What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-02-16 compared with 2020-11-20 · 89 added, 135 removed, 81 unchanged (73% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of the Company's consolidated financial condition, and results of operations and cash flows, and should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q for the three months and the six months ended September 30, 2020, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on July 13, 2020 (the “2020 Form 10-K”).

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of the Company's consolidated financial condition, and results of operations and cash flows, and should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q for the three months and the nine months ended December 31, 2020, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on July 13, 2020 (the “2020 Form 10-K”).

The Company’s actual results could differ materially from those discussed here.

3 unchanged sentences

We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Company Background

At IGC, our aim is to pioneer the future of pharmaceuticals and wellness products through groundbreaking, innovative research in cannabinoid 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 reach by combining creative concepts, dedicated research and development, with a passion for community, and wellness empowerment.

We believe that wellness and access to affordable naturally derived medicine is a human right.

Since 2014, our team has been committed to researching the application of cannabinoid-based therapies as viable alternatives to many current medications.

Early anecdotal evidence suggests cannabinoid and hemp sciences may open doors to the discovery and development of novel treatments for numerous diseases currently believed to be incurable.

Driven by cutting edge research and technology, we are committed to our goal to make cannabinoid-based formulations accessible to the masses and to continue to change the dialogue and current stigmas around cannabis so that cannabis-based products, including medicines, can be made more widely available to the people who need them most.

We are also committed to our business operations in Asia, including (a) the execution of construction contracts, (b) the purchase and resale of physical commodities used in infrastructure, and (c) the rental of heavy construction equipment..

Although COVID-19 continues to impact this business line, IGC looks forward to increasing these operations as the COVID-19 pandemic allows.

Our primary source of revenue for the three months and the nine months ended December 31, 2019, is from our Infrastructure segment, as was our primary source of revenue for the three months ended December 31, 2020.

For the nine months ended December 31, 2020, our primary revenue is from our Life Sciences segment, which produced wellness products, including alcohol-based hand sanitizers, among others.

The Company operates both segments in compliance with applicable state, national, and local laws and regulations and only in locations and regions where it is legal to do so.

Further information on the Company highlights in the nine months ended December 31, 2020, can be found in Part I, Item 1, Note 1 - Business Description, “Business updates”.

Sales Strategy

We have a two-pronged strategy for our Life Sciences, biotech component:

the initial prong is to investigate IGC-AD1 for efficacy in managing the symptoms of Alzheimer’s disease.

This involves conducting Phase 1 through Phase 3 trials on IGC-AD1 over the next several years, with the anticipated goal of demonstrating efficacy and potentially obtaining FDA approval for IGC-AD1 as a cannabinoid-based formulation that can help manage some symptoms for patients suffering from Alzheimer’s disease.

The second prong is to investigate the potential efficacy of IGC-AD1 on memory and/or decreasing or managing plaques and tangles, some of the hallmarks of Alzheimer’s disease.

Our pipeline of investigational cannabinoid formulations include pain creams and tinctures for pain relief.

We believe that the biotech portion of our Life Sciences strategy will take several years and involves considerable risk;

however, we believe it may involve greater defensible growth potential and first-to-market advantage.

Our shorter-term strategy also includes becoming vertically integrated in the hemp industry as we believe this may afford us the opportunity to create the right processes, quality and replicability for eventually creating pharmaceutical grade formulations.

We also believe this may provide us with several profit opportunities, all conducted in accordance with applicable laws and regulations, and only in locations where it is legal to do so, such as:

sale of our products, under the Herbo™, Hyalolex™, Holief™, and Sunday Seltzer™ brand lines, among others;

white labelling of products such as CBD infused lotions, creams, and oils for other brands;

wholesale of hemp extracts including hemp crude extract and hemp isolate;

processing of hemp biomass and crude oil for farmers in the Northwest U.S.

using our manufacturing and trading platform for trading in infrastructure commodities to assist in delivering emergency products such as hand sanitizers, gloves, and other personal protection equipment for the length of the COVID-19 pandemic.

We believe that the additional 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, are likely to be critical to the development and delivery of innovative products and positive patient and customer experiences.

Part of our strategy is to leverage our R&D and our intellectual property, to develop products that we believe are likely to be well differentiated and supported 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, may offer positive results for the management of certain conditions, symptoms and side effects.

| December 31, 2020 Form 10-Q

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, as well as personal protection equipment.

