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INDIA GLOBALIZATION CAPITAL, INC. Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations (type 10-Q)

Economic

INDIA GLOBALIZATION CAPITAL, INC. Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations (type 10-Q)

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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, 2021, and the Annual Report on Form 10-K for the fiscal year
ended March 31, 2021(the “2021 Form 10-K”). The Company’s actual results could
differ materially from those discussed here. Factors that could cause
differences include those discussed in the “Forward-Looking Statements” and
“Risk Factors” sections, as well as discussed elsewhere in this report. The
risks and uncertainties can cause actual results to differ significantly from
those in our forward-looking statements or implied in historical results and
trends. We caution readers not to place undue reliance on any forward-looking
statements made by us, which speak only as of the date they are made. We
disclaim any obligation, except as specifically required by law and the rules of
the SEC, to publicly update or revise any such statements to reflect any change
in our expectations or in events, conditions, or circumstances on which any such
statements may be based, or that may affect the likelihood that actual results
will differ from those set forth in the forward-looking statements.

Overview

Our primary source of revenue in the three months ended December 31, 2021, and
December 31, 2020, was from our Life Sciences segment, which includes a
biopharmaceutical component, and a wellness and lifestyle business, which
involves:

(i) development of
potential new drugs,
subject to
applicable
regulatory
approvals, that use
ultra-low doses of
phytocannabinoids
including
cannabidiol (“CBD”)
and
tetrahydrocannabinol
(“THC”), among
others, in
combination with
other compounds,
believed to assist
in managing symptoms
of diseases like
Alzheimer’s,

(ii) hand sanitizers and
several hemp-based
CBD products and
brands, in various
stages of
development, for
sale online and/or
through stores,

(iii) wholesale
of hemp
extracts
including
hemp
crude
extract,
and hemp
isolate,
among
others,

(iv) white labeling of hemp-based products, and

(v) the offering
of tolling
services
like
extraction
and
distillation
to
hemp-farmers
and
retailers.

(vi) Other hemp
related
lifestyle
products

The Company’s second segment, the infrastructure segment, involves:

(i) Execution of
Construction
Contracts – The
Company is executing
a road building
contract in Kerala,
India valued at
approximately $1.2
million. Work on this
project is sporadic
based on COVID-19
restrictions. The
Company intends to
continue operations
in this business line
as the COVID-19
pandemic permits.
(ii) Purchase and Resale
of Physical
Commodities Used in
Infrastructure – This
business line
includes the purchase
and resale of
commodities,
including steel,
wooden doors, marble,
and tiles, among
others. This work has
been adversely
affected due to
COVID-19. There was
no revenue from this
business line during
the three months
ended December 31,
2021, in part due to
the COVID-19
pandemic. The Company
intends to continue
operations in this
business line as the
COVID-19 pandemic
permits.
(iii) Rental of Heavy
Construction
Equipment – We own
heavy construction
equipment such as
motor grader and
rollers, that we rent
to construction
contractors. This
business is seasonal
and had minimal
revenue during the
three months ended
December 31, 2021, in
part due to the
COVID-19 pandemic.
The Company intends
to continue
operations in this
business line as the
COVID-19 pandemic
permits.

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.

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Company Highlights

? The Company completed all dose escalation studies, and, as announced by the

Company on December 2, 2021, the results of the clinical trial have been

submitted in the Clinical/Statistical Report (“CSR”) filed with the FDA.

? On October 28, 2021, the Company won Best CBD Topical award for its

broad-spectrum hemp extract cream called Holi Wonder™ at the USA CBD Expo

event held in Chicago, Illinois, U.S.

? On October 5, 2021, the Company received a Good Manufacturing Practice (“GMP”)

certification for its facilities in Vancouver, Washington, U.S. where it makes

its products.

? On September 17, 2021, the Company filed a provisional patent application with

the USPTO for our IGC-513 for compositions and methods for treating patients

with Dementia due to Alzheimer’s disease.

? During the nine months ended December 31, 2021, the Company raised

approximately $4.1 million of net proceeds from the issuance of equity stock.

