India Globalization Capital Inc. (NYSE: IGC) has two lines of business, a legacy infrastructure business and a medical cannabis business that has developed a flagship product for Alzheimer’s patients. Also, the Company recently announced that it would develop and commercialize a hemp/CBD infused energy drink. The company is based in Maryland, U.S.A.
On October 15, 2018, the company announced financial results for the quarter ended September 30, 2018, which is the second quarter of its 2019 fiscal year.
Increasing revenue from legacy business: Total revenue was approximately $811 thousand for the three months ended September 30, 2018, an increase of 245% as compared to approximately $235 thousand for the three months ended September 30, 2017. All quarterly revenue was attributable to the legacy infrastructure business operations.
Comfortable liquidity: From a liquidity and financial standpoint, at the end of September 30, 2018, the Company had approximately $6.41 million in cash and cash equivalents. The management believes that it has adequate financial resources to fund its short-term objectives including, among others, marketing HyalolexTM, developing and commercializing its recently announced drink formulation, expanding the depth of its complementary cannabis medication and product portfolio, initiating filings with the Food and Drug Administration (FDA), and conducting small clinical trials as appropriate in support of its product pipeline.
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Key investment highlights of IGC:
- IGC Management’s focus is to develop and commercialize cannabinoid-based alternative therapies for indications such as Alzheimer’s disease, Parkinson’s disease, and pain. The company’ flagship product is Hyalolextm, and it is a cannabinoid-based alternative oral combination therapy whose active ingredients have been shown to help alleviate symptoms associated with Alzheimer’s disease. (not yet approved by FDA though)
- With Hyalolex, the management expects revenue in the fiscal year 2019, though there can be no assurance as to the amount of such revenue and or full-fledged commercialization.
- The Company recently entered the hemp oil/cannabidiol (CBD) infused beverage space and expects to bring a sugar-free CBD infused energy drink to market.
- The Company has filed several patents for its pipeline of products including ones for the treatment of Alzheimer’s, Parkinson’s and Central Nervous System related disorders, pain, eating disorders, seizures in cats and dogs, and an energy drink.
- Besides, since inception, the Company operates a legacy business that involves trading commodities and heavy equipment rental. The company’ present revenue currently comes only from its legacy business.
Source: company’ filings
About the Company: India Globalization Capital, Inc. (“IGC”), a Maryland corporation, was organized on April 29, 2005 formed for acquiring one or more businesses with operations primarily in India, Hong Kong, China and now Malaysia, through a merger, capital stock exchange, asset acquisition or other similar business combination or acquisition. On March 8, 2006, the Company completed an initial public offering. IGC is headquartered in the United States. The operations of IGC are based in USA, India, and Malaysia.
Recent announcements by the company:
- IGC Files Provisional Patent to Protect IP for CBD-Infused Energy Drink: On October 9, 2018, the company announced that it had filed a provisional method and composition patent application (IGC-509) with the U.S. Patent and Trademark Office for the treatment of fatigue and energy restoration. This filing is one of a series of steps in the Company’s development and commercialization plan to support the creation of a branded, hemp/CBD sugar-free energy drink, which was previously disclosed by the Company on September 25, 2018.
- IGC to Enter the Hemp/CBD-Infused Energy Drink Space: On September 25, 2018, the company announced that it had executed a distribution and partnership agreement for several products including a sugar-free, energy drink called ‘Nitro G.’ IGC will pay 797,000 shares of restricted, unregistered, common stock, for a 10-year agreement, with an option for multiple 5-year extensions, for the rights to market the products in the U.S., Canada, Mexico, and South America and exclusive global rights to all developed CBD-infused products. IGC plans to create a branded, hemp/CBD-infused version of the formulation that addresses market demand for energy drinks with the inclusion of healthy properties derived from hemp including CBD.
- India Globalization Capital Raises $1 Million in Direct Equity Investment to Support Hyalolex Commercialization: On September 12, 2018, the company announced that it raised $1.0 million in a private placement of restricted shares. The net proceeds from the offering are for marketing and working capital associated with the commercialization of Hyalolextm. Bradbury Investment Fund makes the investment limited, based in Hong Kong, through three of its Global Asset Funds. The investment is strategic as the fund can introduce the Company to potential acquisitions of global assets as more countries legalize hemp, cannabinoids, and cannabis. Further, the fund can also help the Company in introducing its products, including Hyalolextm, in foreign countries
- IGC to Enter California Market with Hyalolex: On August 14, 2018, the company announced that it had designated California as a priority market for Hyalolex, its lead cannabis-based supplement for treating and managing Alzheimer’s patients. The cannabis market is showing explosive growth, and IGC is aggressively moving forward with the company’ vision of owning and marketing the leading brands for large medical indications such as Alzheimer’s, Parkinson’s, PTSD, pain, veterinary medicine, and cancer. With eight patents filed, IGC has made significant strides towards achieving these goals and building value for the shareholders as an NYSE American listed company.
