# IGC Pharma, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [IGC Pharma, Inc.](/companies/igc.md) (CIK 1326205)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 17:15 ET
- Period: 2023-09-30
- Accession: 0001185185-23-001163
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1326205/000118518523001163/igcpharma20230930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1326205/000118518523001163/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $291.0k | us-gaap:Revenues |
| Revenue | 6 months, 2023-04-01 to 2023-09-30 | $846.0k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $117.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-04-01 to 2023-09-30 | $417.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $174.0k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-04-01 to 2023-09-30 | $429.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $1.3m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-04-01 to 2023-09-30 | $2.0m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $1.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-04-01 to 2023-09-30 | $3.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$2.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-04-01 to 2023-09-30 | −$4.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-04-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$2.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-04-01 to 2023-09-30 | −$4.5m | us-gaap:NetIncomeLoss |
| Operating cash flow | 6 months, 2023-04-01 to 2023-09-30 | −$3.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $3.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $6.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $16.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $2.4m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $139.0k | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2023-09-30 | $3.0k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $14.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,363 characters.

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of IGC Pharma, Inc.’s (“IGC,” the “Company,” “we,” “our,” and/or “us”) consolidated financial condition and results of operations and cash flows. The MD&A should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q for the three months and six months ended September 30, 2023, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on July 7, 2023 (the “2023 Form 10-K”). The Company’s actual results could differ materially from those discussed here. Factors that could cause differences include those discussed in the “Forward-Looking Statements” and “Risk Factors” sections and discussed elsewhere in this report. The risks and uncertainties can cause actual results to differ significantly from those in our forward-looking statements or implied in historical results and trends. Accordingly, we caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as expressly required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those outlined in the forward-looking statements.

### Overview

IGC Pharma is a clinical-stage pharmaceutical company developing novel therapies for Alzheimer’s disease and conditions related to the central nervous system. The company is pursuing five assets: IGC-AD1, TGR-63, LMP, IGC-1C, and IGC-M3, all of which target Alzheimer’s disease and are at various stages of development.

Our most clinically advanced investigational new drug for Alzheimer’s, IGC-AD1, has shown significant promise in preclinical studies. In Alzheimer’s cell lines, IGC-AD1 has demonstrated the potential to effectively suppress or ameliorate two key hallmarks of Alzheimer’s disease: plaques and tangles. In animal models, it has shown effectiveness in improving memory. Furthermore, in a Phase 1 multiple ascending dose (MAD) trial, it exhibited potential efficacy in reducing neuropsychiatric symptoms, including agitation, anxiety, and depression. IGC-AD1 is currently in a Phase 2B, multi-center, randomized, double-blind, placebo-controlled trial, specifically designed to address agitation in dementia from Alzheimer’s disease (clinicaltrials.gov, NCT05543681). This condition affects more than 10 million individuals in North America and Europe. The trial is being conducted at 10 sites in the US and Canada.

Our portfolio includes four other small molecule assets, each at distinct stages of development, all with a singular mission — to transform the landscape of Alzheimer's treatment. LMP targets neuroinflammation, Aβ plaques, and neurofibrillary tangles, TGR-63 targets Aβ plaque, where we seek to disrupt the progression of Alzheimer's disease. IGC-M3 targets the inhibition of Aβ plaque aggregation with the potential to create a profound impact on early-stage Alzheimer’s. IGC-1C targets tau and neurofibrillary tangles, IGC-1C represents a forward-thinking approach to Alzheimer's therapy.

Furthermore, IGC controls a total of 36 patent filings. IGC maintains a state-of-the-art manufacturing facility in Washington State, which is poised for potential use in a Phase 3 trial and commercialization of IGC-AD1. In Bogota, Colombia, we also operate an R&D laboratory and an internal Contract Research Organization (CRO) that provides clinical trial services. The Company is actively expanding its technological capabilities with a primary focus on Generative Artificial Intelligence (AI) to enhance various aspects of operations including clinical research and clinical trials. Our company is investing in and driving AI development with a strong focus on transforming our approach, gaining insights, and increasing cost efficiencies. Our AI initiatives are centered on informing clinical trials, developing a methodology for early detection of Alzheimer’s, and investigating the interaction of pharmaceuticals with cannabinoids.

