NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated balance sheet as of June 30, 2026, and December 31, 2025, condensed consolidated statements of operations for the three months and six months ended June 30, 2026, and 2025, and condensed consolidated statements of cash flows for the six months ended June 30, 2026, and 2025, are unaudited. The consolidated balance sheet as of December 31, 2025, has been derived from audited financial statements, and the accompanying as of June 30, 2026 unaudited condensed consolidated financial statements (“interim statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (the “FASB”) within its Accounting Standards Codification (“ASC”) and under the rules and regulations of the SEC. As a result of the change in fiscal year end from March 31 to December 31, comparative amounts for the three and six months ended June 30, 2025, were derived from the Company’s accounting records for the corresponding calendar periods and were not previously reported as discrete fiscal periods. In addition, certain prior-period amounts may have been reclassified to conform to the current-period presentation. These reclassifications had no effect on previously reported total current liabilities, total liabilities, stockholders’ equity, or net loss.

Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s audited consolidated financial statements for the nine-month transition period ended December 31, 2025, contained in the Company’s transition report on Form 10-KT for the nine months ended December 31, 2025, filed with the SEC on March 18, 2026, specifically in Note 2 to the consolidated financial statements.

Principles of consolidation

The interim statements include the consolidated accounts of the Company and its subsidiaries. In the opinion of the Company’s management, the interim 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. In the event of the liquidation of foreign subsidiaries, the cumulative translation adjustment is reclassified from accumulated other comprehensive loss to accumulated deficit through earnings. (ASC 830-30-40-1).

Presentation and functional currencies

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

The accompanying financial statements are reported in USD. The INR and COP are the functional currencies for certain subsidiaries of the Company. The translation of the functional currencies into USD 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 the reporting currency are accumulated and reported as other comprehensive income/(loss), a separate component of stockholders’ equity. Transactions in currencies other than the functional currency during the period 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. 

Going Concern

The Company assesses and determines its ability to continue as a going concern in accordance with the provisions of ASC Subtopic 205-40, “Presentation of Financial Statements—Going Concern”, which requires the Company to evaluate whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern.

The Company is currently in the clinical trial stage and has not yet achieved profitability. The Company expects to continue to incur significant operating and net losses, as well as negative cash flow from operations, in the near future.

For the three months ended June 30, 2026, and 2025, the Company incurred net losses of approximately $3 million and $1.6 million, respectively. For the six months ended June 30, 2026, and 2025, the Company incurred net losses of approximately $5.3 million and $2.8 million, respectively.  As of June 30, 2026, the Company had cash and cash equivalents of approximately $331 thousand and a working capital deficit of approximately $2.0 million.

During the six months ended June 30, 2026, the Company raised approximately $1.1 million in net proceeds from equity issuances and approximately $1.3 million in net proceeds from debt financings. As of June 30, 2026, the Company had total outstanding debt of approximately $1.1 million. For additional information regarding these financings, please refer to Note 11, “Loans and Other Liabilities,” and Note 13, “Securities.”

The Company estimates that its current cash and cash equivalents, investments, anticipated financing activities, and amounts reasonably expected to be available under its $12 million revolving working capital credit facility with O-Bank will be sufficient to support operations for at least twelve months following the issuance of these condensed consolidated financial statements, although there can be no assurance. This assessment reflects the facility’s monthly draw limitation, applicable borrowing conditions, and May 31, 2027, expiration date and does not assume immediate access to the full facility amount or renewal beyond its current term. As of June 30, 2026, no amounts were outstanding under the facility. These estimates are based on assumptions that may prove incorrect, and the Company may use its available capital resources sooner than currently anticipated. The Company expects to seek renewal of the facility before its expiration; however, there can be no assurance that the facility will be renewed or that any renewal will be on similar terms. The Company’s ability to obtain additional equity or debt financing is also subject to market and contractual conditions, and there can be no assurance that such financing will be available on acceptable terms or when required.

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 $56 thousand of accounts receivable, as of June 30, 2026, with no allowance for doubtful accounts, as compared to $12 thousand of accounts receivable, net of provision for the doubtful debt of $8 thousand as of December 31, 2025.

Current Investments

Current investments consist of marketable securities, including exchange-traded products (“ETPs”), that the Company intends to hold for less than one year. These investments are classified as equity securities under ASC 321, Investments—Equity Securities, and are measured at fair value using quoted prices in active markets (Level 1). Changes in fair value are recognized in other income (expense), net, in the condensed consolidated statements of operations. As of June 30, 2026, Current investments consisted of approximately $23 thousand in a U.S.-listed digital asset ETP. The Company does not directly hold cryptocurrencies or other digital tokens. The Company does not hold any crypto assets within the scope of ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets; its only digital-asset exposure is through a U.S.-listed exchange-traded product accounted for as an equity security under ASC 321.