The Company had entered an “at the market” (“ATM”) offering pursuant to the

Sales Agreement (the “Agreement”) entered on January 13, 2021 with The

Benchmark Company, LLC (the “Sales Agent”) for the issuance and sale of up to

$75,000,000 of the Company’s shares of common stock, par value $0.0001 per

share (the “Shares”).

? The Company licenses a patent filing from the University of South Florida

titled “Ultra-Low dose THC as a potential therapeutic and prophylactic agent

for Alzheimer’s Disease.” The U.S. Patent and Trademark Office (“USPTO”)

issued a patent (#11,065,225) for this filing on July 20, 2021. The granted

patent relates to IGC’s proprietary formulation, IGC-AD1, intended to assist

in the treatment of individuals living with Alzheimer’s disease.

? On June 10, 2021, the Company received forgiveness for the full amount
borrowed as per the PPP Note of approximately $430 thousand.

Strategy

We have a two-pronged strategy for our Life Sciences biopharmaceutical
component: the initial prong is to investigate IGC-AD1 for safety and 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, subject to FDA
regulatory approval and adequate funding, with the anticipated goal of
demonstrating safety and efficacy and potentially obtaining FDA approval for
IGC-AD1 as a phytocannabinoid-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 on decreasing or
managing plaques and tangles, some of the hallmarks of Alzheimer’s disease.

Our pipeline of investigational phytocannabinoid formulations also includes pain
creams and tinctures for pain relief. We believe that the biopharmaceutical
component of our Life Sciences strategy will take several years to implement and
involves considerable risk; however, we believe it may involve more significant
defensible growth potential and first-to-market advantage.

Our consumer service and products strategy includes advancing the women’s line
of products under the brand www.holief.com and developing and creating a
cloud-based platform that connects women with health care professionals who can
help with PMS and dysmenorrhea.

We believe that the additional investment in clinical trials, research, and
development (“R&D”), facilities, marketing, and advertising, 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.

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COVID-19 Update

Our infrastructure business is based in the state of Kerala, India, which is
among the Indian states most affected by COVID-19, and Hong Kong with strict
quarantine and travel restrictions. The restrictions continue to adversely
impact our infrastructure business, financial condition, liquidity, and
operations. While IGC remains committed to its Infrastructure business line and
intends to continue pursuing the execution of construction contracts, the
purchase and resale of physical commodities used in infrastructure, and the
rental of heavy construction equipment as the pandemic allows, we have limited
visibility into when economic conditions will recover in India and Hong Kong.

In response, we have oriented our current focus on a) the human trials on
IGC-AD1 and getting an Alzheimer’s drug through trials and to market, subject to
FDA approval, and b) launching a cannabinoid-based women’s wellness line of
products designed to assist in managing PMS and Dysmenorrhea.

Results of Operations for the Three Months Ended

December 31, 2021, and December 31, 2020

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 December 31,
2021, and December 31, 2020:

Statement of Operations (in thousands, unaudited)

Three months ended December 31,
2021 2020 Change Percent
($) ($) ($) Change
Revenue 142 108 34 31 %
Cost of revenue (80 ) (94 ) 14 (15 )%
Gross profit 62 14 48 343 %
Selling, general and administrative expenses (2,070 ) (2,186 ) 116 (5 )%
Research and development expenses (377 ) (154 ) (223 ) 145 %
Operating loss (2,385 ) (2,326 ) (59 ) 3 %
Impairment of investment – – – – %
Other income, net 4 3 1 33 %
Loss before income taxes (2,381 ) (2,323 ) (58 ) 2 %
Net loss (2,381 ) (2,323 ) (58 ) 2 %

Revenue – Revenue in the quarter ended December 31, 2021, and December 31, 2020,
was primarily derived from our Life Sciences segment, which involved sales of
products such as lotion, gummies, and alcohol-based hand sanitizers, among
others. Revenue was approximately $142 thousand and $108 thousand for the three
months ended December 31, 2021, and December 31, 2020, respectively.