Collectively, these core assets and initiatives underscore our commitment to advancing the field of pharmaceuticals, delivering groundbreaking treatments, and creating lasting value for our investors. We remain steadfast in our pursuit of excellence and our mission to improve the lives of those affected by Alzheimer’s and related conditions.

Our manufacturing facility is also utilized to produce women’s wellness products under the brand “Holief.” IGC Pharma is a Maryland corporation established in 2005 with a fiscal year ending on March 31, spanning a 52- or 53-week period. The company operates in two primary business segments: Life Sciences and Infrastructure.

### Life Sciences Segment

*Pharmaceutical*: Since 2014, the Company has focused primarily on the potential uses of phytocannabinoids, in combination with other compounds, to treat multiple diseases, such as Alzheimer’s disease. As a company engaged in the clinical-stage pharmaceutical industry, we focus our research and development efforts, subject to results of future clinical trials, on seeking pharmaceutical solutions that may a) alleviate neuropsychiatric symptoms such as agitation, anxiety, and depression associated with dementia in Alzheimer’s disease; and b) halt the onset, progression, or cure Alzheimer’s disease.

Currently, IGC-AD1 is in a Phase 2B safety and efficacy clinical trial for agitation in dementia from Alzheimer’s (clinicaltrials.gov, NCT05543681). The progress we are making in the clinical trial, gives us confidence in the potential of IGC-AD1 as a potentially groundbreaking therapy, with the potential to treat Alzheimer’s and to manage devastating symptoms that separate families, increase admissions to nursing homes, and drive the cost of Alzheimer’s care, although there can be no assurance.

Although there can be no assurance, we believe that additional investment in clinical trials, research, and development (R&D), facilities, marketing, advertising, AI and acquisition of complementary products and businesses supporting our Life Sciences segment will be critical to the development and delivery of innovative products and positive patient and customer experiences. We hope to leverage our R&D and intellectual property to develop ground-breaking, science-based products that are proven effective through planned pre-clinical and clinical trials. Although there can be no assurance, 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.

While the bulk of our medium and longer-term focus is on clinical trials and getting IGC-AD1 into an FDA-approved drug, our shorter-term strategy is to use our resources to provide white-label services and market Holief™. We believe this may provide us with several profit opportunities, although there can be no assurance of such profit opportunities.

*Over-the-Counter Products:*

We have created a women’s wellness brand, Holief™, available through online channels that are compliant with relevant federal, state, and local laws and regulations. Holief™ is an all-natural, non-GMO, vegan, line of over-the-counter (OTC) products aimed at treating menstrual cramps (dysmenorrhea) and premenstrual syndrome (PMS). The products are available online and through Amazon and other online channels. In addition, we sell our product formulations to other companies that market them under their brand. This is the white label part of the OTC business.

#### Contract Research Organization (CRO) and Clinical Trial Software:

The IGC-Pharma Electronic Data Capture system (IGC-EDC) is a secure and user-friendly data management software designed to collect clinical trial data in electronic format. The software incorporates rigorous security measures that help IGC to protect data and ensure compliance with regulatory requirements and industry standards. This format is designed for our clinical trials, especially our Phase 2 trial. The EDC system is designed to store and organize handwritten source documents, including medical history, concomitant medications, laboratory results, neuropsychiatric scales scores, adverse events, vital signs, safety calls, demographics, among others. The system allows users to generate data reports that will be used for data analysis and generate computational models to simulate the effects of our investigational drug IGC-AD1 on participants’ outcomes. At IGC Pharma, we recognize the significance of operational excellence and cost management in clinical trials. One major cost driver in conducting trials is the expense associated with engaging CROs. These costs can significantly impact on the overall budget of a trial. To address this challenge and optimize trial costs, we have established an internal CRO, including proprietary software that we believe sets us apart from the traditional approach of outsourcing. We believe this strategic move will enable us to reduce the costs associated with clinical trials compared to relying on external CROs, although there can be no assurance.

