ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors, together with all other information included in this report in evaluating the Company and our common stock. If any of the following risks and uncertainties develops into actual events, they could have a material adverse effect on our business, financial condition or results of operations. In that case, the trading price of our common stock and other securities also could be adversely affected. We make various statements in this section, which constitute “forward-looking statements.” See “Forward-Looking Statements.”

Risks Related to Our Business and Expansion Strategy

Our cannabinoid strategy makes it difficult to find, retain, and attract management.

The environment in which we work is heavily regulated, and while we have experience in regulated industries, it is also heavily scrutinized. This regulatory scrutiny takes a toll on management and makes it very difficult to attract and retain talent. Management spends a great deal of time and money explaining and justifying actions, strategy, and business plans to regulators. A myriad of complex factors including regulations regarding money laundering, inter-state commerce, DOJ, FDA, NYSE, SEC, FTC, and state laws, among others, affect every decision. Navigating this complex set of regulatory landmines and staying focused on generating shareholder value is an arduous task and there can be no assurance that we will be successful in steering clear of all the potential issues, any of which could adversely impact the stock price or lead to delisting from the NYSE American.

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Our cannabinoid strategy makes it difficult to raise money as a public company.

Despite having no direct involvement in selling THC, the Company is often incorrectly classified as a “cannabis company” or a “marijuana company”, with all the nuances that accompany that label, including being blacklisted by banks, investments banks, and by the largest stock clearing services company. Due to the near-monopoly nature of some of these institutions, such as clearing houses, it makes it very difficult for the Company to raise money, deposit share certificates, or even have investment banking relationships. As we cannot control how others perceive us, there can be no assurance that we will be able to raise enough capital for our planned expansion.

The Company depends on the performance of carriers, wholesalers, retailers, and other resellers.

The Company distributes its products through wholesalers, retailers, and resellers, many of whom may distribute products from competing manufacturers. The Company also intends to sell its products and resells third-party products in most of its major markets directly to consumers, small and mid-sized businesses, and other customers through its retail and online stores and its direct sales force. The Company intends to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company employees and contractors, and improving product placement displays. These programs can require a substantial investment while not assuring return or incremental sales. The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for some or all of the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.

Our revenue decreased and we have a history of operating losses and there can be no assurance that we can again achieve or maintain profitability.

Our revenue declined from Fiscal 2019 to Fiscal 2020. Our short-term focus is to gain market share for our Life Sciences segment. However, we have had a history of operating losses. For Fiscal 2020 and Fiscal 2019, we had a net loss of almost $7.3 million and $4.1 million, respectively. Accordingly, there can be no guarantee that our efforts will be successful. If we continue to have losses, we will be required to seek additional financing. No assurance can be given that we can raise any such financing and such financing could be dilutive to our shareholders.

We expect to acquire companies, and we are subject to evolving and often expensive corporate governance regulations and requirements. Our failure to adequately adhere to these requirements, and comply with them with regard to acquired companies, some of which may be non-reporting entities, or the failure or circumvention of our controls and procedures could seriously harm our business and affect our status as a reporting company listed on a national securities exchange.

As a public reporting company whose shares are listed for trading on the NYSE American, we are subject to various regulations. Compliance with these evolving regulations is costly and requires a significant diversion of management time and attention, particularly regarding our disclosure on controls and procedures and our internal control over financial reporting. As we have made and continue to make acquisitions in foreign countries, our internal controls and procedures may not be able to prevent errors or fraud in the future. We cannot guarantee that we can establish internal controls over financial reporting immediately on companies that we acquire. Thus, faulty judgments, simple errors or mistakes, or the failure of our personnel to enforce controls over acquired companies or to adhere to established controls and procedures, may make it difficult for us to ensure that the objectives of our control systems are met. A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our ability to continue as a reporting company listed on a national securities exchange.

We may engage in strategic transactions that could impact our liquidity, increase our expenses, and present significant distractions to our management, and which ultimately may not be successful.

From time to time we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates, or technologies, particularly those arrangements that seek to leverage other organizations’ internal platforms or competencies for the benefit of our products or potential products. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:

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• exposure to unknown or unanticipated liabilities, including foreign laws with which we are unfamiliar;

• disruption of our business and diversion of our management’s time and attention to develop acquired products, product candidates or technologies;

• incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions, which we may not be able to obtain on favorable terms, if at all;

• higher than expected acquisition and integration costs;

• write-downs of assets or goodwill or impairment charges;

• increased amortization expenses;

• difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

• entering a long-term relationship with a partner that proves to be unreliable or counterproductive;

• impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

• inability to retain key employees of any acquired businesses. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects if we are unable to execute on the planned objectives or capitalize on the relationship in the manner that was originally contemplated.

We have a limited senior management team size that may hamper our ability to effectively manage a publicly traded company and manage acquisitions and that may harm our business.

Since we operate in several foreign countries, we use consultants, including lawyers and accountants, to help us comply with regulatory requirements and public company compliance on a timely basis. As we expand, we expect to increase the size of our senior management. However, we cannot guarantee that in the interim period our senior management can adequately manage the requirements of a public company and the integration of acquisitions, and any failure to do so could lead to the imposition of fines, penalties, harm our business, status as a reporting company and/or our listing on the NYSE American.

There is a high rate of failure for drug candidates proceeding through clinical trials.

Generally, there is a high rate of failure for drug candidates proceeding through clinical trials. We may suffer significant setbacks in our clinical trials, similar to the experience of several other companies in the pharmaceutical and biotechnology industries. Further, even if we view the results of a clinical trial to be positive, the FDA or other regulatory authorities may disagree with our interpretation of the data. In the event that we obtain negative results from clinical trials for product candidates or other problems related to potential chemistry, manufacturing and control issues or other hurdles occur and our product candidates are not approved, we may not be able to generate sufficient revenue or obtain financing to continue our operations, our ability to execute on our current business plan may be materially impaired, and/or our reputation in the industry and in the investment community might be significantly damaged. In addition, our inability to properly design, commence and complete clinical trials may negatively impact the timing and results of our clinical trials and ability to seek approvals for our drug candidates.

The farming of hemp is inherently risky, and failed crops can impact our balance sheet and profitability.

As the Farm Bill, legalizing hemp, became effective in 2019, legal hemp farming is relatively new in the U.S. and few farmers have developed the requisite experience to grow, dry, and store hemp. There are many factors that contribute to crop failure including: picking the right seeds that can be germinated in a particular climate and soil condition, appropriate plant nutrition, pest control, and weather and hours of sunshine, among others.

Unlike other plants, growing hemp also involves growing a flower that will test at THC levels that are below legal levels of 0.3% THC by dry weight. Therefore, if plants that are cultivated grow to levels of THC that are higher than the legal limit (“hot” plant), 1% for example, they will fail the state testing protocols and, in many cases, cannot be transported across state borders and will have to be destroyed. In Arizona, where we cultivate hemp, while our plants passed inspection, across the entire hemp farming industry, approximately 40% of the crops failed inspection this past season. In addition, the flowers of a hemp plant, unfortunately, look like those of the marijuana plant and attract thieves that believe it is marijuana and steal them. The plants that are harvested must be dried to a particular moisture level, in order to be stored, or they could develop mold. While many farmers grow plants all over the west coast, the support infrastructure to manage the yield and dry hemp plants did not exist before the onset of winter. Therefore, growing hemp involves forethought and management of the entire chain of growing, drying, testing, transportation, and processing. This past season, no plant insurance was available; however, we anticipate that this will change. While, we have taken many precautions to avert potential problems, we cannot guarantee that all or a portion of our plants will not be hot, stolen, or destroyed by extreme weather, among other risks, any of which could adversely impact our balance sheet and profitability.

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The installation and delivery of equipment ordered from China may be delayed substantially as a result of shipping restrictions imposed due to COVID-19 and may impact our production and business adversely.

The Company ordered equipment from China for the processing of hemp. Upon delivery of the equipment, the Chinese manufacturer is contracted to travel to the U.S. to help commission and certify the equipment. However, due to the recent outbreak of COVID-19, shipping and travel restrictions imposed to contain the epidemic and avoid further transmission have resulted in delays and may result in substantial delay in the shipping of the equipment. As we cannot predict how long these restrictions will be in place, the delay in shipping equipment, and the delay in Chinese engineers traveling to the U.S., could and likely will adversely impact the production of our products and the provision of services to other farmers, customers and Company products. This may also result in other market entrants obtaining a first mover advantage and may adversely impact our revenue in the Life Sciences segment.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

The recent outbreak of COVID-19 has affected most of the world, including the U.S., European and Asian countries. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. The COVID-19 pandemic is affecting the United States and global economies and has and may continue to affect our operations and those of third parties on which we rely, including by causing disruptions in the supply of our products candidates and the conduct of current and future clinical trials. As the end of the COVID-19 pandemic remains unknown, the full extent of the impact of COVID-19 on the Company remains unknown as well.

The impact of COVID-19 on our operations is reflected in reduced revenue and increased expenses in both our Infrastructure and the Life Sciences segments.

In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates. The evolving COVID-19 pandemic is also likely to directly or indirectly impact the pace of enrolment in our clinical trial for IGC-AD1 for at least the next several months and possibly longer as patients may avoid or may not be able to travel to healthcare facilities and physicians' offices unless due to a health emergency. Such facilities and offices may also be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, and may not be available, in whole or in part, for clinical trial services or our other product candidates. Additionally, while the potential economic impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, financing, or clinical trial activities or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on our liquidity, capital resources, operations, and business and those of the third parties on which we rely.

Extreme weather conditions, crop diseases, pests and fluctuations in market demand can create substantial seasonal volatility for our business and results of operations.

A significant portion of the Company’s Life Sciences segment is seasonal and is subject to weather conditions that affect hemp prices and crop yields. Our production is also vulnerable to crop diseases and pest infestations, which may vary in severity, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic condition. We consider the possibility of the occurrence of these adverse seasonal weather conditions in making our production plans to mitigate such risks. However, such events may occur at any time of the year, and the occurrence of any of these events may create the volatility for our business and results of operations.

The market prices of hemp crops and agricultural produce are constantly affected by both demand and supply cycle of the hemp industry. As a result, movements of the market prices would have significant impact on IGC’s earnings. Whilst efforts have been made by Management to implement certain strategies that mitigate the cyclical nature of the business, there can be no assurance that IGC will be fully shielded from the negative effects of cyclical movements of the market prices of crops and agricultural produce.

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We are dependent upon regulatory approvals and fixed term licenses for our ability to grow, harvest, process, and transport hemp and other products derived therefrom.

Our current authorization for growing, harvesting, processing and transport of cannabis is valid for a single growing season at a time and notification to AZDA is needed to renew the license for subsequent growing seasons. All licenses are subject to ongoing compliance and reporting requirements and renewal. There can be no assurance that AZDA will renew a license, even if the Company is in full compliance with all obligations related thereto.

