services are highly competitive, and some are not, as described below: 1. Infrastructure segment: This business is currently limited to India and Hong Kong. The infrastructure industry is highly competitive, and we believe our differentiation is based primarily on price and industry knowledge of construction and commodity requirements for infrastructure projects in the areas in which we operate. 2. Life Sciences segment: We are focused on developing affordable FDA approved medical products that can help individuals suffering from debilitating disease like Alzheimer’s and chronic pain, among others. We believe our differentiation from our competitors, for example, in the use of phytocannabinoids for the treatment of Alzheimer’s, is based primarily on our data, patent filings, and experienced team, offering us an early-mover advantage. We face competition from well-funded seasoned companies. On the healthcare and wellness side, we face competition from companies that are better established in wholesale products such as hemp crude extract, hemp isolate and services such as white labelling and tolling. On the product side we face competition from companies in the food, beverage, and skin care industries. It is unclear how the FDA guidance and ruling on CBD-infused food products, when it is released, will impact the market. Regulatory Despite the passage of the 2018 Farm Bill, the FDA has not set out guidance or rules on the infusion of CBD into food and beverage products. While this has and continues to create a complicated framework within which we navigate, we anticipate that when such rules are set out, the demand for CBD will increase as major food and beverage manufacturers will enter the market. Core business competencies and advantages Our core competencies include the following: • a network of doctors, PhDs, and intellectual property legal experts that have a sophisticated understanding of drug discovery, research, FDA filings, intellectual protection, and product formulation; • knowledge of various cannabinoid strains, their phytocannabinoid profile, extraction methodology, and impact on various pathways; • knowledge of plant and cannabinoid-based combination therapies; • knowledge of research and development in the field; • patent IGC-501 and IGC-504 for treatment of pain and treatment of cachexia and eating disorders in humans and veterinary animals, respectively; and • a team with experience in manufacturing, marketing, and selling cannabinoid products. Licenses, Technology and Cybersecurity We have intellectual property attorneys that advise, counsel, and represent the Company regarding the filing of patents or provisional patent applications, copyrights applications and trademark applications; trade secret laws of general applicability; employee confidentiality and invention assignment. Most of our data, including our accounting data, is stored in the cloud that helps us mitigate the overall risk of losing data. We have a cybersecurity policy in place and are in the process of implementing tighter cybersecurity measures to safeguard against hackers. The Company holds all rights to the patents that have been filed by us with the USPTO. 11 Table of Contents The table below summarizes the nature of activity, type of license required and held, and encumbrances in obtaining permits for each location where the company operated through its subsidiaries in Fiscal 2020: Location Nature of Activity Type of License Required Type of License held Encumbrances in Obtaining Permit U.S. Life Sciences products and General Management General business. License to grow and transport hemp. Industrial Alcohol User Permit Clinical Trials General business licenses. License to grow and transport hemp. Industrial Alcohol User Permit Clinical Trials None. India Infrastructure Contract, Rental of heavy equipment and land General business license Business registrations with tax authorities in various states in India None. Hong Kong Purchase and Resale of physical commodities General business license General business license None. Governmental Regulations In the U.S. we are subject to oversight and regulations, for some or all of our activities, by the following agencies: SEC, state regulators, NYSE, FTC, and the FDA. The cannabis plant consists of several strains or varieties. Hemp and Marijuana are both cannabis plants. Under the 2018 Farm Bill, Hemp is classified as a cannabis plant that has THC below 0.3% by dry weight. Marijuana is classified as a cannabis plant that has THC above 0.3% by dry weight. Marijuana remains illegal under federal law, including in those states in which the use of marijuana has been legalized for medical and or recreational use. On the other hand, on December 12, 2018, the Senate and the House approved the 2018 Farm Bill that the President signed into law. It contains provisions that make industrial hemp legal. Although, effective January 1, 2019, hemp is legal at the federal level, most states have created licensing and testing processes for the growing, processing, and sale of hemp and hemp-derived products. For our business we must apply for licenses in states where we desire to grow and process hemp. For example, in the state of Arizona, where we grow hemp, we are required to apply for licenses and register with the state the geo-location of all our operations, including the land on which hemp is grown and the facilitates where hemp will be processed. These regulations are evolving, differ from jurisdiction to jurisdiction, and are subject to change. FDA Approval Process In the U.S., pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern the research, development, testing, manufacturing, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and importing and exporting of pharmaceutical products, among other things. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as imposition of clinical holds, FDA refusal to approve pending New Drug Applications (“NDA”), warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, civil penalties and criminal prosecution. Pharmaceutical product development in the U.S. typically involves pre-clinical laboratory and animal tests and the submission to the FDA of an Investigational New Drug (“IND”), which must become effective before clinical testing may commence. For commercial approval, the sponsor must submit adequate tests by all methods reasonably applicable to show that the drug is safe for use under the conditions prescribed, recommended, or suggested in the proposed labeling. The sponsor must also submit substantial evidence, generally consisting of adequate, well-controlled clinical trials to establish that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the proposed labeling. In certain cases, the FDA may determine that a drug is effective based on one clinical study plus confirmatory evidence. Satisfaction of FDA premarket approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity of the product or disease. 12 Table of Contents Pre-clinical tests include laboratory evaluation of product chemistry, and formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the pre-clinical tests must comply with federal regulations and requirements, including the FDA’s good laboratory practices regulations and the U.S. Department of Agriculture’s (“USDA’s”) regulations implementing the Animal Welfare Act. The results of pre-clinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term pre-clinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not imposed a clinical hold on the IND or otherwise commented or questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations, (ii) in compliance with Good Clinical Practice (“GCP”), an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors, and (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND. The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The trial protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements or may impose other conditions. Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In general, in Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. The FDA may, however, determine that a drug is effective based on one clinical study plus confirmatory evidence. Only a small percentage of investigational drugs complete all three phases and obtain marketing approval. In some cases, the FDA may require post-market studies, known as Phase 4 studies, to be conducted as a condition of approval in order to gather additional information on the drug’s effect in various populations and any side effects associated with long-term use. Depending on the risks posed by the drugs, other post-market requirements may be imposed. After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. The FDA approval of the NDA is required before marketing of the product may begin in the U.S. The NDA must include the results of all pre-clinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, for Fiscal 2020 $2,942,965, and the manufacturer and/or sponsor under an approved NDA are also subject to annual program fees, for Fiscal 2020 $325,424. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. Under the statute and implementing regulations, the FDA has 180 days (the initial review cycle) from the date of filing to issue either an approval letter or a complete response letter, unless the review period is adjusted by mutual agreement between the FDA and the applicant or as a result of the applicant submitting a major amendment. In practice, the performance goals established pursuant to the Prescription Drug User Fee Act have effectively extended the initial review cycle beyond 180 days. The FDA’s current performance goals call for the FDA to complete review of 90 percent of standard (non-priority) NDAs within 10 months of receipt and within six months for priority NDAs, but two additional months are added to standard and priority NDAs for a new molecular entity (“NME”). 13 Table of Contents The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committee, which is typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with current GMP is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied. After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing 90 percent of resubmissions within two to six months depending on the type of information included. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for health care professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Disclosure of Clinical Trial Information Sponsors of clinical trials of certain FDA-regulated products, including prescription drugs, are required to register and disclose certain clinical trial information on a public website maintained by the U.S. National Institutes of Health. Information related to the product, patient population, phase of investigation, study sites and investigator, and other aspects of the clinical trial is made public as part of the registration. Disclosure of the results of these trials can be delayed for up to two years if the sponsor certifies that it is seeking approval of an unapproved product or that it will file an application for approval of a new indication for an approved product within one year. Competitors may use this publicly available information to gain knowledge regarding the design and progress of our development programs. The Hatch-Waxman Act Orange Book Listing In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent the claims of which cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are considered to be therapeutically equivalent to the listed drug, are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug in accordance with state law. The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement, certifying that its proposed ANDA labeling does not contain (or carves out) any language regarding the patented method-of-use, rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. 14 Table of Contents A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant. The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired. Exclusivity Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which time the FDA cannot receive any ANDA or 505(b)(2) application seeking approval of a drug that references a version of the NCE drug. Certain changes to a drug, such as the addition of a new indication to the package insert, are associated with a three-year period of exclusivity during which the FDA cannot approve an ANDA or 505(b)(2) application that includes the change. An ANDA or 505(b)(2) application may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification and thus no ANDA or 505(b)(2) application may be filed before the expiration of the exclusivity period. For a botanical drug, the FDA may determine that the active moiety is one or more of the principal components or the complex mixture as a whole. This determination would affect the utility of any five-year exclusivity as well as the ability of any potential generic competitor to demonstrate that it is the same drug as the original botanical drug. Five-year and three-year exclusivities do not preclude FDA approval of a 505(b)(1) application for a duplicate version of the drug during the period of exclusivity, provided that the 505(b)(1) applicant conducts or obtains a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Patent Term Extension After NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of the drug’s testing phase — the time between IND submission and NDA submission — and all of the review phase — the time between NDA submission and approval up to a maximum of five years. The time can be shortened if the FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed 14 years. For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by one year. The director of the PTO must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted. Orphan Drugs Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition generally a disease or condition that affects fewer than 200,000 individuals in the U.S. (or affects more than 200,000 in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug for such disease or condition will be recovered from sales in the U.S. of such drug). Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the U.S. for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. If the FDA designates an orphan drug based on a finding of clinical superiority, the FDA must provide a written notification to the sponsor that states the basis for orphan designation, including “any plausible hypothesis” relied upon by the FDA. The FDA must also publish a summary of its clinical superiority findings upon granting orphan drug exclusivity based on clinical superiority. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. 15 Table of Contents Special Protocol Assessment A company may reach an agreement with the FDA under the Special Protocol Assessment, or SPA, process as to the required design and size of clinical trials intended to form the primary basis of an efficacy claim. According to its performance goals, the FDA is supposed to evaluate the protocol within 45 days of the request to assess whether the proposed trial is adequate, and that evaluation may result in discussions and a request for additional information. A SPA request must be made before the proposed trial begins, and all open issues must be resolved before the trial begins. If a written agreement is reached, it will be documented and made part of the administrative record. Under the FDC Act and FDA guidance implementing the statutory requirement, an SPA is generally binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to determining safety or efficacy after the study begins, public health concerns emerge that were unrecognized at the time of the protocol assessment, the sponsor and the FDA agree to the change in writing, or if the study sponsor fails to follow the protocol that was agreed upon with the FDA. Employees and Consultants As of March 31, 2020, we employed a team of approximately 50 full-time employees in our two segments. We also have contract workers and advisors in the U.S., India, Colombia, and Hong Kong. Available Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the Securities and Exchange Commission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at www.igcinc.us when such reports are available on the SEC’s website. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only. IGC maintains several Internet addresses including www.igcinc.us, www.holihemp.com , www.hyalolex.com and www.herbo.com , among others. These, including our Twitter @IGCIR and other social media contain information about IGC and our products on these websites from time to time, as we plan to provide updates on the company, announcements regarding relevant research findings and patent approval, and other important information as we grow and expand. Website and social media references in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information available through, or contained on, the websites and in social media. Therefore, such information should not be considered part of this report. The Company’s filings with the SEC are accessible on SEC’s website, www.sec.gov .