On July 21, 2023, IGC Pharma and the University of Los Andes (Faculty of Engineering) signed a Master Cooperation Agreement, to conduct innovative research in AI applied to the pharmaceutical industry and to join efforts to create academic spaces that allow for generating research and development projects and innovation. This agreement will enable us to work closely with some of the brightest minds in the field and develop innovative projects. We are excited to collaborate with the University of Los Andes and are committed to advancing the frontiers of science and technology together. We believe this overlay of Artificial Intelligence (AI) will help us simulate trial scenarios, generate new insights to facilitate improved decision-making, efficiently design our Phase 3 trial, provide advanced data analysis, and ultimately enhance the effectiveness and efficiency of our clinical trials, although there can be no assurance thereof. Our AI initiatives are centered on enhancing clinical trials, developing a methodology for early detection of Alzheimer’s, and investigating the interaction of pharmaceuticals with cannabinoids. By leveraging AI technology, we aim to accelerate progress in Alzheimer’s drug development and revolutionize the way we approach treatment. We believe that our commitment to advancing the field of AI in medicine creates a strategic advantage in the industry, although there can be no assurance thereof.

### Infrastructure Segment

The Company’s infrastructure business has been operating since 2008. It includes (i) execution of construction contracts and (ii) rental of heavy construction equipment.

### Company Highlights for the Quarter ended September 30, 2023

- The Company has increased its revenue by 44% compared to the same period in 2022. During the three months ended September 30, 2023, the Company generated $291thousand in revenue.
- On July 21, 2023, IGC Pharma and the University of Los Andes (Faculty of Engineering) signed a Master Cooperation Agreement to conduct innovative research in AI applied to the pharmaceutical industry and to join efforts to create academic spaces that allow for generating research and development projects and innovation.
- On July 11, 2023, the Canadian Intellectual Property Office issued a patent (#2,961,410) to the Company titled “CANNABINOID COMPOSITION AND METHOD FOR TREATING PAIN”. The patent relates to compositions and methods for treating multiple types of seizure disorders in humans using a combination of cannabinoids with other compounds. Subject to further research and study, the combination may be used for relieving pain in patients with psoriatic arthritis, fibromyalgia, scleroderma, shingles, and related pain-generating conditions.

### Business Strategy

The Life Sciences business strategy includes:

1\. Subject to FDA approval, developing IGC-AD1 as a drug for treating agitation in dementia due to Alzheimer’s and investigating and developing TGR-63, LMP, IGC-1C and IGC -M3 for the potential treatment of Alzheimer’s disease.

2\. Marketing HoliefTM and formulations.

We believe developing a drug for both symptom and disease-modifying agents has less risk due to the need for expensive multi-year trials. However, there is considerable upside and significant value creation to the extent we obtain a first-in-class advantage, of which there can be no assurance. If we were to obtain a first-in-class advantage, such an advantage could result in significant growth if and when an approved drug such as IGC-AD1 launches.

We believe that additional investment in clinical trials, AI, research and development (R&D), facilities, marketing, advertising, and acquisition of complementary products and businesses will be critical to the ongoing growth of the Life Sciences segment. Although there can be no assurance, we believe these investments will fuel the development and delivery of innovative products that drive positive patient and customer experiences. We hope to leverage our R&D and intellectual property to develop ground-breaking, science-based products that are proven effective through clinical trials, subject to FDA approval. Although there can be no assurance, we believe this strategy can improve our existing products and lead to the creation of new products that can provide treatment options for multiple conditions, symptoms, and side effects.

### Results of Operations for the Three Months Ended

### September 30, 2023, and September 30, 2022

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, 2023, and September 30, 2022:

### Statement of Operations (in thousands, unaudited)

|  | Three months ended September 30, 2023 ($) | 2022 ($) | Change ($) | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | 291 | 202 | 89 | 44% |
| Cost of revenue | (117) | (67) | (50) | 75% |
| **Gross profit** | **174** | **135** | 39 | **29%** |
| Selling, General and Administrative expenses | (1,397) | (1,855) | 458 | (25)% |
| Research and development expenses | (1,268) | (768) | (500) | 65% |
| **Operating loss** | **(2,491)** | **(2,488)** | (3) | **-%** |
| Other income, net | 40 | 46 | (6) | **(13)%** |
| **Loss before income taxes** | **(2,451)** | **(2,442)** | (9) | **-%** |
| Income tax expense/benefit | - | - | - | - |
| **Net loss** | **(2,451)** | **(2,442)** | (9) | **-%** |