There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the hemp market or any particular product, or consistent with currently held views.

The Management believes that the hemp industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the hemp produced. Consumer perception can be significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention and other publicity regarding the consumption of hemp products. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the hemp industry and demand for its products and services, which could affect the Company’s business, financial condition and results of operations and cash flows. The Company’s dependence upon consumer perception means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the Company, its business, financial condition, results of operations and cash flows. Further, adverse publicity, reports or other media attention regarding the safety, efficacy and quality of hemp in general, or the Company’s products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have a material adverse effect. Such adverse publicity or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products legally, appropriately, or as directed. Unfavorable research reports, newspaper articles, social media, or testimonials can adversely affect our sales and consequently our stock price.

In addition, parties outside of the hemp industry with which the Company does business may perceive that they are exposed to reputational risk because of the Company’s hemp related business activities. For example, the Company could receive a notification from a financial institution advising it that they would no longer maintain banking relationships with those in the hemp industry. The Company may, in the future, have difficulty establishing or maintaining bank accounts or other business relationships that it needs to operate its business. Failure to establish or maintain business relationships could have a material adverse effect.

We may fail to expand our growing and manufacturing capability in time to meet market demand for our products and product candidates, and the FDA may refuse to accept our facilities or those of our contract manufactures as being suitable for the production of our products and product candidates. Any problems in our growing or manufacturing process could have a material adverse effect on our business, results of operations and financial condition.

In addition, before we can begin commercial manufacture of any medicinal product candidates for sale in the U.S., we must obtain FDA regulatory approval for the product, which requires a successful FDA inspection of the manufacturing facilities, which includes the facilities of the processor(s) and quality systems in addition to other product-related approvals.

The Company also established an approximately $2.4 million facility it intends to qualify as a Good Manufacturing Practice (GMP) certified processing facility in the State of Washington for processes such as: a) production of products such as lotions, creams, and oils, among others, to support our products and to support white labeling; b) extraction of hemp into crude oil; and c) distillation of crude oil into hemp extracts. There can be no assurance that the facility will receive the GMP certification.

Due to the complexity of the processes used to manufacture our product candidates, we may be unable to initially, or continue to, pass federal, state, or international regulatory inspections in a cost-effective manner. If we are unable to comply with manufacturing regulations, we may be subject to fines, unanticipated compliance expenses, recall or seizure of any approved products, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions would adversely affect our business, results of operations and financial condition.

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Legal claims could be filed that may have a material adverse effect on our business, operating results, and financial condition. We may in the future face risks of litigation and liability claims, the extent of such exposure can be difficult or impossible to estimate and which can negatively impact our financial condition and results of operations.

Our operations are subject to numerous laws and regulations of the U.S., India, Colombia, and Hong Kong relating to the protection of the public and necessary disclosures regarding financial services. Liability under these laws involves inherent uncertainties. Violations of financial regulation laws are subject to civil, and, in some cases, criminal sanctions. We may not have been, or may not be, or may be alleged to have not been or to not be, at all times, in complete compliance with all requirements, and we may incur costs or liabilities in connection with such requirements or allegations. We may also incur unexpected interruptions to our operations, administrative injunctions requiring operation stoppages, fines judgments, settlements, or other financial obligations or penalties, which could negatively impact our financial condition and results of operations. As of March 31, 2020, the Company and several of its officers and directors are parties to four (4) shareholder lawsuits. See Item 3, Legal Proceedings of this report for further information. There can also be no assurance that any insurance coverage we take will be adequate or that we will prevail in any future cases. We can provide no assurance that we will be able to obtain liability insurance that would protect us from any such lawsuits. In the event that we are not covered by insurance, our management could expend significant time and resources addressing any such issues. And, the legal fees necessary to defend against multiple lawsuits can be significant, impacting the Company’s overall bottom line when not covered by insurance or where the fees exceed the Company’s insurance policy limits.

Continued listing on the NYSE is an operating risk for the Company.

Given the current regulatory environment for hemp-based products and increased scrutiny of the industry related thereto, there remains risk with respect to the Company’s ability to maintain its listing with the NYSE American. This risk may limit the Company’s ability to pursue other business opportunities and a delisting by the NYSE American could impact the liquidity of the Company’s common stock.

Our expansion is dependent on laws and regulations pertaining to hemp and cannabinoids.

We expect to acquire companies and hire management in the areas that we have identified. These include, among others, biopharmaceuticals, with a focus on capitalizing on specific niches within these areas such as cannabinoid-based therapies. Entry into any of these areas requires special knowledge of the industry and products. In the event that we are perceived to be entering the legal marijuana sector, even indirectly or remotely, we could be subject to increased scrutiny by regulators because, among other things, marijuana is a Schedule-1 controlled substance and is illegal under federal law. Our failure to adequately manage the risk associated with these businesses and adequately manage the requirements of the regulators can adversely affect our business, our status as a reporting company and our listing on the NYSE American. Further, any adverse pronouncements from regulators about businesses related to the legal cannabis industry, or the hemp industry could adversely affect our stock price.

Our Company is in a very new and highly regulated industry. Significant and unforeseen changes in policy may have material impacts on our business.

Continued development in the phytocannabinoids industry is dependent upon continued state legislative authorization of cannabinoids as well as legislation and regulatory policy at the federal level. The federal Controlled Substances Act currently makes cannabinoids use and possession illegal on a national level. While there may be ample public support for legislative authorization, numerous factors impact the legislative process. Any one of these factors could slow or halt use and handling of cannabinoids in the U.S. or in other jurisdictions, which would negatively impact our development of phytocannabinoid-based therapies and our ability to test and productize these therapies.

Many U.S. state laws conflict with the federal Controlled Substances Act. While we do not, and we do not intend, to distribute or sell marijuana in the U.S., it is unclear whether regulatory authorities in the U.S. would object to the registration or public offering of securities in the U.S. by our Company, to the status of our Company as a reporting company, or even to investors investing in our Company, if we engage in legal cannabinoids cultivation and supply pursuant to the laws and authorization of the jurisdiction where the activity takes place. In addition, the status of cannabinoids under the Controlled Substances Act may have an adverse effect on federal agency approval of pharmaceutical use of phytocannabinoid products. Any such objection or interference could delay indefinitely or increase substantially the costs to access the equity capital markets, test our therapies, or create products from the Life Sciences segment.

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Our business is dependent on continuing relationships with clients and strategic partners.

Our business requires developing and maintaining strategic alliances with contractors that undertake turnkey contracts for infrastructure development projects and with government organizations. The business and our results could be adversely affected if we are unable to maintain continuing relationships and pre-qualified status with key clients and strategic partners.

Our product candidates may be unable to achieve the expected market acceptance, consequently, limiting our ability to generate revenue from new products.

Even when product development is successful and regulatory approval has been obtained, our ability to generate sufficient revenue depends on the acceptance of our products by customers. We cannot assure you that our products will achieve the expected level of market acceptance and revenue. The market acceptance of any product depends on a number of factors such as, the price of the product, the effect of the product, the taste of the product, reputation of the Company, competition, and marketing and distribution support.

The success and acceptance of a product in one state may not be replicated in other states or may be negatively affected by our activities in another state. Any factors preventing or limiting the market acceptance of our products could have a material adverse effect on our business, results of operations and financial condition.

Business interruptions could delay us in the process of developing our product candidates and could disrupt our product sales.

Loss of our manufacturing facilities, our growing plants, stored inventory or laboratory facilities through fire, theft, natural disasters or other causes, or loss of our botanical raw material due to pathogenic infection, waste, destruction or other causes, could have an adverse effect on our ability to meet demand for cannabinoid products or to continue product development activities and to conduct our business. Failure to supply our partners with commercial product may lead to adverse consequences.

Counterfeit versions of our products could harm our business.

Counterfeiting activities and the presence of counterfeit products in market and over the internet continue to be a challenge for maintaining a safe product supply. Counterfeit products are frequently unsafe or ineffective and can be life-threatening. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs along with increased levels of counterfeiting could be mistakenly attributed to the authentic product, affect consumer confidence in the authentic product and harm the business of companies such as ours. If our products were to be the subject of counterfeits, we could incur reputational and financial harm.

We face intense competition, including from generic products. If our competitors’ market or develop alternative products that are approved more quickly or marketed more effectively than our product candidates or are demonstrated to be safer or more effective than our products, our commercial opportunities will be reduced or eliminated.

The Life Sciences products industry is characterized by advancing technology, competition, and a strong emphasis on developing proprietary products. We face competition from a number of sources, some of which may target the same indications as our products or product candidates, such as pharmaceutical companies, including generic drug companies, biotechnology companies, drug delivery companies, and academic and research institutions, many of which have greater financial resources, marketing capabilities, including well-established sales forces, manufacturing capabilities, research and development capabilities, experience in obtaining regulatory approvals for product candidates and other resources than us.

We may not be able to differentiate any products that we may market from those of our competitors, successfully develop or introduce new products that are less costly or offer better performance than those of our competitors, or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors. In addition, there are several established products already commercially available and under development by other companies that treat the indications that our product candidates are intended to treat.

Currency fluctuations may reduce our assets and profitability.

We have assets located in foreign countries that are valued in foreign currencies. Fluctuation of the U.S. dollar relative to the foreign currency may adversely affect our assets and profit.

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Our business relies heavily on our management team and any unexpected loss of key officers may adversely affect our operations.

The continued success of our business is largely dependent on the continued services of our key employees. The loss of the services of certain key personnel, without adequate replacement, could have an adverse effect on our performance. Our senior management, as well as the senior management of our subsidiaries, plays a significant role in developing and executing the overall business plan, maintaining client relationships, proprietary processes, and technology. While no one is irreplaceable, the loss of the services of any would be disruptive to our business.

Our quarterly revenue, operating results and profitability will vary.

Factors that may contribute to the variability of quarterly revenue, operating results or profitability include:

• Fluctuations in revenue due to seasonality of the marketplace, which results in uneven revenue and operating results over the year;

• Additions and departures of key personnel;

• Strategic decisions made by us and our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments, and changes in business strategy; and

• Economic conditions, including but not limited to, the adverse impact on operating results due to the COVID-19 pandemic.

We may not successfully register the provisional patents with the USPTO.

We have filed ten provisional patents with the USPTO, in the combination therapy space, for the indications of pain, medical refractory epilepsy, eating disorders, and cachexia as part of our intellectual property strategy focused on the phytocannabinoid-based health care industry. Although, two patents have been issued, there is no guarantee that our remaining applications will result in a successful registration with the USPTO. If we are unsuccessful in registering patents, our ability to create a valuable line of products can be adversely affected. This in turn may have a material and adverse impact on the trading price of our common stock.

We may be unable to protect our intellectual property rights and/or intellectual property rights licensed to us and may be subject to intellectual property litigation and infringement claims by third parties.