We are currently experiencing a lack of certainty in this business segment due to the COVID-19 pandemic and stay-at-home and shelter in place orders.

COVID-19 Update

2 unchanged sentences

In response to the evolving circumstances, we supplemented our facilities to manufacture, label, and distribute FDA-registered alcohol-based hand sanitizers and hand rubs.

While there is a general lack of visibility, we anticipate drastically reduced revenue from Infrastructure, and also unpredictable revenue from the Life Sciences segment as the world economy remains impacted by the COVID-19 pandemic.

During the six months ended September 30, 2020:

We anticipate reduced revenue from Infrastructure, and also unpredictable revenue from the Life Sciences segment as the world economy remains impacted by the COVID-19 pandemic.

During the nine months ended December 31, 2020:

Our revenue from the infrastructure business remains adversely affected with increased expenses.

2 unchanged sentences

While we took delivery of the equipment, the commissioning and certification of the equipment continues to be delayed.

The commissioning of our large-scale processing and distillation equipment is delayed.

| September 30, 2020 Form 10-Q

While our primary source of revenue for the three months and the six months ended September 30, 2019, is from our Infrastructure segment, our primary source of revenue for the three months ended September 30, 2020 is from our Infrastructure segment and for the six months ended September 30, 2020, is from our Life Sciences segment, which produced wellness products, including alcohol-based hand sanitizers, among others.

The Company operates both segments in compliance with applicable state, national, and local laws and regulations and only in locations and regions where it is legal to do so.

Further information on the Company highlights in the six months ended September 30, 2020, can be found in Part I, Item 1, Note 1 - Business Description, “Business updates”.

Expanding Sales Strategy

In the Life Sciences segment, 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 throughout the rest of Fiscal 2021.

The Company has been working on branded products, under the Herbo™, Hyalolex™, Holief™ and Sunday Seltzer™ product lines, and expects to launch online sales during Fiscal 2021 or early Fiscal 2022.

Our strategy for the Infrastructure segment is to continue investing in and competitively bidding 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.

FDA Clinical Trials

On July 30, 2020, IGC received a notice from the FDA to proceed with a 12-subject Phase 1 human clinical trial (“removal of full clinical hold”) on its INDA, submitted under Section 505(i) of the Federal Food, Drug, and Cosmetic Act, for IGC-AD1.

The Phase 1 trial is proposed to involve a randomized placebo-controlled MAD study to evaluate safety and tolerability of IGC-AD1 in subjects with mild to severe dementia due to Alzheimer’s disease.

In addition, the study will evaluate PK and collect data on other factors.

The Company’s IGC-AD1 formulation is based on a patent filed by the USF that uses a cannabinoid as one of the active ingredients.

The Company has exclusive rights to the patent filing.

The Company’s flagship product Hyalolex Drops of Clarity™, currently available in select dispensaries in Puerto Rico, is modeled around this formulation.

For further information on the FDA trial process, please refer the Item 1, Business in Part I of the 2020 Form 10-K.

Alzheimer’s disease

According to the National Institute of Health’s National Institute on Aging (NIA), Alzheimer’s is an irreversible, progressive brain disorder that destroys memory and thinking skills, and, eventually, the ability to carry out the simplest tasks.

Symptoms, for most people, may first appear for individuals in their mid-60s.

1 Some experts believe that Alzheimer’s is the third leading cause of death just behind heart disease and cancer.

Alzheimer’s is believed to cause about 70% of dementia, which is the loss of cognitive functioning that includes thinking, remembering, reasoning, and behavioral abilities.

2 Alzheimer’s is named after Dr.

Alois Alzheimer, who, in 1906, based on a histopathological study, found that the brain tissue of a women who died of unusual mental illness had abnormal clumps and tangled bundles of fiber.

Her symptoms included memory loss, language problems and unpredictable behavior.

The clumps are now called beta-amyloid plaques (plaques) and the bundles are now called neurofibrillary or tau tangles (tangles).

These plaques and tangles are considered the main features, or hallmarks, of Alzheimer’s disease, another being the loss of connection between nerve cells.

1 https://www.nia.nih.gov/health/alzheimers-disease-fact-sheet

2 https://www.who.int/news-room/fact-sheets/detail/dementia

3 https://www.nia.nih.gov/health/alzheimers-disease-fact-sheet

| September 30, 2020 Form 10-Q

While some researchers view Alzheimer’s as a spectrum disease, the NIA categorizes Alzheimer’s in three stages:

mild, moderate, and severe.