*Revenue –* During the three months ended September 30, 2023, the Company generated approximately $291 thousand in revenue, representing an increase of approximately $89 thousand, or 44%, compared to the approximately $202 thousand recorded during the three months ended September 30, 2022. The primary source of revenue in both quarters was from the Life Sciences segment, encompassing the sales of our formulations as white-labeled manufactured products and sales of branded holistic women’s health care products, among others. The Infrastructure segment revenue was nil and approximately $7 thousand for the three months ended September 30, 2023, and September 30, 2022, respectively.

*Cost of revenue –* Cost of revenue amounted to approximately $117 thousand for the three months ended September 30, 2023, compared to $67 thousand in the three months ended September 30, 2022, this represents gross margins of 60% to 67%, respectively. The cost of revenue is primarily attributable to the cost of raw materials, labor, and other direct overheads required to produce our products in the Life Science segment. Typically, the gross margin in the Life Sciences business will fluctuate from one quarter to another based on the mix within the Life Science business between white label, private label, and branded products. There is insufficient revenue to model or project gross margins.

*Selling, General and Administrative expenses (“*SG&A”) – SG&A expenses primarily encompass various costs such as employee-related expenses, sales commissions, professional fees, legal fees, marketing expenses, other corporate expenses, allocated general overhead, provisions, depreciation, and write-offs related to doubtful accounts and advances. During the three months ended September 30, 2023, SG&A expenses decreased by approximately $458 thousand or 25% to approximately $1.4 million, from approximately $1.9 million recorded for the three months ended September 30, 2022. The decrease in SG&A expenses is attributed to a decrease in operational and corporate expenses.

*Research and Development expenses –* R&D expenses were attributed to our Life Sciences segment. The R&D expenses increased by approximately $500 thousand or 65% to $1.3 million during the three months ended September 30, 2023, from approximately $768 thousand for the three months ended September 30, 2022. The increase is primarily attributable to the progression of Phase 2 trials on IGC-AD1 and pre-clinical studies on the other small molecule assets. Although there can be no assurance, we anticipate increased R&D expenses as the development of our other small molecule assets targeting Alzheimer’s and the Phase 2B trial on Alzheimer’s expand.

*Other income, net –* Other net income decreased by approximately $6 thousand or 13% during the three months ended September 30, 2023. The total other income for the three months ended September 30, 2023, and 2022, is approximately $40 thousand and $46 thousand, respectively. The component of other income typically includes interest and rental income, dividend income, profits from the sale of assets, unrealized gains from non-debt investments, net income, and income from the sale of scraps. These sources contribute to the overall other income generated by the Company.

### Results of Operations for the Six Months Ended September 30, 2023, and September 30, 2022

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, 2023, and September 30, 2022:

### Statement of Operations (in thousands, unaudited)

|  | Six months ended September 30, 2023 ($) | 2022 ($) | Change ($) | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | 846 | 414 | 432 | 104% |
| Cost of revenue | (417) | (137) | (280) | 204% |
| **Gross profit** | **429** | **277** | **152** | **55%** |
| Selling, General and Administrative expenses | (3,044) | (3,405) | 361 | (11)% |
| Research and development expenses | (2,015) | (2,162) | 147 | (7)% |
| **Operating loss** | **(4,630)** | **(5,290)** | **660** | **(12)%** |
| Other income, net | 104 | 63 | 41 | 65% |
| **Loss before income taxes** | **(4,526)** | **(5,227)** | **701** | **(13)%** |
| **Income tax expense/benefit** | - | - | - | - |
| **Net loss** | **(4,526)** | **(5,227)** | **701** | **(13)%** |

*Revenue –* Revenue was approximately $846 thousand and $414 thousand for the six months ended September 30, 2023, and September 30, 2022, respectively. Revenue in both quarters was primarily derived from our Life Sciences segment, which involved providing white-label manufactured products and sales of holistic women’s health care products, among others. The Infrastructure segment revenue was approximately $166 thousand and $17 thousand for the six months ended September 30, 2023, and September 30, 2022, respectively. The increase in revenue derived from the Infrastructure segment relates to the completion of a construction contract. The Company remains committed to its current strategy of driving sales in formulations both as branded and white-labeled products in the Life Science segment.