We intend to protect our intellectual property through limited patents and our unpatented trade secrets and know-how through confidentiality or license agreements with third parties, employees, and consultants, and by controlling access to and distribution of our proprietary information. However, this method may not afford complete protection, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the U.S. and unauthorized parties may copy or otherwise obtain and use our products, processes or technology. Additionally, there can be no assurance that others will not independently develop similar know-how and trade secrets. We are also dependent upon the owners of intellectual property rights licensed to us under various wholesale license agreements to protect and defend those rights against third party claims. If third parties take actions that affect our rights, the value of our intellectual property, similar proprietary rights or reputation or the licensors who have granted us certain rights under wholesale license agreements, or we are unable to protect the intellectual property from infringement or misappropriation, other companies may be able to offer competitive products at lower prices, and we may not be able to effectively compete against these companies. We also face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, may require us to:

● defend against infringement claims which are expensive and time consuming;

● cease making, licensing, or using, either temporarily or permanently, products that incorporate the challenged intellectual property;

● re-design, re-engineer, or re-brand our products or packaging; or

● enter into royalty or licensing agreements to obtain the right to use a third party’s intellectual property.

In the event of claims by third parties for infringement of intellectual property rights we license from third parties under wholesale license agreements, we could be liable for costs of defending allegations of infringement, and there are no assurances the licensors will either adequately defend the licensed intellectual property rights or that they would prevail in the related litigation. In that event, we would incur additional costs and may deprived from generating royalties from these agreements.

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We may face risks relating to health care privacy and security laws.

We may be subject to various privacy and security regulations, including but not limited to HIPAA, as amended by HITECH, and their respective implementing regulations, including the related final published omnibus rule. HIPAA mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common health care transactions, as well as standards relating to the privacy and security of individually identifiable health information. These obligations would require the Company to adopt administrative, physical, and technical safeguards to protect such information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates” — independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent then HIPAA and many of which differ from each other in significant ways and may not have the same effect, thereby complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and criminal penalties.

Some of our lines of business will rely on third-party service providers to host and deliver services and data, and any interruptions or delays in these hosted services, security or privacy breaches, including cybersecurity attacks, or failures in data collection could expose us to liability claims, increased costs, reduced revenue, and harm our business and reputation.

Our lines of business and services, but especially our development of cannabinoids-based combination therapies for products, including HyalolexTM, Drops of ClarityTM and other products in that brand, chronic pain, post-traumatic stress disorder, and eating disorders, and our long-term use and/or development of blockchain technologies to solve critical issues facing the cannabinoids industry, rely on services hosted and controlled directly by our suppliers and distributors and their third-party service providers. We do not have redundancy for all our systems; many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. These facts could cause reputational harm, loss of customers, or loss of future business, thereby reducing our revenue.

Our suppliers and distributors and their third-party service providers hold customer data, some of which is hosted in third-party facilities. A security incident or cybersecurity attack at those facilities or ours may compromise the confidentiality, integrity, or availability of customer data. We have a cybersecurity policy in place, however, unauthorized access to customer data stored on our computers or networks may be obtained through break-ins, breaches of our secure network by an unauthorized party, employee theft or misuse, or other misconduct. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers. Accounts created with weak passwords could allow cyber-attackers to gain access to customer data. If there were an inadvertent disclosure of customer information, or if a third party were to gain unauthorized access to the information we possess on behalf of our customers, our operations could be disrupted, our reputation could be damaged, and we could be subject to claims or other liabilities. In addition, such perceived or actual unauthorized disclosure of the information we collect, or breach of our security could damage our reputation, result in the loss of customers, and harm our business.

Hardware or software failures or errors in our systems or those of our suppliers and distributors or their third-party service providers, could result in data loss or corruption, cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant, or cause us to fail to meet committed service levels. Furthermore, our ability to collect and report data may be delayed or interrupted by several factors, including access to the Internet, the failure of our network or software systems or security breaches. In addition, computer viruses or other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware could expose us to litigation. We may also find, on occasion, that we cannot deliver data and reports in near real time because of several factors, including failures of our network or software. If we supply inaccurate information or experience interruptions in our ability to capture, store and supply information in near real time or at all, our reputation could be harmed, we could lose customers, or we could be found liable for damages or incur other losses.

All our data is stored on the cloud on multiple servers that helps us mitigate the overall risk of losing data. We have a cybersecurity policy in place and are in the process of implementing tighter cybersecurity measures to safeguard against hackers. Complying with these security measures and compliances would incur further costs.

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The states in which we and our distributers and suppliers and their service providers operate require that we maintain certain information about our customers and transactions. If we fail to maintain such information, we could be in violation of state laws. Laws and regulations relating to the handling of personal data may impede the adoption of our services or result in increased costs, legal claims, fines against us, or reputational damage.

We rely on third parties to process, manufacture and to compound some of our products, we have no control over these third parties and we may not be able to obtain quality products on a timely basis or in sufficient quantity.

Some of our products are manufactured or compounded by unaffiliated third parties. We do not have any long-term contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and import capacity. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any manufacturer or compounder would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new sources, we may encounter delays in production and added costs as a result of the time it takes to engage third parties. Any delays, interruption or increased costs in the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.

We face risks associated with the manufacture of our products which could adversely affect our business and financial results.

We are subject to the risks inherent in manufacturing our products, including industrial accidents, environmental events, strikes and other labor disputes, disruptions in supply chain or information systems, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as natural disasters and other external factors over which we have no control. If such an event were to occur, it could have an adverse effect on our business and financial results.

The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation risk.

The Company records a write-down for product and component inventories that become obsolete or exceed anticipated demand, or for which cost exceeds net realizable value. The Company may also accrue necessary cancellation fee reserves for orders of excess products and components. The Company reviews long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be recoverable. If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value. Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, no assurance can be given that the Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.

The Company orders components for its products and builds inventory in advance of product announcements and shipments. Manufacturing purchase obligations cover the Company’s forecasted component and manufacturing requirements, typically for periods up to 150 days. Because the Company’s markets are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments.

Our accounting personnel may make unintentional errors.

Given our small size and foreign operations, a small unrectified mistake in the preparation of financial statements and the maintenance of our books and records in accordance with U.S. GAAP and SEC rules and regulations may constitute a material weakness in our internal controls over financial reporting. For more information, please see Item 9A, “Controls and Procedures.”

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Risks Related to ownership of our common stock

Future sales of common stock by us could cause our stock price to decline and dilute your ownership in our Company.

Our certificate of incorporation authorizes the issuance of up to 150,000,000 shares of Common Stock, par value $0.0001 per share and 1,000,000 shares of preferred stock, par value $0.0001 per share. The Company has 11,672,178 outstanding public warrants (IGC: IW) to purchase 1,167,217 shares of common stock by surrendering 10 warrants and a payment of $5.00 in exchange for each share of common stock. We have 91,472 units outstanding that can be separated into common stock and warrants. Ten units may be separated into one share of common stock and 20 warrants (IGC: IW). The unit holders are requested to contact the Company or our transfer agent, Continental Stock Transfer & Trust, to separate their units into common stock and warrants. The warrants expire on March 8, 2021. We also have outstanding options to purchase 160,000 shares, expiring between calendar years 2022 and 2024 with a weighted average exercise price of $0.4 per share. We are not restricted from issuing additional shares of our common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock by us in the market or the perception that such sales could occur. If we raise funds by issuing additional securities in the future or the outstanding warrants or stock options to purchase our common stock are exercised, the newly issued shares will also dilute your percentage ownership in our Company.

The market price for our common stock may be volatile.

The trading volume in our common stock may fluctuate and cause significant price variations to occur. Fluctuations in our stock price may not be correlated in a predictable way to our performance or operating results. Our stock price may fluctuate as a result of a number of events and factors such as those described elsewhere in this “Risk Factors” section, events described in this report, and other factors that are beyond our control. In addition, the stock market, in general, has historically experienced significant price and volume fluctuations. Our common stock has also been volatile, with our 52-week closing price range being at a low of $0.3 and a high of $2.07 per share. These fluctuations are often unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the market price of our common stock. In addition, it is possible, given our current trading price, that we may fail to comply with the minimum trading price required to trade our shares on the NYSE American, resulting in delisting of our shares.

The stock market in general has recently experienced relatively large price and volume fluctuations, particularly in response to the COVID-19 outbreak. In particular, the market prices of securities of smaller biotechnology and medical device companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. In addition, price volatility may increase if the trading volume of our common stock remains limited or declines.

Our publicly-filed reports are subject to review by the SEC, and any significant changes or amendments required as a result of any such review may result in material liability to us and may have a material adverse impact on the trading price of our common stock.

The reports of publicly-traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a company’s reports at least once every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could be required to modify, amend, or reformulate information contained in prior filings as a result of an SEC review, as well as state in filings that we have inadequate control or expertise over financial reporting. Any modification, amendment, or reformulation of information contained in such reports could be significant and result in material liability to us and have a material and adverse impact on the trading price of our common stock.

We do not anticipate declaring any cash dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and earnings for use in the operation and expansion of our business.

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Maryland anti-takeover provisions and certain anti-takeover effects of our Charter and Bylaws may inhibit a takeover at a premium price that may be beneficial to our stockholders.

Maryland anti-takeover provisions and certain anti-takeover effects of our charter and bylaws may be utilized, under some circumstances, as a method of discouraging, delaying or preventing a change of control of our Company at a premium price that would be beneficial to our stockholders. For more detailed information about these provisions, please see “Anti-takeover Law, Limitations of Liability and Indemnification” as follows:

Business Combinations

Under the Maryland General Corporation Law, some business combinations, including a merger, consolidation, share exchange or, in some circumstances, an asset transfer or issuance or reclassification of equity securities, are prohibited for a period of time and require an extraordinary vote. These transactions include those between a Maryland corporation and the following persons (a “Specified Person”):

An interested stockholder, which is defined as any person (other than a subsidiary) who beneficially owns 10% or more of the corporation’s voting stock, or who is an affiliate or an associate of the corporation who, at any time within a two-year period prior to the transaction, was the beneficial owner of 10% or more of the voting power of the corporation’s voting stock; or an affiliate of an interested stockholder.

A person is not an interested stockholder if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. The board of directors of a Maryland corporation also may exempt a person from these business combination restrictions prior to the time the person becomes a Specified Person and may provide that its exemption be subject to compliance with any terms and conditions determined by the board of directors. Transactions between a corporation and a Specified Person are prohibited for five years after the most recent date on which such stockholder becomes a Specified Person. After five years, any business combination must be recommended by the board of directors of the corporation and approved by at least 80% of the votes entitled to be cast by holders of voting stock of the corporation and two-thirds of the votes entitled to be cast by holders of shares other than voting stock held by the Specified Person with whom the business combination is to be effected, unless the corporation’s stockholders receive a minimum price as defined by Maryland law and other conditions under Maryland law are satisfied.