Lease

The Company has elected the short-term lease exemption under ASC 842 for leases with a lease term of 12 months or less; such leases are not recorded on the balance sheet, and the related payments are recognized as expense on a straight-line basis over the lease term. As of June 30, 2026, the Company’s remaining lease arrangements were short-term in nature, and accordingly the Company had no operating lease right-of-use assets or operating lease liabilities recognized as of that date.

Intangible assets

The Company’s intangible assets are accounted for in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Intangible assets having indefinite lives are not amortized but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value. We perform an impairment analysis on December 1 annually on the indefinite-lived intangible assets following the steps laid out in ASC 350-30-35-18. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets. If quantitative analysis is necessary, we would analyze various aspects, including revenues from the business associated with the intangible assets. In addition, intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company has analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss, and, at this time and based on the information presently known, does not believe it is more likely than not that an impairment loss has been incurred.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated period of benefit. In accordance with ASC 360-10-35-21, definite-lived intangibles are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.

The Company intends to capitalize trademarks and related expenses exceeding $2,500 per trademark.

Software Development Costs

The Company is developing three proprietary software platforms intended to be commercialized: -

1. A clinical data management platform designed for the collection, analysis, and real-time monitoring of clinical trial data.

2. MINT- AD – An AI-driven cognitive decline risk stratification and treatment personalization platform aimed at assisting in the early detection of AD and providing data-informed therapeutic suggestions; and

3. Agentic Harmonization Assistant (“AHA”) to support MINT-AD and the Company’s broader AI research and development efforts, IGC Pharma has and is developing AHA, an agentic analytics and data harmonization architecture designed to support large-scale AD research.

In accordance with ASC 985-20, Software to Be Sold, Leased, or Marketed, and ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, the Company capitalizes development costs incurred after technological feasibility has been established (for software to be marketed) or when management has authorized and committed to funding the project and it is probable that the project will be completed and used as intended (for internal-use software). Costs incurred during the research and planning phase are expensed as incurred.

Effective January 1, 2026, the Company elected to early adopt ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40), on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

Capitalized costs include direct labor, third-party development services, cloud computing infrastructure directly related to model development and deployment, and associated overhead. These costs are amortized on a straight-line basis over their estimated useful lives, typically five to ten years, beginning when the software is ready for its intended commercial use.

As of the quarter ended June 30, 2026, the Company capitalized approximately $1.8 million in software development costs. For more information, please refer to Note 5, “Intangible Assets”.

Loss per share

The computation of basic loss per share for the six months ended June 30, 2026, excludes potentially dilutive securities of approximately 22 million shares, which include share options, unvested shares such as restricted share awards, units and warrants, granted to directors, employees, non-employees, and advisors, and shares from the conversion of outstanding units, if any, because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for the six months ended June 30, 2026, and 2025, used for the computation of basic earnings per share (“EPS”), is 99,252,520 and 81,352,079, respectively, as compared to 100,331,320 and 83,027,117, for the three months ended June 30, 2026, and 2025, respectively. Due to the loss incurred by the Company during the six months ended June 30, 2026, and 2025, all the potential equity shares are anti-dilutive, and accordingly, the fully diluted EPS is equal to the basic EPS.

Cybersecurity

The Company maintains a cybersecurity risk management program designed to identify, assess, and mitigate risks from cybersecurity threats. The Company’s cybersecurity program, governance framework, and board oversight are described in Item 1C of the Company’s Annual Report on Form 10-KT for the nine-month transition period ended December 31, 2025.

There have been no material changes to the Company’s cybersecurity risk management program during the three months ended June 30, 2026. During the period, the Company did not identify any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, the Company’s business strategy, results of operations, or financial condition.

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 Life Sciences segment.

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. In retail sales, we offer consumer products through our online stores. Revenue is recognized when control of the goods is transferred to the customer. This generally occurs upon our delivery to a third-party carrier or to the customer directly. Revenue from white-label services is recognized when the performance obligation has been completed, and output material has been transferred to the customer.

Net sales disaggregated by significant products and services for the three months and six months ended June 30, 2026, and 2025 are as follows:

Recently adopted accounting pronouncements

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments eliminate the project-stage framework for capitalizing internal-use software costs and require capitalization when (1) management has authorized and committed to funding the project and (2) it is probable that the project will be completed and used as intended. The Company elected to early adopt ASU 2025-06 effective January 1, 2026, on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses and other segment items on an interim and annual basis, including entities with a single reportable segment. The Company adopted ASU 2023-07 effective for the quarterly period ended March 31, 2026, on a retrospective basis. The adoption resulted in expanded disclosures in Note 16, “Segment Information”, including the presentation of significant expense categories reviewed by the chief operating decision maker, but did not affect the Company’s consolidated financial position, results of operations, or cash flows.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), effective for annual periods beginning after December 15, 2026. The Company is evaluating the impact of this standard on its disclosures.