Broadly, in mild Alzheimer’s, problems can include wandering, getting lost, not remembering the way home for example, trouble handling money and paying bills, repeating questions, and personality and behavior changes.

In moderate Alzheimer’s there is damage to the areas of the brain that control language, reasoning, sensory processing, and conscious thought.

Problems can include carrying out multistep tasks such as dancing, getting dressed, and more behavior changes including hallucinations, delusions, paranoia and impulsive behavior.

By the time severe Alzheimer’s sets in, plaques and tangles spread throughout the brain, and the brain shrinks significantly.

People with severe Alzheimer’s are completely dependent on others for care, they cannot communicate, and, near the end, the body shuts down.

Plaques are believed to be caused by an unhealthy brain’s inability to clear a protein called beta amyloid (® amyloid, “A®”) that is cleaved, as part of a normal cycle, from a larger protein called Amyloid Precursor Protein (APP).

5 These cleaved smaller-length proteins are cleared in healthy brains.

However, in Alzheimer’s brains, they accumulate, sticking to each other, becoming sticky plaques that are deposited between neurons, affecting neuronal connections and leading, for example, to memory loss.

Inside a neuron there are microtubules, analogous to highways, that help transport nutrients from one part of the nerve cell to another.

Tau protein helps bind and stabilize the microtubule structures.

In Alzheimer’s patients, tau detaches from the microtubules and stick together, forming threads that eventually join to form tangles inside the neurons, leading to neuronal death.

Essentially, plaques deposit between neurons, and tangles kill neurons from the inside.

6 It may be characterized as a near perfect assault on the brain with devastating consequences.

There is no cure for Alzheimer’s disease.

Alzheimer’s patients manifest Behavior and Psychological Symptoms caused by Dementia (BPSD) that include, among others, depression, agitation, aggression, sleep disturbance (sundown syndrome), delusions, hallucinations, anxiety.

These symptoms put a burden on caregivers that leads to caregiver distress.

In 2017, IGC acquired rights to a patent filed by USF on treating Alzheimer’s disease using a cannabinoid in combination with another naturally occurring molecule.

The research on which the patent application is based showed that in Alzheimer’s cell lines, various combinations of the formulation blocked the production of A®, blocked the formation of A® oligomers (plaques), inhibited the hyperphosphorylation of tau, which leads to the destabilization of microtubules, and increases mitochondrial activity, among others.

The research also showed improvement in the memory of Alzheimer’s induced transgenic mice.

Based on this and other data, IGC acquired the patent rights from USF, formulated a liquid investigational medication, and filed an INDA with the FDA.

The investigational drug, IGC-AD1, is ready for human trials, which is expected to begin with a Phase 1 MAD, PK trial.

4 https://www.nia.nih.gov/health/alzheimers-disease-fact-sheet

5 https://www.nia.nih.gov/health/what-happens-brain-alzheimers-disease#:~:text=Amyloid%20Plaques&text=In%20the%20Alzheimer's%20brain%2C%20abnormal,of%20beta-amyloid%20influence%20Alzheimer's.

6 https://www.nia.nih.gov/health/what-happens-brain-alzheimers-disease#:~:text=In%20Alzheimer's%20disease%2C%20however%2C%20abnormal,the%20synaptic%20communication%20between%20neurons.

7 https://www.alz.org/alzheimers-dementia/treatments

8 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5550537/

| September 30, 2020 Form 10-Q

Results of Operations for the T hree M onths E nded

September 30, 2020 and September 30, 2019

Results of Operations for the Three Months Ended

December 31 , 2020 and December 31 , 2019

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

The following table presents an overview of our results of operations for the three months ended September 30, 2020 and September 30, 2019:

The following table presents an overview of our results of operations for the three months ended December 31, 2020 and December 31, 2019:

Statement of Operations (in thousands, unaudited)

Three months ended September 30,

Three months ended December 31 ,

Cost of revenue

4 unchanged sentences

Loss before income taxes

Revenue – Revenue in the quarter ended September 30, 2020 and September 30, 2019, were $125 thousand and $1,821 thousand respectively.

The decrease in revenue is primarily due to restrictions imposed by the COVID pandemic.