A Maryland corporation may elect not to be governed by these provisions by having its board of directors exempt various Specified Persons, by including a provision in its charter expressly electing not to be governed by the applicable provision of Maryland law or by amending its existing charter with the approval of at least 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and two-thirds of the votes entitled to be cast by holders of shares other than those held by any Specified Person. Our Charter does not include any provision opting out of these business combination provisions.

Control Share Acquisitions

The Maryland General Corporation Law also prevents, subject to exceptions, an acquirer who acquires sufficient shares to exercise specified percentages of voting power of a corporation from having any voting rights except to the extent approved by two-thirds of the votes entitled to be cast on the matter not including shares of stock owned by the acquiring person, any directors who are employees of the corporation and any officers of the corporation. These provisions are referred to as the control share acquisition statute.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted prior to the acquisition by a provision contained in the corporation’s charter or bylaws. Our Bylaws include a provision exempting us from the restrictions of the control share acquisition statute, but this provision could be amended or rescinded either before or after a person acquired control shares. As a result, the control share acquisition statute could discourage offers to acquire our common stock and could increase the difficulty of completing an offer.

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Board of Directors

The Maryland General Corporation Law provides that a Maryland corporation which is subject to the Exchange Act and has at least three outside directors (who are not affiliated with an acquirer of the company) under certain circumstances may elect by resolution of the board of directors or by amendment of its charter or bylaws to be subject to statutory corporate governance provisions that may be inconsistent with the corporation’s charter and bylaws. Under these provisions, a board of directors may divide itself into three separate classes without the vote of stockholders such that only one-third of the directors are elected each year. A board of directors classified in this manner cannot be altered by amendment to the charter of the corporation. Further, the board of directors may, by electing to be covered by the applicable statutory provisions and notwithstanding the corporation’s charter or bylaws:

• provide that a special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting,

• reserve for itself the right to fix the number of directors,

• provide that a director may be removed only by the vote of at least two-thirds of the votes entitled to be cast generally in the election of directors, and

• retain for itself sole authority to fill vacancies created by an increase in the size of the board or the death, removal, or resignation of a director.

In addition, a director elected to fill a vacancy under these provisions serves for the balance of the unexpired term instead of until the next annual meeting of stockholders. A board of directors may implement all or any of these provisions without amending the charter or bylaws and without stockholder approval. Although a corporation may be prohibited by its charter or by resolution of its board of directors from electing any of the provisions of the statute, we have not adopted such a prohibition. We have adopted a staggered board of directors with three separate classes in our charter and given the board the right to fix the number of directors, but we have not prohibited the amendment of these provisions. The adoption of the staggered board may discourage offers to acquire our common stock and may increase the difficulty of completing an offer to acquire our stock. If our Board chose to implement the statutory provisions, it could further discourage offers to acquire our common stock and could further increase the difficulty of completing an offer to acquire our common stock.

Effect of Certain Provisions of our Charter and Bylaws

In addition to the Charter and Bylaws provisions discussed above, certain other provisions of our Bylaws may have the effect of impeding the acquisition of control of our Company by means of a tender offer, proxy fight, open market purchases or otherwise in a transaction not approved by our Board of Directors. These provisions of Bylaws are intended to reduce our vulnerability to an unsolicited proposal for the restructuring or sale of all or substantially all of our assets or an unsolicited takeover attempt, which our Board believes is otherwise unfair to our stockholders. These provisions, however, also could have the effect of delaying, deterring, or preventing a change in control of our Company.

Our Bylaws provide that with respect to annual meetings of stockholders, (i) nominations of individuals for election to our Board of Directors and (ii) the proposal of business to be considered by stockholders may be made only pursuant to our notice of the meeting, by or at the direction of our Board of Directors, or by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our Bylaws.

Special meetings of stockholders may be called only by the chief executive officer, the board of directors or the secretary of our Company (upon the written request of the holders of a majority of the shares entitled to vote). At a special meeting of stockholders, the only business that may be conducted is the business specified in our notice of meeting. With respect to nominations of persons for election to our Board of Directors, nominations may be made at a special meeting of stockholders only pursuant to our notice of meeting, by or at the direction of our Board of Directors, or if our Board of Directors has determined that directors will be elected at the special meeting, by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our Bylaws.

These procedures may limit the ability of stockholders to bring business before a stockholders meeting, including the nomination of directors and the consideration of any transaction that could result in a change in control and that may result in a premium to our stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Our corporate headquarters is located in Potomac, Maryland. We own a property of approximately 40,000 square feet that is used for general management and R&D operations. In addition, we are leasing, through December 2025, approximately16,000 square feet in Vancouver Washington for manufacturing, sales, and distribution of our Life Sciences segment products and services. We subleased a 100-acre cultivation land in Arizona for harvesting hemp. In Puerto Rico we own a property of approximately 1,355 square feet that we use primarily for medical trials and related operations. In addition, we own and lease facilities in U.S., Colombia, Hong Kong, and India that is used for sales, accounting, management, and R&D. We own approximately 5 acres of land in India. The Company believes its existing facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conducting of its business.

ITEM 3. LEGAL PROCEEDINGS

The Company may be involved in legal proceedings, claims, and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. We believe there are no such matters that have a material financial impact on the consolidated financial statements as of March 31, 2020, except as disclosed below.

During the quarter ended September 30, 2019, the Company reached a preliminary agreement to resolve all derivative suits then- and currently-pending against the Company and various directors and officers. In January 2020, the Company and the named defendant directors and officers executed a formal settlement agreement with the plaintiffs in all pending derivative lawsuits on specific final terms of settlement. Pursuant to the settlement agreement, which was filed with the Court as an exhibit to an Amended Consent Motion for Preliminary Approval of Derivative Settlement on April 30, 2020, the Company will adopt certain corporate governance modifications, and the derivative plaintiffs will receive $200,000.00 from the Company’s insurer to cover their attorneys’ fees and a nominal service award. The Company has created a provision for $200,000 as of March 31, 2020. Shareholders were given notice of the proposed settlement through the Company’s filing of an SEC Form 8-K report, the issuance of a press release, publication in Investor’s Business Daily, and posting in the “Investors” section of the Company’s website, all of which were deemed by the court to constitute sufficient notice to shareholders of the settlement. Shareholders were given the opportunity to assert objections to the final settlement, and no objections were received by the parties to the derivative suit or filed with the court. On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved. On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits.

As of March 31, 2020, the Company was a party to three shareholder lawsuits, as described below.

Shareholder Class Action Litigation

Tchatchou v. India Globalization Capital, Inc., et al., Civil Action No. 8:18-cv-03396 (U.S. District Court for the District of Maryland). On November 2, 2018, IGC shareholder Alde-Binet Tchatchou instituted a shareholder class action complaint on behalf of himself and all others similarly situated in the United States District Court for the District of Maryland. IGC, Ram Mukunda, Richard Prins, and Sudhakar Shenoy were named as defendants. On May 13, 2019, the plaintiff in the Tchatchou litigation filed an amended complaint against IGC, Mukunda, and Claudia Grimaldi, (collectively, the “Class Action Defendants”), thereby removing Prins and Shenoy as defendants. The plaintiff in Tchatchou alleges that the Class Action Defendants violated Section 10(b) of the Exchange Act, SEC Rule 10b-5, and Section 20(a) of the Exchange Act and made false and misleading statements to the public by issuing a September 25, 2018, press release entitled “IGC to Enter the Hemp/CBD-Infused Energy Drink Space” and related disclosures, in which IGC announced it had “executed a distribution and partnership agreement” for the sugar-free energy drink named Nitro G, as well as through related public statements. The plaintiff in Tchatchou has not publicly disclosed the amount of damages they seek. On February 28, 2019, all pending shareholder class actions were consolidated, and the Tchatchou litigation was designated as the lead case. For the current state of affairs regarding the Tchatchou Class Action Litigation, please refer to Note 21 - Subsequent Events.

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On October 11, 2019, the Class Action Defendants filed a motion to dismiss the consolidated shareholder class action litigation on a number of grounds, including that the Class Action Defendants did not make any false or misleading statements or any materially false or misleading statements to the public; the Class Action Defendants did not act with any intent to deceive the public, nor did they recklessly do so; and that the Class Action Defendants’ alleged conduct did not cause any loss allegedly suffered by the class action plaintiffs. The motion to dismiss remains pending before the United States District Court for the District of Maryland, and the Company anticipates that a decision is likely to be issued during calendar 2020, although it can provide no assurances of the same.

Harris-Carr v. India Globalization Capital, Inc., et al., Civil Action No. 8:18-cv-03408 (U.S. District Court for the District of Maryland). On November 2, 2018, IGC shareholder Gabe Harris-Carr instituted a shareholder class action complaint on behalf of himself and all others similarly situated in the United States District Court for the District of Maryland. IGC, Ram Mukunda, and Claudia Grimaldi were named as defendants. On February 28, 2019, all pending shareholder class actions, including the Harris-Carr litigation, were consolidated, and the Tchatchou litigation, described above, was designated as the lead case. On May 13, 2019, the plaintiff in the Tchatchou litigation filed an amended complaint, which becomes the operative complaint for the consolidated matter and supersedes the Harris-Carr complaint.

Shareholder Derivative Action Litigation

Erny v. Mukunda, et al., Civil Action No. 1:18-cv-03698 (U.S. District Court for the District of Maryland). On November 30, 2018, IGC shareholder Gene Erny instituted a shareholder derivative complaint on behalf of IGC in the United States District Court for the District of Maryland. Ram Mukunda, Claudia Grimaldi, Rohit Goel, Richard Prins, and Sudhakar Shenoy were named as defendants, and IGC was named as a nominal defendant. The Erny litigation represents a claim made by a shareholder on behalf of the Company (as opposed to against the Company). The complaint in the Erny litigation alleges that the Company should have filed suit against the individual defendants – Mukunda, Grimaldi, Goel, Prins, and Shenoy (collectively referred to as the “Individual Defendants”) – for securities fraud and breach of fiduciary duty. The plaintiff in Erny alleges that, through the individual defendants, the Company made false and misleading statements, and the individual defendants breached their fiduciary duties, as follows: “Under the direction and watch of the Individual Defendants, the [Company’s] 2018 Proxy Statement failed to disclose that: (1) the Company had substantially discontinued the business it was conducting at the time that it was initially listed on the New York Stock Exchange, and was instead engaged in ventures or promotions that had not been developed to a commercial stage or the success of which is problematical; (2) the Company adapted its business model frequently and radically in an attempt to lure investors seeking to capitalize on market fads, such as blockchain and cannabinoids; (3) the benefits of the Company’s relationships with manufacturers, partners, and distributors were overstated in order to create a misleadingly positive impression of IGC’s potential commercial success; (4) DaMa Pharmaceutical does not have a long history of developing premier pharmaceutical products; (5) as a result of the foregoing, IGC’s stock would be suspended from the New York Stock Exchange and potentially delisted; (6) the Company failed to maintain internal controls; and (7) as a result of the foregoing, the Company’s public statements were materially false and misleading at all relevant times.” The plaintiff in the Erny litigation further alleges that the “Individual Defendants also caused the [Company’s] 2018 Proxy Statement to be false and misleading with regard to executive compensation in that they purported to employ ‘pay-for-performance’ elements while failing to disclose that the Company’s share price was being artificially inflated by the false and misleading statements made by the Individual Defendants as alleged herein, and therefore any compensation based on the Company’s financial performance was artificially inflated. The false and misleading elements of the 2018 Proxy Statement led to the reelection of Defendant Prins, which allowed him to continue breaching his fiduciary duties to IGC.” Because the claims made in Erny are asserted against the individual defendants, as opposed to the Company, the Company is merely a nominal defendant.