*Cost of revenue –* Cost of revenue amounted to approximately $417 thousand for the six months ended September 30, 2023, compared to $137 thousand in the six months ended September 30, 2022, this represents gross margins of 51% and 67%, respectively. The cost of revenue is primarily attributable to the cost of raw materials, labor, and other direct overheads required to produce our products in the Life Science segment. The decrease in gross margin is reflective of a change in the mix of revenue between Infrastructure and Life Science. Typically, the gross margin in the Life Sciences business, while higher than in the infrastructure, will fluctuate from one quarter to another based on the mix within the Life Science business between white label, private label, and branded products.

*Selling, General and Administrative expenses –* SG&A expenses were approximately $3 million and $3.4 million for the six months ended September 30, 2023, and September 30, 2022, respectively. The decrease of $361 thousand is attributed to a decrease in operational and corporate expenses. 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 advance, if any.

*Research and Development expenses –* R&D expenses were attributed to our Life Sciences segment. The R&D expenses decreased by approximately $147 thousand or 7% to $2 million during the six months ended September 30, 2023, from approximately $2.1 million during the six months ended September 30, 2022. The decrease is primarily attributable to the reduction of non-cash expenses due to achievement of performance-based milestone.

*Other income, net –* Other net income increased by approximately $41 thousand or 65% during the six months ended September 30, 2023. As a result, the total other income for the six months ended September 30, 2023, and 2022 is approximately $104 thousand and $63 thousand, respectively. The increase in other income for the six months ended September 30, 2023, is attributable to profit from the sale of assets. Other income includes interest and rental income, dividend income, profit from the sale of assets, unrealized gains from investments, net income, and income from scrap sales.

### 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,” and Note 11, “Loans and Other Liabilities,” in Item 1 of this report for further information on Company commitments and contractual obligations.

On June 30, 2023, the Company signed the Master Loan and Security Agreement (the “Credit Agreement”) with O-Bank, CO., LTD. pursuant to which the Company may borrow up to $12 million. Additionally, the Company sold 10 million shares of common stock for $3 million pursuant to an SPA with Bradbury Asset Management and three unrelated investors. These measures have been taken to address ongoing liquidity requirements and ensure the Company’s ability to sustain its operations. Moreover, the Company plans to raise additional funds through private placement and ATM offerings, subject to market conditions, although there can be no assurance that such financing efforts will be successful.

The Credit Agreement matures on June 30, 2024, with an option to renew. Borrowings under the Credit Agreement will bear interest, calculated according to the interest rate mentioned in the Certificate of Deposit (as defined in the Credit Agreement), as the case may be, plus an applicable margin of 1%, and the Company shall bear the tax. Interest is due and payable in full by the Company on the last business day of each interest period. As of September 30, 2023, the entire amount of $12 million remains unused.

On October 27, IGC Pharma, Inc. (the “Company”) entered into a Sales Agreement (the “Agreement”) with A.G.P./Alliance Global Partners (the “Agent”) pursuant to which the Company may offer and sell, from time to time, through the Agent, as sales agent and/or principal, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $60 million (“Shares”), subject to certain limitations on the amount of Common Stock that may be offered and sold by the Company set forth in the Sales Agreement (the “Offering”). Prior to entering into the Sales Agreement with A.G.P./Alliance Global Partners, the Company terminated the Sales Agreement dated January 13, 2021, with The Benchmark Company.

The Company expects to raise further capital for its research and development initiatives as and when it is able to do so, but there can be no assurance thereof. In addition, there can be no assurance of the terms thereof, and any subsequent equity financing sought may have dilutive effects on our current shareholders. While there is no guarantee that we will be successful, we are applying to non-dilutive funding opportunities such as Small Business Research and Development programs. In addition, subject to limitations on the amount of capital that can be raised, the Company expects to utilize its shelf registration on a statement on Form S- 3 to raise capital through at-the-market offerings or otherwise.