Revenue in the Infrastructure segment was approximately $67 thousand and $1,547 thousand for the three months ended September 30, 2020 and 2019 respectively.

The revenue is from the execution of construction contract and sales of infrastructure related physical commodities.

Revenue in the Life Sciences segment for the three months ended September 30, 2020, was $58 thousand as compared to $274 thousand for the three months ended September 30, 2019, albeit with a change in product mix.

Primarily due to COVID-19, we have limited visibility on when either of our segments will stabilize and become predictable.

Revenue – Revenue in the quarter ended December 31, 2020 and December 31, 2019, was $108 thousand and $573 thousand respectively.

The decrease in revenue is from infrastructure and is primarily due to restrictions imposed by the COVID-19 pandemic.

Revenue in the Infrastructure segment was approximately $52 thousand and $568 thousand for the three months ended December 31, 2020 and 2019 respectively.

The revenue is from the execution of construction contract.

Revenue in the Life Sciences segment for the three months ended December 31, 2020, was $56 thousand as compared to $5 thousand for the three months ended December 31, 2019, albeit with a change in product mix.

Primarily due to the COVID-19 pandemic, we have limited visibility on when either of our segments will stabilize, generate significant revenue and become predictable.

We expect volatility in both segments in the foreseeable future.

We expect to be opportunistic in providing personal protection equipment as the country reopens from the pandemic.

Cost of revenue – Cost of revenue amounted to approximately $99 thousand for the three months ended September 30, 2020, compared to $1,793 thousand in the three months ended September 30, 2019.

The cost of revenue for the three months ended September 30, 2020, is primarily attributable to raw materials that are required to produce our products.

| December 31, 2020 Form 10-Q

Cost of revenue – Cost of revenue amounted to approximately $94 thousand for the three months ended December 31, 2020, compared to $543 thousand in the three months ended December 31, 2019.

The cost of revenue for the three months ended December 31, 2020, is primarily attributable to raw materials that are required to produce our products.

Selling, general and administrative expenses – Selling, general and administrative expenses consist primarily of employee-related expenses, sales commission, professional fees, legal fees, marketing, other corporate expenses, allocated general overhead and provisions, depreciation and write-offs relating to doubtful accounts and advances, if any.

Selling, general and administrative expenses increased by approximately $389 thousand or 36% to $1,483 thousand for the three months ended September 30, 2020, from $1,094 thousand for the three months ended September 30, 2019.

The increase of approximately $0.4 million is attributed to a one-time settlement expense of approximately $50 thousand, compensation expenses attributed to increased head count and associated employee-related expenses, marketing expense related to expansion of brands and depreciation expense related to increase in Property, Plant and Equipment.

We expect general and administrative expenses to decrease as one-time legal and other one-time expenses continue to abate over the rest of this year.

Selling, general and administrative expenses increased by approximately $773 thousand or 55% to $2,186 thousand for the three months ended December 31, 2020, from $1,413 thousand for the three months ended December 31, 2019.

The increase of approximately $773 thousand is related to increased overheads, marketing and professional expenses, one-time SEC settlement expense of $175 thousand, one-time $245 thousand inventory related adjustments, and $124 thousand of increased depreciation expenses, among others.

Research and Development expenses – R&D expenses were attributed to our Life Sciences segment.

The R&D expenses for the three months ended September 30, 2020, is approximately $219 thousand and approximately $222 thousand for the three months ended September 30, 2019.

The cost associated with this work is mostly research comprising of plant extracts that could be productized and data to support the efficacy of the extracts, including preparing for potential FDA trials, product research, designing, formulating and market analysis.

The R&D expenses for the three months ended December 31, 2020, are approximately $154 thousand and approximately $295 thousand for the three months ended December 31, 2019.

The R&D expenses, in part, relate to research comprising of plant extracts that could be productized and data to support the efficacy of the extracts, including preparing for potential FDA trials, product research, designing, formulating and market analysis.

We expect R&D expenses to increase with Phase 1 trials on IGC-AD1.

All research and development costs are expensed in the quarter in which they are incurred.

| September 30, 2020 Form 10-Q

Other Income, net – Other net income decreased by approximately $90 thousand or 83% during the three months ended September 30, 2020.

The total other income for the three months ended September 30, 2020 and 2019 is approximately $19 thousand and $109 thousand, respectively.