On January 28, 2019, the court issued a consent order staying proceedings in the Erny litigation pending resolution of a motion to dismiss (which was then yet to be filed) by the Class Action Defendants in the Tchatchou matter, described above. On May 9, 2019, Erny and Hamdan, described below, were consolidated, and the Erny litigation was designated as the lead derivative case.

On July 31, 2019, the Company and the Individual Defendants reached a preliminary agreement with the plaintiffs in the derivative suits identified herein to resolve all derivative suits, including the Erny litigation and the Hamdan and Patel matters, described below. In January 2020, the Company and the named defendant directors and officers reached agreement with the plaintiffs in all pending derivative lawsuits on specific final terms of settlement, and all parties executed a mutually acceptable settlement agreement. Shareholders were given notice of the proposed settlement through the Company’s filing of an SEC Form 8-K report, the issuance of a press release, publication in Investor’s Business Daily, and posting in the “Investors” section of the Company’s website, all of which were deemed by the court to constitute sufficient notice to shareholders of the settlement. Shareholders were given the opportunity to assert objections to the final settlement, and no objections were received by the parties to the derivative suit or filed with the court. On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved. On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits.

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Hamdan v. Mukunda, et al., Civil Action No. 8:19-cv-00493 (U.S. District Court for the District of Maryland). On February 20, 2019, IGC shareholder Waseem Hamdan instituted a shareholder derivative complaint on behalf of IGC in the United States District Court for the District of Maryland. Ram Mukunda, Claudia Grimaldi, Rohit Goel, Richard Prins, and Sudhakar Shenoy were named as defendants, and IGC was named as a nominal defendant. The allegations made by the plaintiff in the Hamdan litigation are substantially similar to the allegations made in Erny, and the claims against the individual director defendants are based on the same alleged transactions and/or occurrences as are the claims made in the Erny litigation. Because the claims made in Hamdan are asserted against the individual defendants, as opposed to the Company, the Company is merely a nominal defendant. On May 9, 2019, Erny and Hamdan were consolidated, with the Erny litigation, described above, designated as the lead case. As a result of the consolidation, the Hamdan litigation became subject to the January 28, 2019, order entered in the Erny litigation staying proceedings pending resolution of an anticipated motion to dismiss to be filed by the Class Action Defendants in the Tchatchou matter, described above.

The Hamdan litigation is subject to the same negotiated settlement described in Erny, above, and is resolved effective July 6, 2020.

Patel v. Mukunda, et al., Civil Action No. 8:19-cv-01673 (U.S. District Court for the District of Maryland). On June 6, 2019, IGC shareholder Dimple Patel instituted a shareholder derivative complaint on behalf of IGC in the United States District Court for the District of Maryland. Ram Mukunda, Claudia Grimaldi, Rohit Goel, Richard Prins, Shajy Mathilakathu, and Sudhakar Shenoy (collectively, with reference to the Patel litigation, “Individual Defendants”) were named as defendants, and IGC was named as a nominal defendant. The Patel litigation represents a claim made by a shareholder on behalf of the Company (as opposed to against the Company). The complaint in the Patel litigation alleges that the Company should have filed suit against the Individual Defendants for breach of fiduciary duty. Specifically, the complaint alleges that the Individual Defendants “violated their duty of good faith by knowingly causing and/or recklessly allowing the Company to make false and misleading statements and/or fail[ed] to disclose that: (i) [IGC] substantially discontinued the business that it conducted at the time it began trading on the NYSE; (ii) the Company had become engaged in ventures or promotions which have not developed to a commercial stage; (iii) cannabis-related products, including CBD-based beverages, are illegal in Malaysia; (iv) neither IGC nor Treasure Network was a licensed manufacturer of cannabis-based products in Malaysia; (v) CBD-infused Nitro G was not an approved and registered product under Malaysian law; (vi) Treasure Network, founded in 2017, was not “experienced”; (vii) Treasure Network was a distributor, not a manufacturer; (viii) at all relevant times, the Individual Defendants had the ability to exercise substantial control over Treasure Network; (ix) consequently, the Company was not an operating company for the purposes of continued trading and listing on the NYSE American; and (x) as a result, India Globalization’s public statements were materially false and misleading at all relevant times.” Because the claims made in the Patel litigation are asserted against the individual Defendants, as opposed to the Company, the Company is merely a nominal defendant. The Patel litigation has not been consolidated with Erny and Hamdan to date.

The Patel litigation is subject to the same negotiated settlement described in Erny, above, and is resolved effective July 6, 2020. On July 8, 2020, the Court dismissed the Patel litigation with prejudice pursuant to the approved settlement.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the NYSE American under the symbol “IGC” with CUSIP number 45408X308. The common stock of the Company is also quoted on the Frankfurt, Berlin, and Stuttgart (XETRA2) stock exchanges in Germany (ticker symbol: IGS1). Our warrants (ticker symbol: IGCIW, CUSIP number 45408X118, expiring on March 8, 2021) are quoted on the OTC Markets. We have 91,472 units outstanding that can be separated into common stock and warrants as on March 31, 2020. The Units are not listed on an exchange. Ten units may be separated into one share of common stock and 20 warrants (IGC: IW). The unit holders are requested to contact the Company or our transfer agent, Continental Stock Transfer & Trust, to separate their units into common stock and warrants.

The Company has 11,672,178 outstanding publicly traded warrants to purchase 1,167,217 shares of its common stock. The trading history for the warrants is not available. No warrants were issued in Fiscal 2020 or Fiscal 2019. As set out on Form 8-K filed on February 19, 2019, the Company unilaterally extended the expiration of the warrants. The extension commencing at 5:00 p.m. New York time on March 6, 2019, and terminating at 5:00 p.m., New York time, on March 8, 2021. The terms of the warrants will permit the Company to exchange ten warrants and $5 for each share of common stock (CUSIP 45408X 308), in accordance with Section 3.1 of the Warrant Agreement.

Further information on the securities can be referred to in Note 13 of Part II, Item 8.

Securities authorized for issuance under equity compensation plans

The following table shows (in thousands), as of March 31, 2020, information regarding outstanding awards available under our compensation plans (including individual compensation arrangements) under which our equity securities may be delivered.

Equity compensation plans approved by security holders:

(1) Consists of our 2018 Omnibus Incentive Plans, as approved by our stockholders on November 8, 2017. See Note 15, “Stock-Based Compensation” of the Notes to the Consolidated Financial Statements included in this report.

(2) Consists of 2 million shares as a special grant of common stock, as approved by our stockholders on January 7, 2020.

Holders

As of June 24, 2020, we had approximately 45 registered shareholders of record of our common stock, and approximately 4 and 2 registered holders of record of our warrants and units respectively. The number of record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers. Continental Stock Transfer & Trust Company is the transfer agent and registrar for our common stock and warrants.

Dividend policy

We have not paid any dividends on our common stock to date and do not intend to pay dividends. It is the present intention of our Board of Directors to retain all earnings, if any, for use in our business operations. Accordingly, our Board does not anticipate declaring any dividends in the foreseeable future.

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Unregistered sales of equity securities

None.

Purchases of equity securities by the issuer and affiliated purchasers

None

ITEM 6. SELECTED FINANCIAL DATA

Item 6 does not apply to us because we are a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis apply to Fiscal 2020 that ends on March 31, 2020, and Fiscal 2019 that ends on March 31, 2019. These statements should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this Annual Report on Form 10-K.

In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties that may cause our actual results to differ materially from plans and results discussed in forward-looking statements. We encourage you to review the risks and uncertainties discussed in the sections entitled Item 1A. “Risk Factors” and “Forward-Looking Statements” included at the beginning of this Annual Report on Form 10-K.

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 Fiscal 2020 and 2019, is from our Infrastructure segment. In Fiscal 2020, we significantly reduced the buying and selling of construction materials in Hong Kong because of what we believe to be a slow-down in the Hong Kong economy due, in part, to widespread protests, along with the spread of COVID-19. The Company’s Infrastructure segment, involves:

Our second segment, Life Sciences, includes a biotech component, and a vertically integrated hemp-cannabinoid based healthcare and wellness business, which involves:

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(iv) hemp growing and processing facilities,

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

Since the legal industrial hemp industry remains relatively new, during Fiscal 2020, the Company focused on setting up facilities for long-term expansion of its Life Sciences segment. The Company filed an Investigative New Drug Application (INDA) with the FDA for a double-blind, placebo-controlled, 100-person trial, for its proprietary patent pending formulation based on IGC-AD1 and established an approximately $0.5 million facility in San Juan, Puerto Rico to conduct the trial. The Company also established an approximately $2.4 million facility it intends to qualify as a Good Manufacturing Practice (GMP)-certified processing facility in the State of Washington for: a) production of products such as lotions, creams, and oils, among others, to support our products and to support white labeling; b) extraction of hemp into crude oil; and c) distillation of crude oil into hemp extracts. The crop that was grown in Arizona, passed inspection by the Arizona Department of Agriculture (AZDA) with the harvest certified as legal under the United States Department of Agriculture (USDA) rules.

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 Fiscal 2020 can be found in Item 1, “Fiscal 2020 Highlights”.

Results of Operations

Fiscal 2020 compared to Fiscal 2019

The following table presents an overview of our results of operations for Fiscal 2020 and Fiscal 2019:

Statement of Operations (in thousands, audited)

Fiscal

2020 ($) 2019 ($) Change ($) Percent Change

Tax expense - (2 ) 2 100 %

Revenue – Revenue was primarily derived from our Infrastructure segment in both Fiscal 2020 and 2019. Revenue was approximately $4,072 thousand and $5,116 thousand, for Fiscal 2020 and 2019, respectively, representing a decline of $1,044 thousand or 20%. This decrease in revenue is attributed to a decrease in the infrastructure business, especially in the last quarter of Fiscal 2020 due to the outbreak of COVID-19 and the slowing down of the Hong Kong economy as a result of widespread protests. We have limited visibility on when the infrastructure business will normalize and expect a significant decrease in revenue from the infrastructure business until operations resume following the COVID-19 pandemic.