About the industry/demand drivers:
- According to a Grand View Research forecast, the global energy drinks market is projected to be almost $85 billion by the year 2025, with non-alcoholic beverage sales expected to account for a significant portion of the market. This represents a unique opportunity for the development and commercialization of a CBD-infused, sugar-free energy beverage.
- California is considered to be the largest addressable U.S. market for cannabis with an environment that strongly embraces its acceptance. This represents a significant opportunity for Hyalolex and other brands, as such the company is currently coordinating the necessary steps to efficiently and rapidly introduce its product to high-density regions in the state. It should be noted that according to U.S. Census data, California has an estimated population of 39.54 million and that total is larger than all of Canada. IGC’s management team has been actively meeting with California-based manufacturers and distributors to assemble the requisite combination of partners to efficiently bring Hyalolex to dispensaries, patients, and caregivers in California. The company’ “Drops of Clarity” marketing program will highlight the potential benefits of Hyalolex as a supplement to cannabis physicians as well as to caregivers and patients via both a digital format and through grassroots outreach.
- Revenue: Total revenue was about $811 thousand and about $235 thousand for the three months ended September 30, 2018, and 2017, respectively. This represents an increase in revenue of about $576 thousand or about 245 %. In the three-month period ended September 30, 2018, the company revenue arose from trading commodities and the equipment rental businesses. The increase in total revenue is attributable to an increase in the volume of trading in different types of steel and other infrastructure related material in and outside of India. The company’ focus in the current year is to increase margins and further de-risk the trading business.
- Profitability: Net loss was about $858 thousand and about $304 thousand for the three-month periods ended September 30, 2018, and 2017, respectively. The $554 thousand increase in loss (182 % increase) is attributable to an increase in SG&A.
- Liquidity and financial flexibility: At the end of September 30, 2018, the Company had about $6.41 million in cash and cash equivalents. In the quarter ended September 30, 2018, the non-GAAP total cash burn after adjusting for non-cash items that include ESOPs and other payments made with common stock, is about $506 thousand.
- The cash burn is primarily associated with public company expenses, increased product R&D, production, and getting Hyalolextm ready for market, among others. The Company believes that it has adequate financial resources to meets its short-term goals including marketing Hyalolex, developing and marketing a drink formulation, marketing several other complimentary medications, initiating filings with the FDA and conducting small clinical trials, amongst others.
Key risk factors and potential stock drivers:
- The favorable outcome of clinical testing and its path to FDA approvals could be a medium-term trigger for IGC stock.
- That said, notwithstanding, incremental/recent developments; the company’s meaningful value (on a long run) would still be far-fetched in its targeted business streams. The company’ business operations are still at a very early stage, and present revenue is driven only by its legacy business.
- The company has changed its business strategies in the past. Therefore, management’ ability to ramp up operations and actually demonstrate a track record of revenue/profitability would continue to remain crucial.
- The company’s business risk profile is subject to significant regulatory risk. Cannabis remains illegal under U.S federal law, and therefore, strict enforcement of federal laws regarding medical-use cannabis would likely result in slower growth of the company business plans, and/or delisting from the NYSE American.
- The company’s ability to ramp-up profitability while sustaining its revenue growth would be one of the key stock drivers over the near to medium term. Additionally, the company should regulate its development and other indirect costs.
- On Friday, Oct 19th, 2018, IGC closed at $3.18, with a robust average volume of 14.7 million shares exchanging hands. Market capitalization is $115.586 million. The current RSI is 45.74
- In the past 52 weeks, shares of IGC have traded as low as $0.36 and as high as $14.58
- At $3.18, shares of IGC are trading around its 50-day moving average (MA) at $2.83 and above its 200-day moving average (MA) at $1.19
- The present support and resistance levels for the stock are at $2.29 & $4.59 respectively.