Please refer to Item 1A. “Risk Factors” of our Form 10-K for the fiscal year ended March 31, 2023, for further information on the risks related to the Company.

*(in thousands, unaudited)*

|  | As of September 30, 2023 ($) | As of March 31, 2023 ($) | Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | 3,026 | 3,196 | (170) | (5)% |
| Working capital | 4,011 | 4,568 | (557) | (12)% |

#### Cash and cash equivalents

Cash and cash equivalents decreased by approximately $170 thousand to $3 million in the six months ended September 30, 2023, from $3.2 million as of March 31, 2023, a decrease of approximately 5%.

#### Summary of Cash flows

*(in thousands, unaudited)*

|  | Six months ended September 30, 2023 | 2022 | Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Cash used in operating activities | (3,086) | (3,882) | 796 | (21)% |
| Cash provided by investing activities | 67 | 24 | 43 | 179% |
| Cash provided by financing activities | 2,858 | 101 | 2,757 | 2,730 |
| Effects of exchange rate changes on cash and cash equivalents | (9) | (80) | 71 | 89% |
| **Net decrease in cash and cash equivalents** | **(170)** | **(3,837)** | **3,667** | **(96)%** |
| Cash and cash equivalents at the beginning of period | 3,196 | 10,460 | (7,264) | (69)% |
| **Cash and cash equivalents at the end of the period** | **3,026** | **6,623** | **(3,597)** | **(54)%** |

#### Operating Activities

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

Net cash used in operating activities for the six months ended September 30, 2022, was approximately $3.8 million. It consists of a net loss of approximately $5.2 million, a positive impact on cash due to non-cash expenses of approximately $2.2 million, and a negative change in operating assets and liabilities of approximately $808 thousand. Non-cash expenses consist of an amortization/depreciation charge of approximately $332 thousand, stock-based expenses of approximately $1.8 million, and net loss on the sale of a fixed asset of approximately $45 thousand. In addition, changes in operating assets and liabilities had a negative impact of approximately $808 thousand on cash, of which approximately $65 thousand is due to a decrease in accounts receivables, approximately $524 thousand decrease in accounts payable, and approximately $219 thousand decrease in other net current assets and liabilities.

#### Investing Activities

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

Net cash provided by investing activities for the six months ended September 30, 2022, was approximately $24 thousand, which comprised proceeds from the sale of property, plant, and equipment of approximately $277 thousand, adjusted with cash expenses of approximately $60 thousand for the acquisition and filing expenses related to patents and approximately $193 thousand of a short-term investment.

#### Financing Activities

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

Net cash provided by financing activities from the issuance of equity stock through our 2021 ATM offering, net of all expenses related to the issuance of stock, was approximately $101 thousand and re-payment of the loan of approximately $2 thousand for the six months ended September 30, 2022.

### 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 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.

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 2023 Form 10-K, as well as Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2023 Form 10-K, for a discussion of all our critical and significant accounting policies.

### Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASUs) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Newly issued ASUs not listed are expected to have no impact on the Company’s consolidated financial position and results of operations because either the ASU is not applicable, or the impact is expected to be immaterial. Recent accounting pronouncements that may apply to us are described in Note 2, “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 2023 Form 10-K.

## Controls and procedures

As filed, 2,351 characters.

### Evaluation of Disclosure Controls and Procedures

Our Management maintains disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Management, including our Chief Executive Officer (our principal executive officer) and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our Management, including the Chief Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that the information required to be disclosed in the reports filed or submitted by us under the Exchange Act was recorded, processed, summarized and reported within the requisite time periods specified in SEC rules and forms and that such information was accumulated and communicated to our Management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

Our Management, including our Chief Executive Officer and Principal Financial Officer, evaluated our “internal control over financial reporting” as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the three months ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there were no changes in our internal control over financial reporting during the three months ended September 30, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 144 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001185185-23-001163. Last ingested by Listed: Nov 6, 2026, 16:27 ET. No prices; not investment advice.