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Cost of revenue – Cost of revenue amounted to approximately $3,957 thousand for Fiscal 2020, compared to $4,984 thousand in Fiscal 2019, a decrease of approximately $1,027 thousand or 21%. This decrease in cost of revenue is attributable to a decrease in our Infrastructure businesses in the last quarter of Fiscal 2020 due to the outbreak of COVID-19 and the slowing down on the Hong Kong economy as a result of the widespread protests.

General and administrative expenses – General and administrative expenses consist primarily of employee-related expenses, 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. General and administrative expenses increased by approximately $2,449 thousand or 70% to $5,968 thousand for Fiscal 2020, from $3,519 thousand for Fiscal 2019. The increase of $2,449 thousand is attributed largely to legal and professional fees that amounted to approximately $0.8 million, and approximately $0.9 million compensation expenses attributed to increased head count and associated employee-related expenses. In addition, we had approximately $754 thousand of non-cash expenses and $150 thousand provision for advance in Fiscal 2020.

Research and Development expenses – R&D expenses were attributed to our Life Sciences segment. The R&D expenses decreased approximately $245 thousand or 20%, to $1,011 thousand for Fiscal 2020, compared to $1,256 thousand for Fiscal 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 running FDA trials, product research, designing, formulating and market analysis. All research and development costs are expensed in the quarter in which they are incurred. The decrease is attributed to a slowdown of R&D activity in the last quarter of Fiscal 2020 due to COVID-19.

Impairment loss – Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued Apogee 1.2 million shares of IGC’s common stock valued at $888 thousand for the purchase of a 24.9% ownership interest in Midtown Partners & Co., LLC (“MTP”). During Fiscal 2018, after considering several factors, the Company concluded that it no longer had significant influence over MTP and hence maintained the same value of investment of approximately $773 thousand. During Fiscal 2020, the Company decided to impair this investment. The Company still owns 24.9% ownership in MTP as on March 31, 2020.

Other Income, net – Other net income decreased by approximately $217 thousand or 40% during Fiscal 2020. The total other income for Fiscal 2020 and 2019 is approximately $331 thousand and $548 thousand, respectively. The major decrease is due to a one-off $300 thousand gain on the settlement of a note payable in Fiscal 2019. In Fiscal 2020, such amount includes interest income, rental income and approximately $84 thousand dividend income from marketable securities, net.

Liquidity and capital resources

Our sources of liquidity are cash and cash equivalents, cash flows from operations, short-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 9, “Leases” in Item 8 of this report for further information on Company commitments and contractual obligations.

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. Management is actively monitoring the impact of COVID-19 on its financial condition, liquidity, operations, suppliers, industry, and workforce. Please refer to Item 1A. “Risk Factors” for further information on the risks related to the Company.

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

(in thousands, audited)

As of March 31, 2020 ($) As of March 31, 2019 ($) Change Percent Change

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Cash and cash equivalents

Cash and cash equivalents decreased by approximately $18,352 thousand to $7,258 thousand in Fiscal 2020, from $25,610 thousand in Fiscal 2019, a decrease of approximately 72%.

The major decrease was due to investments of approximately $5,081 thousand in marketable securities, $4,389 thousand in purchase of property, plant and equipment, and $3,998 thousand in inventory.

Summary of Cash flows

(in thousands, audited)

Fiscal

Cash provided by/ (used in) financing activities (59 ) 27,598 (27,657 ) (100 )%

Operating Activities

Net cash used for operating activities for Fiscal 2020 was $8.7 million. This consists of a net loss of $7.3 million and non-cash items totaling $1.7 million, which in turn consist of an amortization/depreciation charge of $144 thousand, impairment loss of $782 thousand, and stock-based expenses totaling $770 thousand. Changes in operating assets and liabilities had a negative impact of $3,058 thousand on cash of which $3,998 was due to increase in inventory.

Net cash used for operating activities for Fiscal 2019 was $3.3 million. This consists of a net loss of $4.1 million and non-cash items totaling $387 thousand, which in turn consist of an amortization/depreciation charge of $59 thousand, one-time settlement gain of $300 thousand, and stock-based expenses totaling $610 thousand. Changes in operating assets and liabilities had a positive impact of $380 thousand on cash.

Investing Activities

Net cash used in investing activities during Fiscal 2020 was $9.5 million which is comprised of approximately $77 thousand for the acquisition and filing expenses related to patents and trademarks, purchase of property, plant and equipment of $4,389 thousand and investments of approximately $5,081 thousand in marketable securities.

Net cash used in investing activities during Fiscal 2019 was $260 thousand which is comprised of approximately $45 thousand for the acquisition of the patent from the University of South Florida, purchase of property, plant and equipment of $15 thousand and a loan for the procurement of equipment in the amount of $200 thousand at an interest rate of 3 percent per annum.

Financing Activities

Net cash used in financing activities was $59 thousand during Fiscal 2020, consisting of $18 thousand from the exercise of share options, and the $77 thousand share related expenses.

Net cash provided by financing activities was $27.6 million during Fiscal 2019, consisting of $29.5 million received net from the sale of common shares through the Company’s public offering and private placement program, offsetting the payment of $1.9 million of payment of outstanding loans.

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Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and such differences may be material.

Management believes that the following accounting policies are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (ASC 606). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 prescribes a 5-step process to achieve its core principle. The Company recognizes revenue from trading, rental, or product sales as follows:

I. Identify the contract with the customer

II. Identify the contractual performance obligations

III. Determine the amount of consideration/price for the transaction

IV. Allocate the determined amount of consideration/price to the performance obligations

V. Recognize revenue when or as the performing party satisfies performance obligations.

The consideration/price for the transaction (performance obligation(s)) is determined as per the agreement or invoice (contract) for the services and products in the Infrastructure and Life Sciences segment.

Revenue in the Infrastructure Business is recognized for the renting business when the equipment is rented, and terms of the agreement has been fulfilled during the period. The revenue from the purchase and resale of physical infrastructure commodities is recognized once the bill of lading along with the invoice have been transferred to the customer. Revenue from the execution of infrastructure contracts is recognized on the basis of output method as and when part of the performance obligation has been completed and approval from the contracting agency has been obtained after survey of the performance completion as of that date. In the Life Sciences segment, the revenue from the wellness and lifestyle business is recognized once goods have been sold to the customer and the performance obligation has been completed. We license our products to processors. The royalty income is recognized once goods have been sold to its customer by the processor.

Net sales disaggregated by significant products and services for Fiscal 2020 and Fiscal 2019 were as follows (in thousands):

Year Ended March 31,

Infrastructure segment

Rental income (1) 7 30

Construction contracts (2) 101 -

Purchase and resale of physical commodities (3) 3,553 5,061

Life Sciences segment

Wellness and Lifestyle (4) 386 25

Tolling/White labeling service (5) 25 -

(1) Rental income consists of income from rental of heavy construction equipment.

(2) Construction income stems from the execution of contracts either directly or as a subcontractor. There was revenue of $101 thousand from the $1.1 million NHAI construction contract during Fiscal 2020. The Company expects to complete the project 12 and 15 months.

(3) Relates to the income from purchase and resale of physical commodities used in infrastructure, like steel, wooden doors, marble, and tiles.

(4) Relates to revenue from Life Sciences segment such as sale of hemp crude extract, hemp isolate, and hemp distillate and royalty income from sale of HyalolexTM, now named HyalolexTM Drops of ClarityTM.

(5) Relates to income from tolling services.

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Accounts receivable

We make estimates of the collectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness, and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. We had $133 thousand of accounts receivable, net of provision, for doubtful debt of $9 thousand as of March 31, 2020 as compared to $84 thousand, net of provision, for doubtful debt of $6 thousand as of March 31, 2019.

Short-term and long-term investments

Our policy for short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations, and delivers an appropriate yield in relationship to our investment guidelines and market conditions. Short-term and long-term investments consist of corporate, various government agency and municipal debt securities, as well as certificates of deposit that have maturity dates that are greater than 90 days. Certificates of deposit and commercial paper are carried at cost which approximates fair value. Available-for-sale securities: Investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except as indicated in the following sentence. All or a portion of the unrealized holding gain and loss of an available-for sale security that is designated as being hedged in a fair value hedge shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 35-4.

Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs. Where the Company’s ownership interest is in excess of 20% and the Company enjoys significant interest, the Company has accounted for the investment based on the equity method in accordance with ASC 323, “Investments – Equity method and Joint Ventures”. Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and its share of post-acquisition movements in accumulated other comprehensive income (loss) is recognized in other comprehensive income (loss). Where the Company does not have significant influence, the Company has accounted for the investment in accordance with ASC Topic 321 “Investments-Equity Securities”.

Impairment of investment

The Company regularly reviews its investment portfolio to determine if any security is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period any such determination is made. In making this determination, the Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis. The Company’s assessment of whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security, which would have an adverse impact on the Company’s financial condition and operating results. The estimated amount of liability is based on the information available with us with respect of bank debt and other borrowings. During Fiscal 2020 the Company impaired investments of $782 thousand.

Change in inventory valuation method

On April 1, 2019, the Company changed its methodology for the valuation of inventory from first-in-first-out to weighted average cost method, because the newly adopted accounting principle is preferable in the circumstances because the weighted average cost method of accounting for all inventories will improve financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. The change did not impact the financial statements for the prior years.

Inventory

Inventory is valued at the lower of cost or net realizable value, net realizable value defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

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Inventory consists of raw materials, finished goods and work-in-progress such as extracted crude oil, CBD isolate, growing crops, crude oil, herbal oils, among others. Work-in-progress also includes product manufacturing in process, costs of growing hemp, in accordance with applicable laws and regulations including but not limited to labor, utilities, fertilizers and irrigation. Inventory is primarily accounted for using the weighted average cost method. Primary costs include raw materials, packaging, direct labor, overhead, shipping and the depreciation of manufacturing equipment. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Harvested crops are measured at net realizable value, with changes recognized in profit or loss only when the harvested crop:

- has a reliable, readily determinable, and realizable market value;

- has relatively insignificant and predictable costs of disposal; and

- is available for immediate delivery.

The Company believes its harvested crops does not have a readily available market. Hence, the Company values its harvested crops at cost.

Stock-based compensation

Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award. The cost is recognized as expense ratably over the employee’s requisite service period or vesting period, which is generally up to one or three years, on a straight-line basis. We account for forfeitures when they occur. Equity awards issued to non-employees are recorded at their fair value on the grant date as they are immediately exercisable and not forfeitable at the date of grant. For further information refer to Note-15 “Stock-Based Compensation”.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax base of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and State income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal, state, and foreign deferred tax assets.

Foreign currency translation

IGC operates in India, U.S., Colombia and Hong Kong and a substantial portion of the Company’s financials are denominated in the Indian Rupee (INR), the Hong Kong Dollar (HKD) or the Colombian Peso (COP). As a result, changes in the relative values of the U.S. Dollar (USD), the INR, the HKD or the COP affect financial statements.