Revenue in the Life Sciences segment in the three months ended December 31,
2020, was $56 thousand as compared to $134 thousand in the three months ended
December 31, 2021, albeit with a change in product mix. Revenue in our
Infrastructure segment for the three months ended December 31, 2020, was $52
thousand compared to $8 thousand in the three months ended December 31, 2021.
The revenue relates to the execution of a construction contract. 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 areas reopen from the pandemic.

Cost of revenue – Cost of revenue amounted to approximately $80 thousand for the
three months ended December 31, 2021, compared to $94 thousand in the three
months ended December 31, 2020. The cost of revenue in the three months ended
December 31, 2021, is primarily attributable to raw materials that are required
to produce our products.

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Selling, general and administrative expenses (“SG&A”)- SG&A expenses consist
primarily of employee-related expenses, sales commission, professional fees,
legal fees, marketing, other corporate expenses, allocated general overhead and
provisions, depreciation and write-offs relating to doubtful accounts and
advances, if any. SG&A expenses decreased by approximately $116 thousand or 5%
to approximately $2.07 million for the three months ended December 31, 2021,
from approximately $2.19 million for the three months ended December 31, 2020.
The decrease of approximately $116 thousand consists of one-time $245 thousand
inventory-related adjustments during the three months ended December 31, 2020.

Research and Development expenses- Research and Development (“R&D”) expenses
were attributed to conducting the Phase 1 trial on patients suffering from
Alzheimer’s disease and product research in our Life Sciences segment. The R&D
expenses for the three months ended December 31, 2021, are approximately $377
thousand compared to approximately $154 thousand for the three months ended
December 31, 2020, increase of approximately $223 thousand or 145%. The cost
associated with this work is mostly associated with the clinical trial on
patients suffering from Alzheimer’s disease, research comprising of plant
extracts that could be productized and data to support the efficacy of the
extracts, product research, designing, formulating and market analysis. Of the
increase of $223 thousand, $100 thousand is attributed to one-off expense
related to the completion of Phase 1 clinical trial and $50 thousand to one-off
expense related to the grant of licensed patent from the University of South
Florida. We expect R&D expenses to increase with progression in trials on
IGC-AD1, subject to FDA approval.

Other income, net -Other net income increased by approximately $1 thousand or
33% during the three months ended December 31, 2021. The total other income for
the three months ended December 31, 2021, and 2020 was approximately $4 thousand
and $3 thousand, respectively. Other income includes interest income and rental
income, among others.

Results of Operations for the Nine Months Ended

December 31, 2021, and December 31, 2020

The historical results presented below are not necessarily indicative of the
results that may be expected for any future period. The following table presents
an overview of our results of operations for the nine months ended December 31,
2021 and December 31, 2020:

Statement of Operations (in thousands, unaudited)

Nine months ended December 31,
2021 2020 Change Percent
($) ($) ($) Change
Revenue 275 817 (542 ) (66 )%
Cost of revenue (149 ) (731 ) 582 (80 )%
Gross profit 126 86 40 47 %
Selling, general and administrative expenses (7,956 ) (5,424 ) (2,532 ) 47 %
Research and development expenses (1,097 ) (595 ) (502 ) 84 %
Operating loss (8,927 ) (5,933 ) (2,994 ) 50 %
Impairment of investment (37 ) – – – %
Other income, net 451 71 380 535 %
Loss before income taxes (8,513 ) (5,862 ) (2,651 ) 45 %
Net loss (8,513 ) (5,862 ) (2,651 ) 45 %

Revenue – Revenue in the nine months ended December 31, 2021, was primarily
derived from our Life Sciences segment, which involved sales of products such as
lotion, gummies, and alcohol-based hand sanitizers, among others. Revenue was
approximately $275 thousand and $817 thousand for the nine months ended December
31, 2021, and the nine months ended December 31, 2020, respectively.

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Revenue in the Life Sciences segment in the nine months ended December 31, 2020,
was $698 thousand as compared to $249 thousand in the nine months ended December
31, 2021, albeit with a change in product mix. Revenue in our Infrastructure
segment for the nine months ended December 31, 2020, and December 31, 2021, was
$119 thousand and $26 thousand, respectively. Such revenue relates to execution
of a construction contract. 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 $149 thousand for
the nine months ended December 31, 2021, compared to $731 thousand in the nine
months ended December 31, 2020. The cost of revenue in the nine months ended
December 31, 2021, is primarily attributable to raw materials 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 $2.5 million or 47% to approximately $7.96
million for the nine months ended December 31, 2021, from approximately $5.4
million for the nine months ended December 31, 2020.