Other Income, net – Other net income decreased by approximately $72 thousand or 96% during the three months ended December 31, 2020.

The total other income for the three months ended December 31, 2020 and 2019 is approximately $3 thousand and $75 thousand, respectively.

Other income includes interest income, rental income, dividend income and unrealized gain from marketable securities, net, and income from sale of scrap, among others.

Results of Operations for the S ix M onths E nded

September 30, 2020 and September 30, 2019

Results of Operations for the Nine Months Ended

December 31 , 2020 and December 31 , 2019

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, 2020 and September 30, 2019:

The following table presents an overview of our results of operations for the nine months ended December 31, 2020 and December 31, 2019:

Statement of Operations (in thousands, unaudited)

Six months ended September 30,

Nine months ended December 31 ,

Cost of revenue

4 unchanged sentences

Loss before income taxes

Revenue – Revenue in the six months ended September 30, 2020, was primarily derived from our Life Sciences segment, which involved sales of products such as alcohol-based hand sanitizers, among others.

In the six months ended September 30, 2019, our revenue was primarily derived from the infrastructure segment.

Revenue was approximately $709 thousand and $3,470 thousand for the six months ended September 30, 2020 and 2019, respectively.

Revenue in the Life Sciences segment in the six months ended September 30, 2019, was $379 thousand as compared to $642 thousand in the six months ended September 30, 2020, albeit with a change in product mix.

At the same time, revenue in our Infrastructure segment for the six months ended September 30, 2019, was $3,091 thousand and $67 thousand in the six months ended September 30, 2020, relating to sales of infrastructure related physical commodities and execution of construction contract respectively.

Primarily due to COVID-19, we have limited visibility on when either of our segments will stabilize and become predictable.

Revenue – Revenue in the nine months ended December 31, 2020, was primarily derived from our Life Sciences segment, which involved sales of products such as alcohol-based hand sanitizers, among others.

In the nine months ended December 31, 2019, our revenue was primarily derived from the infrastructure segment.

Revenue was approximately $817 thousand and $4,043 thousand for the nine months ended December 31, 2020 and 2019, respectively.

| December 31, 2020 Form 10-Q

Revenue in the Life Sciences segment in the nine months ended December 31, 2019, was $384 thousand as compared to $698 thousand in the nine months ended December 31, 2020, albeit with a change in product mix.

At the same time, revenue in our Infrastructure segment for the nine months ended December 31, 2019, was $3,659 thousand and $119 thousand in the nine months ended December 31, 2020.

Such revenue relates to execution of construction contract respectively.

Primarily due to COVID-19, we have limited visibility on when either of our segments will stabilize, generate significant revenue and become predictable.

We expect volatility in both segments in the foreseeable future.

We expect to be opportunistic in providing personal protection equipment, including hand sanitizers, as the country reopens from the pandemic.

Cost of revenue – Cost of revenue amounted to approximately $637 thousand for the six months ended September 30, 2020, compared to $3,401 thousand in the six months ended September 30, 2019.

The cost of revenue in the six months ended September 30, 2020, is primarily attributable to raw materials that are required to produce our products.

Cost of revenue – Cost of revenue amounted to approximately $731 thousand for the nine months ended December 31, 2020, compared to $3,944 thousand in the nine months ended December 31, 2019.

The cost of revenue in the nine months ended December 31, 2020, is primarily attributable to raw materials that are required to produce our products.

Selling, general and administrative expenses increased by approximately $895 thousand or 38% to $3,238 thousand for the six months ended September 30, 2020, from $2,343 thousand for the six months ended September 30, 2019.

The increase of approximately $0.9 million is attributed to a one-time settlement expense of approximately $50 thousand, a payroll accrual of approximately $200 thousand, compensation expenses attributed to increased head count and associated employee-related expenses, marketing expense related to expansion of brands and depreciation expense related to increase in Property, Plant and Equipment.

We expect general and administrative expenses to decrease as one-time legal and other one-time expenses continue to abate over the rest of this year.

| September 30, 2020 Form 10-Q

Selling, general and administrative expenses increased by approximately $1,668 thousand or 44% to $5,424 thousand for the nine months ended December 31, 2020, from $3,756 thousand for the nine months ended December 31, 2019.