The accompanying financial statements are reported in USD. The INR, HKD and COP are the functional currencies for certain subsidiaries of the Company. The translation of the functional currencies into U.S. dollars is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues and expenses using average exchange rates prevailing during the reporting periods. Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive income/(loss), a separate component of shareholders’ equity. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of operations. The exchange rates used for translation purposes are as follows:

Period End Average Rate Period End Rate

Period (P&L rate) (Balance sheet rate)

HKD 7.82 Per USD HKD 7.75 Per USD

HKD 7.84 Per USD HKD 7.85 Per USD

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Cybersecurity

We have a cybersecurity policy in place and have implemented tighter cybersecurity measures to safeguard against hackers. Complying with these security measures and compliances is expected to incur further expenses. In Fiscal 2020 and Fiscal 2019, there were no known or detected breaches in cybersecurity.

Recently issued and adopted 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 which may be applicable to us are described in “Note 2. Significant Accounting Policies” in our Consolidated Financial Statements contained herein in Part II, Item 8.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 7A does not apply to us because we are a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firms 41

Consolidated Balance Sheets 42

Consolidated Statements of Operations and Comprehensive Loss 43

Consolidated Statements of Stockholders’ Equity 44

Consolidated Statements of Cash Flows 45

Notes to Consolidated Financial Statements 46

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of India Globalization Capital, Inc.

Opinions on the Consolidated Financial Statements

We have audited the accompanying Consolidated balance sheets of India Globalization Capital, Inc. and its subsidiaries (the "Company") as of March 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows, for each of the two years in the period ended March 31, 2020, and the related notes (collectively referred to as the "Consolidated financial statements"). In our opinion, the Consolidated financial statements present fairly, in all material respects, the Consolidated financial position of the Company as at March 31, 2020 and 2019, and the Consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These Consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's Consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the Consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the Consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Manohar Chowdhry & Associates

Chartered Accountants

We have served as the Company’s auditor since 2018.

Chennai, India

Date: July 9, 2020

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India Globalization Capital, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

ASSETS

Current assets:

Marketable Securities 5,081 -

Accounts receivable, net 133 84

Property, plant and equipment, net 9,780 5,886

Non-Marketable Securities 11 794

Operating lease asset 574 -

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accrued liabilities and others 1,134 509

Short-term loan 50 50

Other liabilities 16 15

Operating lease liability 485 -

Total non-current liabilities 501 15

Commitments and Contingencies – See Note 12

Stockholders' equity:

Accumulated other comprehensive loss (2,850 ) (2,419 )

Total liabilities and stockholders' equity 28,984 34,465

The accompanying notes should be read in connection with these consolidated financial statements.

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India Globalization Capital, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except loss per share)

Years Ended March 31,

General and administrative expenses (5,968 ) (3,519 )

Research and development expenses (1,011 ) (1,256 )

Impairment of investment (782 ) -

Loss before income taxes (7,315 ) (4,095 )

Income taxes expense - (2 )

Net loss attributable to common stockholders (7,315 ) (4,097 )

Foreign currency translation adjustments (431 ) (362 )

Loss per share attributable to common stockholders:

Basic & diluted $ (0.19 ) $ (0.13 )

The accompanying notes should be read in connection with these consolidated financial statements.

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India Globalization Capital, Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

Bricoleur Note penalty shares 30 18 - - 18

Common stock issued through public offering, net 5,899 28,508 - - 28,508

Share based compensation & other expenses 2,019 638 - - 638

Common stock issued through private placement, net 870 950 - - 950

Cancellation of IGC shares (80 ) (19 ) (129 ) (148 )

Loss on foreign currency translation - - - (362 ) (362 )

Share based compensation & other expenses 70 711 - - 711

Cancellation of IGC shares (252 ) - - - -

Loss on foreign currency translation - - - (431 ) (431 )

The accompanying notes should be read in connection with these consolidated financial statements.

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India Globalization Capital, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended March 31,

Cash flows from operating activities:

Adjustment to reconcile net loss to net cash:

Depreciation and amortization 144 59

Non-cash Interest - 18

Gain on settlement of note payable, net - (300 )

Impairment of investment 782 -

Share based compensation and other expenses 770 610

Changes in:

Accounts receivable (49 ) 474

Deposits and advances (259 ) (422 )

Claims and advances (307 ) (193 )

Accounts payable 442 (30 )

Accrued liabilities and others 1,113 312

Net cash used in operating activities (8,677 ) (3,330 )

Cash flow from investing activities:

Purchase of property, plant and equipment (4,389 ) (15 )

Investment in marketable securities (5,081 ) -

Loan repayment - (200 )

Acquisition and filing cost of patents and rights (77 ) (45 )

Net cash used by investing activities (9,547 ) (260 )

Cash flows from financing activities:

Issuance of equity stock through public offering (net of expenses) (59 ) 28,508

Issuance of equity stock through private placement (net of expenses) - 950

Proceed from option exercised - 18

Repayment of loan - (1,878 )

Net cash (used in)/provided by financing activities (59 ) 27,598

Effects of exchange rate changes on cash and cash equivalents (69 ) (56 )

Net increase in cash and cash equivalents (18,352 ) 23,952

Cash and cash equivalent at the beginning of the period 25,610 1,658

Cash and cash equivalent at the end of the period 7,258 25,610

Supplementary information:

Cash paid for interest 8 14

Non-cash items:

Common stock issued as penalty on notes payable - 18

Amortization of operating lease 7 -

The accompanying notes should be read in connection with these consolidated financial statements.

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India Globalization Capital, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For Fiscal Years Ended March 31, 2020 and 2019

Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to India Globalization Capital, Inc., together with our subsidiaries.

NOTE 1 – NATURE OF OPERATIONS AND MANAGEMENT’S PLANS

IGC has two segments: Infrastructure and Life Sciences. The Company’s Infrastructure Business, managed from India, involves: (a) the execution of construction contracts, (b) the rental of heavy construction equipment, and (c) the purchase and resale of physical commodities used in infrastructure. Our revenue in Fiscal 2020 was primarily derived from this business. Information about our infrastructure products and service offerings is available at www.igcinc.us.

The Company’s Life Sciences segment, managed from the United States, involves: a) the development of potential new drugs, subject to applicable regulatory approvals , b) several CBD-based products and brands, in various stages of development, for sale online and through stores, c) wholesale of hemp extracts including hemp crude extract and hemp isolate, among others, d) hemp growing and processing facilities, e) white labeling of hemp-based products and f) the offering of tolling services like extraction and distillation to hemp farmers.

In Fiscal 2020 we completed the development of several products building out our “house of brands” that we intend to market online and through retail stores. We are enthusiastic about what we believe to be the immense potential of these unique concepts to address various segments of the exponentially growing cannabinoid wellness and lifestyle product market. In Fiscal 2020, the Company generated $411 thousand revenue from its Life Sciences segment, however COVID-19 has forced the Company to delay the launch of some of the brands and products. In Fiscal 2020 the Company in response to the COVID-19 pandemic adapted its manufacturing facilities and operations to include alcohol-based hand sanitizers which go on sale in Fiscal 2021.

The Company’s principal office in the U.S. is in Potomac, Maryland, and the Company has a facility in Washington State and offices in Colombia, Hong Kong, and India.

As of March 31, 2020, the Company had the following direct operating subsidiaries: Techni Bharathi Private Limited (TBL), IGCare LLC, Holi Hemp LLC, IGC Pharma LLC, SAN Holdings LLC, Sunday Seltzer, LLC and Colombia-based beneficially-owned subsidiary Hamsa Biochem SAS (Hamsa). The Company’s fiscal year is the 52- or 53-week period that ends on March 31. The Company is a Maryland corporation established in 2005. The Company’s filings are available on www.sec.gov.

Business updates

• The Company is executing a road building contract in Kerala, India valued initially at approximately $0.6 million. Throughout Fiscal 2020, the Company worked on execution of the contract as well as sought approval for an expansion of the contract. The total value of the contract was increased to approximately $1.1 million. The Company estimates that it will take between 12 and 15 months to complete the work. Work on this project has been temporarily suspended due to COVID-19. We expect to re-start the project in second quarter of Fiscal 2021.

• The Company filed an INDA with the FDA for a double-blind, placebo-controlled, 100-person trial, for its proprietary patent pending formulation based on IGC-AD1 that uses ultra-low doses of tetrahydrocannabinol (“THC”) with other natural compounds intended to assist in the management of the care of patients suffering from Alzheimer’s disease.

• IGC filed a provisional patent, IGC 510, Compositions and Methods using CBD for treating stammering and symptoms of Tourette syndrome with the USPTO.

• The Company established an approximately $0.5 million facility in San Juan, Puerto Rico to house and conduct trials.

• As part of an out-reach and marketing campaign, we distributed samples of HyalolexTM Drops of ClarityTM, to dispensaries in Puerto Rico. The formulation is currently available in about 51 dispensaries in Puerto Rico. While this is a small market penetration, it allows us to collect data. Based on feedback received from customers and dispensaries in Puerto Rico, the Company has expanded the scope of the HyalolexTM formulation to potentially target other ailments, such as anxiety and sleep disorders, and has introduced a line of products including tinctures, among others. These will all be branded under HyalolexTM, with the original formulation branded as HyalolexTM Drops of ClarityTM. Post COVID-19 based stay-in-place restrictions we expect to manufacture and distribute these products initially in Puerto Rico and subsequently online and in other states.

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• In Fiscal 2020 the Company in response to the COVID-19 pandemic adapted its manufacturing facility to include FDA-registered alcohol-based hand sanitizers, which go on sale in Fiscal 2021.

• The Company advanced its branding and product strategy with the development of several brands aimed at various sectors of the market. The progress includes filing trademark applications and intent to use applications; securing URLs; creating product formulations, labelling, and packaging; obtaining product insurance; securing product development teams; conducting focus groups; performing quality and taste testing; and organizing and registering limited liability companies to mitigate risk, among others.

• The Company grows hemp in Arizona. The crop has passed inspection by the Arizona Department of Agriculture (“AZDA”) and has been certified as legal by AZDA. However, the harvest is delayed due to of the difficulty in finding workers because of the social distancing rules brought on by COVID-19.

• We prepared our facilities in Washington for the dual purpose of manufacturing finished products as well as for extraction and distillation. Most of our hemp processing and distillation equipment is sourced from China. Currently, due to COVID-19 the commissioning and certification of the equipment is delayed as the technicians are unable to travel from China to the U.S.

• On February 15, 2020, the Company signed a Share Subscription Agreement (“SSA”) with Evolve I, to acquire 20% of Evolve I. As of March 31, 2020, the Company has not completed its due diligence.

• In January 2020, the Company and the named defendant directors and officers executed a formal settlement agreement on specific final terms of settlement with the plaintiffs in all pending derivative lawsuits. On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved. On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits. Please See Item 3 Legal Proceedings.