The $2.5 million increase in Selling, general & administrative expenses is
attributable to the following: approximately $1.7 million to a provision for
stolen inventory at our vendor’s premises, approximately $172 thousand to
investor relations related expenses, approximately $125 thousand for an IRS tax
penalty, and non-cash increase of $499 thousand and $125 thousand for to Common
stock-based compensation and depreciation expenses, respectively.

Research and Development expenses – Research and Development expenses were
attributed to conducting the Phase 1 trial on patients suffering from
Alzheimer’s disease and product research in our Life Sciences segment. The
Research and Development expenses for the nine months ended December 31, 2021,
are approximately $1.1 million compared to approximately $595 thousand for the
nine months ended December 31, 2020. The cost associated with this work is
mostly associated with the clinical trial on patients suffering from Alzheimer’s
disease, research comprising of plant extracts that could be productized and
data to support the efficacy of the extracts, product research, designing,
formulating and market analysis. Of the increase of $502 thousand, $100 thousand
is attributed to one-off expense related to completion of Phase 1 clinical trial
and $50 thousand to one-off expense related to the grant of licensed patent from
University of South Florida. We expect Research and Development expenses to
increase with progression in trials on IGC-AD1.

Impairment of investment – On May 12, 2020, the Company acquired approximately
19.8% shareholding in Evolve I, Inc. However, based on an assessment of the
business environment, the Company decided to dispose the holding and exit the
acquisition. During the nine-months ended December 31, 2021, the Company
received back partial shares of IGC common stock, which had been given pursuant
to the SSA, in exchange for the return of its shareholding in Evolve.
Accordingly, the Company cancelled the partial shares received by it and
impaired its remaining investment of approximately $37 thousand.

Other income, net – Other net income increased by approximately $380 thousand
during the nine months ended December 31, 2021. The total other income for the
nine months ended December 31, 2021, and 2020 is approximately $451 thousand and
$71 thousand, respectively. Other income includes interest income, rental
income, among others. During the nine months ended December 31, 2021, the other
income included approximately $430 thousand related to forgiveness of the PPP
Note.

Liquidity and Capital Resources

Our sources of liquidity are cash and cash equivalents, funds raised through the
ATM offering, cash flows from operations, short-term and long-term borrowings,
and short-term liquidity arrangements. The Company continues to evaluate various
financing sources and options to raise working capital to help fund current
research and development programs and operations. The Company does not have any
material long-term debt, capital lease obligations or other long-term
liabilities, except as disclosed in this report. Please refer to Note 12,
“Commitments and contingencies”, Note 11, “Loans and Other Liabilities” and Note
9, “Leases” in Item 1 of this report for further information on Company
commitments and contractual obligations.

While the Company believes its existing balances of cash, cash equivalents and
marketable securities and other short-term liquidity arrangements will be
sufficient to satisfy its working capital needs, capital asset purchases, debt
repayments, investments, including but not limited to, mutual funds, treasury
bonds, cryptocurrencies, and other asset classes, clinical trials and other
liquidity requirements, if any, associated with its existing operations over the
next 12 months, it will raise money as and when it is able to do so. The Company
continues to utilize the ATM to raise capital. Management is actively monitoring
the impact of COVID-19 on the Company’s financial condition, liquidity,
operations, suppliers, industry, legal expenses, and workforce.

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Please refer to Item 1A. “Risk Factors” for further information on the risks
related to the Company.

(in thousands, unaudited)

As of
December As of
31, 2021 March 31, 2021
($) ($) Change Percent Change

Cash and cash equivalents 11,941 14,548 (2,607 ) (18 )%
Working capital 17,958 21,149 (3,191 ) (15 )%

Cash and cash equivalents

Cash and cash equivalents decreased by approximately $2.6 million to $11.9
million in the nine months ended December 31, 2021, from $14.5 million as of
March 31, 2021, a decrease of approximately 18%.

The major decrease was due to approximately $152 thousand in purchase of
property, plant, and equipment and a net cash loss of approximately $5.6
million, part of which was set-off with approximately $4.1 million of net
proceeds from the issuance of equity stock through an ATM offering.

Summary of Cash flows

(in thousands, unaudited)

Nine months ended December 31,
2021 2020 Change Percent Change
Cash used in operating activities (6,574 ) (8,295 ) 1,721 (21 )%
Cash (used in)/ provided by investing
activities (189 ) 1,459 (1,648 ) (113 )%
Cash provided by financing activities 4,143 530 3,613 682 %
Effects of exchange rate changes on cash
and cash equivalents 13 16 (3 ) (19 )%
Net decrease in cash and cash
equivalents (2,607 ) (6,290 ) 3,683 (59 )%
Cash and cash equivalents at the
beginning of period 14,548 7,258 7,290 100 %
Cash and cash equivalents at the end of
the period 11,941 968 10,973 1,134 %

Operating Activities

Net cash used in operating activities for the nine months ended December 31,
2021, was approximately $6.6 million. This consists of a net loss of
approximately $8.5 million and non-cash items totaling approximately $2.89
million, which in turn consist of an amortization/depreciation charge of
approximately $486 thousand, stock-based expenses totaling approximately $1.1
million, approximately $1.7 million for a provision related to stolen inventory,
approximately $37 thousand related to impairment of investment and gain due to
forgiveness of the PPP Note of approximately $430 thousand. Changes in operating
assets and liabilities had a net negative impact of approximately $944 thousand
on cash, of which approximately $51 thousand is related to inventory.

Net cash used in operating activities for the nine months ended December 31,
2020, was approximately $8.3 million. This consists of a net loss of
approximately $5.9 million 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 $3.3 million on cash, of which approximately $911 thousand was due
to an investment in inventory.

Investing Activities

Net cash used in investing activities for the nine months ended December 31,
2021, was approximately $189 thousand, which is comprised of expenses of
approximately $37 thousand for the acquisition and filing expenses related to
patents and purchase of property, plant, and equipment of approximately $152
thousand.

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Net cash provided by investing activities for the nine months ended December 31,
2020, was $1.5 million, which is comprised of approximately $92 thousand for the
acquisition and filing expenses related to patents and trademarks, purchase of
property, plant, and equipment of $1.4 million and investments of approximately
$149 thousand in non-marketable securities and proceeds of $3 million in
marketable securities.

Financing Activities

Net cash provided by financing activities was approximately $4.1 million for the
nine months ended December 31, 2021, which is comprised of net proceeds from
issuance of equity stock through ATM offering, net of all expenses related to
issuance of stock.

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

Off-Balance Sheet Arrangements

We do not have any outstanding derivative financial instruments, off-balance
sheet guarantees, interest rate swap transactions or foreign currency forward
contracts. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
an unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or that engages in leasing, hedging or research and
development services with us.

Critical Accounting Policies

While all accounting policies impact the financial statements, certain policies
may be viewed as critical. Critical accounting policies are those that are both
most important to the portrayal of financial condition and results of operations
and that require Management’s most subjective or complex judgments and
estimates. Our Management believes the policies that fall within this category
are the policies on revenue recognition, inventory, accounts receivable, foreign
currency translation, impairment of long-lived assets and investments,
stock-based compensation, and cybersecurity. We have a cybersecurity policy in
place and have taken cybersecurity measures that we expect are likely to
safeguard the Company against breaches. There were no impactful breaches in
cybersecurity during the nine months ended December 31, 2021.

Please see our disclosures in Note 2 – Summary of Significant Accounting
Policies to the Notes to the Unaudited Condensed Consolidated Financial
Statements in this report, in the Notes to the Audited Consolidated Financial
Statements in the 2021 Form 10-K, as well as Item 7 – Management’s Discussion
and Analysis of Financial Condition and Results of Operations in the 2021 Form
10-K, for a discussion of all our critical and significant accounting policies.

Recent Accounting Pronouncements

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 2021 Form 10-K.

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