The increase of approximately $1,668 thousand is attributed to one-time settlement expenses of approximately $225 thousand, $342 thousand inventory related adjustments, compensation expenses attributed to increased head count and associated employee-related expenses, marketing and professional expenses related to expansion of brands and depreciation expense related to increase in Property, Plant and Equipment.

Research and Development expenses – R&D expenses were attributed to our Life Sciences segment.

The R&D expenses for the six months ended September 30, 2020, is approximately $441 thousand and approximately $469 thousand for the six months ended September 30, 2019.

The R&D expenses for the nine months ended December 31, 2020, are approximately $595 thousand and approximately $764 thousand for the nine months ended December 31, 2019.

1 unchanged sentence

All research and development costs are expensed in the quarter in which they are incurred.

Other Income, net – Other net income decreased by approximately $117 thousand or 63% during the six months ended September 30, 2020.

The total other income for the six months ended September 30, 2020 and 2019 is approximately $68 thousand and $185 thousand, respectively.

Other income includes interest income, rental income, dividend income and unrealized gain from marketable securities, net, and income from sale of scrap, among others.

Other Income, net – Other net income decreased by approximately $189 thousand or 73% during the nine months ended December 31, 2020.

The total other income for the nine months ended December 31, 2020 and 2019 is approximately $71 thousand and $260 thousand, respectively.

Other income includes interest income, rental income, dividend income and unrealized gains from marketable securities, net, and income from sale of scrap, among others.

Liquidity and Capital Resources

3 unchanged sentences

Please refer to Note 12, “Commitments and Contingencies” and Note 9, “Leases” in Item I of this report for further information on Company commitments and contractual obligations.

While, the Company believes its existing balances of cash, cash equivalents and marketable securities and other short-term liquidity arrangements, will be sufficient to satisfy its working capital needs, capital asset purchases, share repurchases, debt repayments, investments and other liquidity requirements, if any, associated with its existing operations over the next 12 months, it expects to raise money when it is able to do so.

Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, suppliers, industry, legal expenses, and workforce.

| December 31, 2020 Form 10-Q

This liquidity and capital resources discussion compares the unaudited consolidated Company financials.

(in thousands, unaudited)

September 30, 2020

December 31, 2020

March 31, 2020

3 unchanged sentences

Cash and cash equivalents

Cash and cash equivalents decreased by approximately $6,107 thousand to $1,151 thousand in the six months ended September 30, 2020, from $7,258 thousand as of March 31, 2020, a decrease of approximately 84%.

A major decrease in our cash and cash equivalents in the six months ended September 30, 2020, was due to $1,229 thousand used in purchase of property, plant, and equipment and a $2,439 thousand investment in inventory.

In addition, cash and cash equivalents decreased as a result of our net losses of approximately $3,539 thousand during the six months ended September 30, 2020.

| September 30, 2020 Form 10-Q

Cash and cash equivalents decreased by approximately $6,290 thousand to $968 thousand in the nine months ended December 31, 2020, from $7,258 thousand as of March 31, 2020, a decrease of approximately 87%.

Part of the decrease in our cash and cash equivalents in the nine months ended December 31, 2020, was due to a $1,381 thousand investment in the purchase of property, plant, and equipment, a $911 thousand investment in inventory (net of $1.74 million inventory accounted in Deposits and advances).

In addition, we had proceeds of approximately $3,081 thousand from marketable securities and cash and cash equivalents losses of approximately $5,862 thousand during the nine months ended December 31, 2020.

Summary of Cash flows

(in thousands, unaudited)

Six months ended September 30,

Nine months ended December 31 ,

Percent Change

Cash used in operating activities

Cash (used in) investing activities

Cash provided by/ (used in) investing activities

Cash provided by financing activities

Effects of exchange rate changes on cash and cash equivalents

Net increase/(decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and Cash Equivalents at the beginning of period

1 unchanged sentence

Operating Activities

Net cash used in operating activities for the six months ended September 30, 2020, was approximately $6 million.

This consists of a net loss of approximately $3.5 million and non-cash items totaling approximately $550 thousand, which in turn consist of an amortization/depreciation charge of approximately $185 thousand and stock-based expenses totaling approximately $365 thousand.

Changes in operating assets and liabilities had a negative impact of approximately $3.5 million on cash, of which approximately $2.4 million was due to an increase in inventory..

Net cash used in operating activities for the six months ended September 30, 2019 was $4.4 million.