• IGC recently received notification that on March 24, 2020, the USPTO issued a method and composition patent (#10,596,159 B2) for the Company’s cannabinoid formulation for the treatment of cachexia and eating disorders in humans and veterinary animals. IGC filed this application for its IGC-504 formulation (#15/751,901) on August 11, 2016.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

a) Principles of consolidation

The consolidated financial statements include the accounts of the Company and all its subsidiaries. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Transactions between the Company and its subsidiaries are eliminated in the consolidated financial statements.

b) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Management believes that the estimates and assumptions used in the preparation of the consolidated financial statements are prudent and reasonable. Significant estimates and assumptions are generally used for, but not limited to: allowance for uncollectible accounts receivable; future obligations under employee benefit plans; the useful lives of property, plant, equipment; intangible assets; valuations; impairment of goodwill and investments; recoverability of advances; the valuation of options granted and warrants issued; and income tax and deferred tax valuation allowances, if any. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Critical accounting estimates could change from period to period and could have a material impact on IGC’s results, operations, financial position, and cash flows. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

c) Revenue recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

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ASC 606 prescribes a 5-step process to achieve its core principle. The Company recognizes revenue from trading, rental, or product sales as follows:

I. Identify the contract with the customer.

II. Identify the contractual performance obligations.

III. Determine the amount of consideration/price for the transaction.

IV. Allocate the determined amount of consideration/price to the contractual obligations.

V. Recognize revenue when or as the performing party satisfies performance obligations.

d) Cost of Sales

Our cost of sales includes costs associated with in-house and outsourced distribution, labor expense, components, manufacturing overhead, and outbound freight for our products division. In our products division, cost of sales also includes the cost of refurbishing, if required, on products returned by customers that will be offered for resale and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value. These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value.

(e) Earnings/(Loss) per Share

The computation of basic loss per share for Fiscal 2020, excludes potentially dilutive securities of about 5 million shares which includes share options, unvested shares such as restricted shares and restricted share units, granted to employees and advisors, warrants, and shares from the conversion of outstanding units, shares to be issued to Evolve I pursuant to the Share Subscription Agreement, if any, because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for Fiscal 2020 and 2019, used for the computation of basic earnings per share (“EPS”) is 39,490,014 and 35,393,407, respectively. Due to the loss incurred during Fiscal 2020 and 2019, all the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.

f) Income taxes

The Company accounts for income taxes under the asset and liability method, in accordance with ASC 740, Income Taxes, which requires an entity to recognize deferred tax liabilities and assets. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. A valuation allowance is established and recorded when management determines that some or all of the deferred tax assets are not likely to be realized and therefore, it is necessary to reduce deferred tax assets to the amount expected to be realized.

In evaluating a tax position for recognition, management evaluates whether it is more-likely-than-not that a position will be sustained upon examination, including resolution of related appeals or litigation processes, based on technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold, the tax position is measured and recognized in the Company’s financial statements as the largest amount of tax benefit that, in management’s judgment, is greater than 50% likely of being realized upon settlement. As of March 31, 2020, and 2019, there was no significant liability for income tax associated with unrecognized tax benefits.

g) Accounts receivable

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h) Cash and cash equivalents

For financial statement purposes, the Company considers all highly liquid debt instruments with maturity of three months or less, to be cash equivalents. The Company maintains its cash in bank accounts in the U.S., India, Colombia, and Hong Kong, which at times may exceed applicable insurance limits. The cash and cash equivalents in the Company on March 31, 2020 and 2019, was approximately $7,258 thousand and $25,610 thousand, respectively.

i)Short-term and long-term investments

j) Property, plant and equipment (PP&E)

Property and equipment are recorded at cost net of accumulated depreciation and depreciated over their estimated useful lives using the straight-line method.

Upon retirement or disposition, cost and related accumulated depreciation of the property and equipment are de-recognized, and any gain or loss is reflected in the results of operation. Cost of additions and substantial improvements to property and equipment are capitalized. The cost of maintenance and repairs of the property and equipment are charged to operating expenses as incurred.

k) Fair value of financial instruments

FASB ASC No. 820, “Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s financial instrument includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values due to the nature of the items. Please refer to Note -16 “Fair value of financial instruments”, for further information.

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l) Concentration of credit risk and significant customers

Financial instruments, which potentially expose the Company to concentrations of credit risk, are primarily comprised of cash and cash equivalents, investments, accounts receivable and unbilled accounts receivable, if any. The Company places its cash, investments in highly rated financial institutions. The Company adheres to a formal investment policy with the primary objective of preservation of principal, which contains credit rating minimums and diversification requirements. Management believes its credit policies reflect normal industry terms and business risk. The Company does not anticipate non-performance by the counterparties and, accordingly, does not require collateral. During Fiscal 2020, sales were spread across customers in Asia and U.S. and the credit concentration risk is low.

m) Stock – Based Compensation

The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Stock-Based Compensation. The Company expenses stock-based compensation to employees over the requisite vesting period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards are recognized on a straight-line basis over the requisite vesting period. For stock-based employee compensation cost recognized at any date will be at least equal to the amount attributable to the share-based compensation that is vested at that date. The Company estimates the fair value of stock option grants using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates. The closing share price of the Company’s common stock on the date of grant is considered the fair-value of the share. The volatility factor is determined based on the Company’s historical stock prices. The expected term represents the period that our stock-based awards are expected to be outstanding. The Company has never declared or paid any cash dividends. Equity awards issued to non-employees are recorded at their fair value on the grant date as they are immediately exercisable and not forfeitable on the date of grant.

n) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. We record associated legal fees as incurred. Information regarding our commitments and contingencies is incorporated by reference in Note 12 of this Annual Report on Form 10-K.

o) Impairment of long – lived assets

The Company reviews its long-lived assets, with finite lives, for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable. Such circumstances include, though are not limited to, significant or sustained declines in revenues or earnings, future anticipated cash flows, business plans and material adverse changes in the economic climate, such as changes in operating environment, competitive information and impact of changes in government policies. For assets that the Company intends to hold for use, if the total of the expected future undiscounted cash flows produced by the assets or subsidiary company is less than the carrying amount of the assets, a loss is recognized for the difference between the fair value and carrying value of the assets. For assets, the Company intends to dispose of by sale, a loss is recognized for the amount by which the estimated fair value less cost to sell is less than the carrying value of the assets. Fair value is determined based on quoted market prices, if available, or other valuation techniques including discounted future net cash flows. Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.

p) Change in inventory valuation method

On April 1, 2019, the Company changed its methodology for the valuation of inventory from first-in-first-out to weighted average cost method. The newly adopted accounting principle is preferable because the weighted average cost method of accounting for all inventories will improve financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. The change did not impact the financial statements for the prior years.

q) Inventory

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Harvested crops are measured at net realizable value, with changes recognized in profit or loss only when the harvested crop:

- has a reliable, readily determinable, and realizable market value;

- has relatively insignificant and predictable costs of disposal; and

- is available for immediate delivery.

The Company believes its harvested crops does not have a readily available market. Hence, the Company values its harvested crops at cost.

r) Cybersecurity

We have a cybersecurity policy in place and tighter cybersecurity measures to safeguard against hackers. In Fiscal 2020, there were no impactful breaches in cybersecurity.

s) Research and Development Expenses

During Fiscal 2020 and 2019, the Company recorded research and development expenses of approximately $1 million and $1.3 million, respectively. All research and development costs are expensed in the period in which they are incurred.

t) Goodwill

Goodwill represents the excess cost of an acquisition over the fair value of our share of net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries would be disclosed separately. Goodwill is stated at cost less impairment losses incurred, if any. As of March 31, 2020, there was no Goodwill.

u) Leases

Lessor Accounting

For lessors, however, the accounting remains largely unchanged from the current model, changes have been made to align certain lessor and lessee accounting guidance and the key aspects of the lessor accounting model with new revenue recognition standard. Under the new guidance, contract consideration will be allocated to its lease components and non-lease components (such as maintenance). For the Company as a lessor, any non-lease components will be accounted for under ASC Topic 606, Revenue from Contracts with Customers, unless the Company elects a lessor practical expedient to not separate the non-lease components from the associated lease component. The amendments in ASU 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (“Topic 606”). To elect the practical expedient, the timing and pattern of transfer of the lease and non-lease components must be the same and the lease component must meet the criteria to be classified as an operating lease if accounted for separately. If these criteria are met, the single component will be accounted for under either Topic 842 or Topic 606 depending on which component(s) are predominant. The lessor practical expedient to not separate non-lease components from the associated component must be elected for all existing and new leases.

As lessor, the Company expects that post-adoption substantially all existing leases will have no change in the timing of revenue recognition until their expiration or termination. The Company expects to elect the lessor practical expedient to not separate non-lease components such as maintenance from the associated lease for all existing and new leases and to account for the combined component as a single lease component. The timing of revenue recognition is expected to be the same for the majority of the Company’s new leases as compared to similar existing leases; however, certain categories of new leases could have different revenue recognition patterns as compared to similar existing leases.

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For leases that are accounted for as operating leases, income is recognized on a straight-line basis over the term of the lease contract. Generally, when a lease is more than 180 days delinquent (where more than three monthly payments are owed), the lease is classified as being on nonaccrual and the Company stops recognizing leasing income on that date. Payments received on leases in nonaccrual status generally reduce the lease receivable. Leases on nonaccrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full.

Lessee Accounting

The Company adopted ASU 2016-02 effective April 1, 2019 using the modified retrospective approach. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. In connection with the adoption, the Company will elect to utilize the modified retrospective presentation whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, the Company will elect the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company will adopt a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less). and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets.

Under ASU 2016-02 (Topic 842), lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. There was no impairment for right-of-use lease assets as of March 31, 2020.

The Company categorizes leases at their inception as either operating or finance leases. On certain lease agreements, the Company may receive rent holidays and other incentives. The Company recognizes lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments.

v) Recently issued and adopted 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 below 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.

Not yet adopted

Disclosures: In August 2018, the FASB issued ASU 2018-13. Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in the standard apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements in ASC 820, Fair Value Measurement. The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements

Collaborative Arrangement: Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

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Intangibles-Goodwill and Other-Internal-Use Software: In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 (Subtopic 350-40)aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial instruments. The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The amendment is effective for fiscal years beginning after January 2023. The Company is evaluating the impact of this update.

NOTE 3 – INVENTORY

(in thousands)

Raw Materials 227 -

Finished Goods 305 -

Inventory in the form of work-in-progress as of March 31, 2020, is comprised of, but not limited to, various hemp-based extracts such as, crude oil, hemp distillate, and hemp isolate. The Company accounts all hemp extracts as work-in-progress until they are in the processing facility. Inventory also includes cost related to growing crops like seeds, fertilizer, other raw materials, labor, farm related overhead and the depreciation of farming equipment, among others.

IGC US Equity

IGC · 10-K · period ended 2020-03-31

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

IGC US Equity☆

IGC · 10-K · period ended 2020-03-31

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

IGC US Equity