Cash was consumed from continuing operations, with the net loss of $2.6 million, non-cash items totaling $406 thousand, consisting of a depreciation charge of $45 thousand and stock-based expenses totaling $361 thousand and changes in working capital accounts had a negative impact of $2.3 million on cash.

Net cash used in operating activities for the nine months ended December 31, 2020, was approximately $8,295 thousand.

This consists of a net loss of approximately $5,862 thousand and non-cash items totaling approximately $835 thousand, which in turn consist of an amortization/depreciation charge of approximately $312 thousand and stock-based expenses totaling approximately $523 thousand.

Changes in operating assets and liabilities had a negative impact of approximately $3,268 thousand on cash, of which approximately a $911 thousand is due to investment in inventory (net of $1.74 million inventory accounted in Deposits and advances).

Net cash used in operating activities for the nine months ended December 31, 2019, was $6,684 thousand.

Cash was consumed from continuing operations, with the net loss of $4,161 thousand, non-cash items totaling $593 thousand, consisting of a depreciation and amortization charge of $69 thousand and stock-based expenses totaling $524 thousand and changes in working capital accounts had a negative impact of $3,116 thousand on cash.

| December 31, 2020 Form 10-Q

Investing Activities

Net cash used in investing activities for the six months ended September 30, 2020, was $195 thousand, which is comprised of approximately $48 thousand for the acquisition and filing expenses related to patents and trademarks, purchase of property, plant and equipment of $1.2 million and investments of approximately $149 thousand in non-marketable securities and proceeds of $1.2 million from marketable securities.

Net cash used in investing activities during the six months ended September 30, 2019 was $7.1 million which is comprised of approximately $2 million for the purchase of office space, plant and equipment among others, $5 million for investment in a marketable securities and $23 thousand for the acquisition and filing of patents.

Net cash from investing activities for the nine months ended December 31, 2020, was approximately $1,459 thousand, which is comprised of expenses of approximately $92 thousand for the acquisition and filing expenses related to patents and trademarks, purchase of property, plant and equipment of approximately $1,381 thousand and investments of approximately $149 thousand in non-marketable securities and proceeds of $3,081 thousand from marketable securities.

Net cash used in investing activities during the nine months ended December 31, 2019, was $8,806 thousand which was comprised of approximately $3,675 thousand for purchase of office space, plant and equipment among others, $5,063 thousand for investment in a money market mutual fund and $68 thousand for the acquisition and filing of patents.

Financing Activities

Net cash provided by financing activities was $530 thousand for the six months ended September 30, 2020, which is comprised of proceeds from loans.

Please refer Note 11, “Loans and Other Liabilities” for further information.

Cash provided by financing activities of approximately $18 thousand during the six months ended September 30, 2019 consisted of share options previously issued to advisor.

| September 30, 2020 Form 10-Q

Net cash provided by financing activities was $530 thousand for the nine months ended December 31, 2020, which is comprised of proceeds from borrowings.

Cash provided by financing activities of approximately $18 thousand during the nine months ended December 31, 2019, consisted of stock options exercised by an advisor.

Off-Balance Sheet Arrangements

6 unchanged sentences

Our Management believes the policies that fall within this category are the policies on revenue recognition, inventory, accounts receivable, foreign currency translation, impairment of long-lived assets and investments, stock-based compensation, and cybersecurity.

We have a cybersecurity policy in place and tighter cybersecurity measures to safeguard against hackers.

There were no impactful breaches in cybersecurity during the six months ended September 30, 2020.

We have a cybersecurity policy in place and have taken cybersecurity measures that we expect are likely to safeguard the Company against breaches.

There were no impactful breaches in cybersecurity during the nine months ended December 31, 2020.

Please see our disclosures in Note 2 – Summary of Significant Accounting Policies to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report, in the Notes to the Audited Consolidated Financial Statements in the 2020 Form 10-K, as well as Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2020 Form 10-K, for a discussion of all our critical and significant accounting policies.

1 unchanged sentence

The recent accounting pronouncements are discussed in Note 2 – Summary of Significant Accounting Policies to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report and in the Notes to the Audited Consolidated Financial Statements in Part II of our Annual Report on Form 10-K for fiscal year ended March 31, 2020, filed with the SEC on July 13, 2020.

| December 31, 2020 Form 10-Q

Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis