INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
See accompanying Notes to Consolidated Financial Statements below in this report and Notes to the Audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC on July 14, 2017.
See accompanying Notes to Consolidated Financial Statements below in this report and Notes to the Audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC on July 14, 2017.
See accompanying Notes to Consolidated Financial Statements below in this report and Notes to the Audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC on July 14, 2017.
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – OVERVIEW OF INDIA GLOBALIZATION CAPITAL, INC. (“IGC”)
IGC develops cannabis-based combination therapies to treat Alzheimer’s, pain, nausea, eating disorders, several end points of Parkinson’s, and epilepsy in humans, dogs and cats. In support of this effort, IGC has assembled a portfolio of patent filings and four lead product candidates addressing these conditions. In India, the Company is engaged in heavy equipment rental, and in Malaysia, real-estate management.
The Company is a Maryland Corporation formed in April 2005. In March 2006, we completed an initial public offering of our common stock. Our registered office in the U.S. is located in Bethesda, Maryland. We have a facility in Washington State, where we conduct our R&D. Our back office is located in Kochi, Kerala India. In addition, many of our staff and advisors work from their home offices.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation of financial statements
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements and management used estimates and assumptions that could affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year. The significant accounting policies adopted by the Company, in respect of these consolidated financial statements, are set out in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and respective notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC on July 14, 2017. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The consolidated financial statements include the accounts of the Company and all its subsidiaries that are more than 50% owned and controlled. The Company consolidates the subsidiaries into its consolidated financial statements. Transactions between the Company and its subsidiaries have been eliminated in the consolidated financial statements.
In the quarter ended June 30, 2017, in addition to the US, IGC operates in India and Malaysia and a substantial portion of the Company’s sales are denominated in INR and RM. As a result, changes in the relative values of the U.S. dollar and INR or the RM affect revenues and profits as the results are translated into U.S. dollars in the consolidated and pro forma financial statements. The accompanying financial statements are reported in U.S. dollars. The INR and the RM are the functional currencies for 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, costs 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.
The Company’s current fiscal year ends on March 31, 2018.
Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to India Globalization Capital, Inc., together with its subsidiaries, as listed and described in its Annual Report on Form 10-K filed with the SEC on July 14, 2017. We exclude our investments and minority non-controlling interests, and any information provided by them is not incorporated by reference in this report, and you should not consider it a part of this report. Our filings are available on www.sec.gov. The information contained on our website, www.igcinc.us, is not incorporated by reference in this report, and you should not consider it a part of this report.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable, net of allowances, amounted to $839,462 and $752,926 as of June 30, 2017 and March 31, 2017, respectively. The accounts receivable net of reserves for the quarter ended June 30, 2017 come primarily from construction management and rental of heavy construction equipment.
NOTE 4 – OTHER CURRENT AND NON-CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Prepaid /preliminary expenses
|
|
$
|
6,750
|
|
|
$
|
6,750
|
|
Advance to suppliers, others & services
|
|
|
388,705
|
|
|
|
352,850
|
|
Security/statutory advances
|
|
|
13,907
|
|
|
|
14,216
|
|
Prepaid and accrued interest
|
|
|
1,442
|
|
|
|
1,436
|
|
Deposit and other current assets
|
|
|
5,356
|
|
|
|
35,156
|
|
Total
|
|
$
|
416,160
|
|
|
$
|
410,408
|
|
Other non-current assets consist of the following:
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Statutory/Other advances
|
|
$
|
541,244
|
|
|
$
|
539,720
|
|
Patent expenses capitalized
|
|
|
130,898
|
|
|
|
-
|
|
Total
|
|
$
|
672,142
|
|
|
$
|
539,720
|
|
On May 21, 2012, TBL entered into an agreement with Weave & Weave for the purchase of land value $616,806. TBL gave Weave and Wave and advance of $377,795. As of the date of this filing, the parties are in the process of negotiating a settlement that includes the purchase and sale of land as well as the refund of the advance given by TBL. The capitalized patent expenses are direct expenses, legal, filing fees, etc., associated with filing patents in North America, Europe and Canada.
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL
The movement in intangible assets and goodwill is given below.
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Intangible assets at the beginning of the period
|
|
$
|
-
|
|
|
$
|
113,321
|
|
Amortization
|
|
|
-
|
|
|
|
(113,321
|
)
|
Effect of foreign exchange translation
|
|
|
-
|
|
|
|
-
|
|
Total Intangible assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Goodwill of Cabaran Ultima SDN BHD
|
|
|
198,169
|
|
|
|
198,169
|
|
Total Goodwill
|
|
$
|
198,169
|
|
|
|
198,169
|
|
The value of goodwill for the two periods shown is $198,169 and is associated with the acquisition of Cabaran Ultima.
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Category
|
|
Useful Life (years)
|
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Building (flat)
|
|
|
25
|
|
|
$
|
242,040
|
|
|
$
|
241,181
|
|
Plant and machinery
|
|
|
20
|
|
|
|
1,716,141
|
|
|
|
1,710,055
|
|
Computer equipment
|
|
|
3
|
|
|
|
157,882
|
|
|
|
157,349
|
|
Office equipment
|
|
|
5
|
|
|
|
119,939
|
|
|
|
119,528
|
|
Furniture and fixtures
|
|
|
5
|
|
|
|
70,833
|
|
|
|
70,368
|
|
Vehicles
|
|
|
5
|
|
|
|
293,549
|
|
|
|
292,764
|
|
Assets under construction
|
|
|
N/A
|
|
|
|
961,812
|
|
|
|
957,880
|
|
Total
|
|
|
|
|
|
$
|
3,562,196
|
|
|
$
|
3,549,125
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
$
|
(2,610,187
|
)
|
|
$
|
(2,595,189
|
)
|
Net Assets
|
|
|
|
|
|
$
|
952,009
|
|
|
$
|
953,936
|
|
Depreciation expense for the three months ended June 30, 2017 was $5,964 as compared to $97,672 for fiscal ended March 31, 2017. Capital work-in-progress represents advances paid towards the acquisition of property and equipment and the cost of property and equipment not put to use before the balance sheet date.
NOTE 7 – INVESTMENTS – OTHERS
Investments – others for each of the periods ended June 30, 2017 and March 31, 2017 consisted of the following:
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Investment in equity shares of unlisted company & associates
|
|
$
|
65,167
|
|
|
$
|
63,392
|
|
Investment in Land
|
|
|
5,174,611
|
|
|
|
5,174,611
|
|
Total
|
|
$
|
5,239,778
|
|
|
$
|
5,238,003
|
|
NOTE 8 – Intentionally Left Blank
NOTE 9 – OTHER CURRENT AND NON-CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
As of June 30, 2017
|
|
|
As of March 31, 2017
|
|
Statutory payables
|
|
$
|
14,041
|
|
|
$
|
15,203
|
|
Employee related liabilities
|
|
|
393,128
|
|
|
|
676,511
|
|
Total
|
|
$
|
407,169
|
|
|
$
|
691,714
|
|
For the quarter ended June 30, 2017, there were no other non-current liabilities.
NOTE 10 – RELATED PARTY TRANSACTIONS
As of June 30, 2017, the Company has (i) a balance due of $86,916 payable to our CEO inclusive of certain unpaid salaries from previous years and (ii) a long-term loan of $175,991 due by Cabaran to a Director of Cabaran (RM 755,000), for a loan made to Cabaran.
We pay an affiliate of our CEO $4,500 per month for office space and certain general and administrative services rendered in Maryland. In addition, we pay another affiliate of our CEO $6,100 per month for office and facilities in Washington State. We believe, based on rents and fees for similar services in the Washington, D.C. metropolitan area, and Washington State that the fee charged by the affiliates are at least as favorable as we could have obtained from an unaffiliated third party and these payments are not considered, or meant to be compensation to our CEO. The rental agreement for the Maryland location is on a month-to-month basis and may be terminated by our Board of Directors of the Company at any time without notice. The rental agreement for Washington State facilities expires on December 31, 2017, unless renewed by mutual consent. During the quarter ended June 30, 2017, the total rent paid to the affiliates were $13,500 for the office space (and services) in Maryland, and $18,300 for the facilities in Washington State.
All compensation paid to our CFO, is paid to an affiliate of our CFO, specifically a limited liability company (LLC), wholly owned by our CFO. There are no payments, other than what is mentioned in this filing, that have been made to the CFO directly or to his LLC. The Company treats payments and issuances of stock made to the LLC as if they are made directly to our CFO.
Loans by Related Parties:
We have a working capital loan that has a loan balance as of June 30, 2017 and as of March 31, 2017 of $97,500 from an affiliate of our CEO, at an annual interest rate of zero percent, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
Loans to Related Parties
On April 30, 2015, FYE 2016, we loaned Apogee Financial Services $70,000 as working capital for Midtown partners. The loan is outstanding as of June 30, 2017.
NOTE 11 – NOTES PAYABLE AND LOANS – OTHERS
The Company has an unsecured Note Payable to Bricoleur Partners, L.P. in the amount of $1,800,000 (“2012 Security”), which was extended to July 31, 2016, subject to the same terms of the 2012 Agreement. Up to July 2014, the Company was making monthly interest payments of 17,100 shares of common stock. Starting on August 2014 and as per Amendment No. 2 to the 2012 Security, the Company started making a monthly interest payment of 23,489 shares of common stock. Contractually, there is no cash interest paid to Bricoleur on the Note. Instead, the parties have agreed that the Company will make a payment (booked under interest payment) of 30,000 shares of common stock for each month the loan remains unpaid, regardless of the trading price of the stock. The arrangement allows the Company and Bricoleur to pursue permanent conversion of the principal to common stock, or repayment of the principal using common stock. During the quarter ended June 30, 2017, the Company issued a total of 90,000 shares valued at $36,600 to this debt holder, which constitutes non-tax-deductible interest payments for the Company.
As of June 30, 2017, the Company has five loans categorized as Loans Others totaling $388,476 at an average annual interest rate of 10%: Loan 1: We have a loan for $59,726, due on April 25, 2018 bearing 10% annual interest rate. This loan is from one of our Advisors and former director. Loan 2: We have a loan from an individual for $100,000, at an annual interest rate of 24%, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan. Loan 3: We have a loan from an individual for $50,000, at an annual interest rate of 15%, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan. Loan 4: We have a loan of $81,250 from an affiliate of our CEO, at an annual interest rate of 15%, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan. Loan 5: We have a working capital loan that has a loan balance as of June 30, 2017 of $97,500 from an affiliate of our CEO, at an annual interest rate of zero percent, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
NOTE 12 – COMMITMENTS AND CONTINGENCY
No significant contingencies or commitments were made or existed during the three months ended June 30, 2017.
NOTE 13 – COMMON STOCK
Our common stock trades on the NYSE AMERICAN under the symbol “IGC” with CUSIP number 45408X308, $0.0001 par value (“Common Stock”). This security is also available for trading on the Borse Frankfurt, Stuttgart, and Berlin Exchanges (ticker symbol: IGS1). The Common stock of the Company is also available for trading on the Borse Frankfurt, Borse Berlin, and Borse Stuttgart (XETRA2) exchanges in Germany. The Warrants and Units now trade on the OTC Markets. We have redeemable Warrants (CUSIP number 45408X118 expiring on March 6, 2019) to purchase Common Stock (ticker symbol: IGC.WT) and Units consisting of one share of Common Stock and two redeemable warrants to purchase Common Stock that are not listed. The Unit holders are requested to contact the Company to get their existing Units separated into Common Stock and Warrants.
During the quarter ended June 30, 2017, the Company issued 90,000 shares valued at $36,600 to Bricoleur Partners, L.P. for the outstanding $1,800,000 promissory note (“2012 Security”), which constituted an element of repayment of interest.
On May 20, 2016, IGC entered into a new At-The-Market Agency Agreement (“ATM Agreement”) with IFS Securities, Inc. (dba Brinson Patrick, a division of IFS Securities, Inc.), as sales agent (“Brinson Patrick” or the “Agent”). IGC intends to use the net proceeds from the sale of securities offered for working capital needs, repayment of indebtedness and other general corporate purposes. During the quarter ended June 30, 2017, the Company issued 1,260,359 shares of Common Stock valuated at $647,691 under this agreement.
Under the December 18, 2014 Purchase Agreement with Apogee, we issued 1,200,000 common shares of IGC valued at $888,000 for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC. Pending downward adjustments, subject to certain balance sheet items of MTP, a total of 500,000 shares of IGC common stock have been held back. Pending the resolution of these balance sheet items, the shares that have been held back may be cancelled. The agreement had a deadline of June 30, 2015, for Apogee and Midtown Partners to obtain the requisite approvals from FINRA. Apogee did not file for approval on time, and consequently pursuant to the terms of the Agreement, there are several penalties that will apply, including the cancellation of 700,000 shares of IGC stock and a penalty of $125,000 owed by Apogee to us. We are not seeking to consummate the acquisition of the remaining interest in Midtown Partners at this time.
The Company has granted (1) its new advisors options to purchase 200,000 shares at an average exercise price of $0.20 per share, all of which are outstanding and exercisable as of June 30, 2017 and (2) 100,000 shares to acquire the exclusive right to the license of the U.S. patent filing entitled “THC as a Potential Therapeutic Agent for Alzheimer’s Disease” by the University of South Florida. Further, pursuant to IGC’s employee stock option plan and during the quarter ended June 30, 2017, IGC granted a total of 1,179,994 shares to its directors and some of its employees. As of June 30, 2017, IGC has 26,803,020 shares of Common Stock issued and outstanding.
NOTE 14 – STOCK-BASED COMPENSATION
On April 1, 2009, the Company adopted ASC 718, “Compensation-Stock Compensation” (previously referred to as SFAS No. 123 (revised 2004),
Share Based Payment)
. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. As of June 30, 2017, under the 2008 Omnibus Plan, 4,379,899 shares of common stock have been awarded. As of June 30, 2017, there are no shares of common stock available for future grants of options or stock awards.
NOTE 15 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $436,351 for the three months ended June 30, 2017 as compared to $307,772 for the three months ended June 30, 2016. Selling, general and administrative expenses include compensation expenses to management, legal and professional expenses, investor-relations expenses, acquisition related expenses and travel expenses.
NOTE 16 – IMPAIRMENT
None during fiscal quarter ended June 30, 2017.
NOTE 17 – OTHER INCOME
Other income for the three-month periods ended June 30, 2017 and 2016 amounted to $8,355 and $1,755, respectively, and included income received from the supply of skilled operators for the heavy equipment rental business and from the rent of the apartment belonging to TBL, which is located in Kochi, India.
NOTE 18 – RECONCILIATION OF EPS
The historical weighted average per share for our shares through June 30, 2017, was applied using the treasury method of calculating the fully diluted shares. The weighted average number of shares outstanding as of June 30, 2017 and 2016 used for the computation of basic earnings per share (“EPS”) is 25,865,307 and 23,312,056, respectively. Due to the loss incurred during the three-month period ended June 30, 2017, all of the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.
NOTE 19 – INCOME TAXES
The Company adopted ASC 740, Accounting for Uncertainty in Income Taxes. In assessing the recoverability of its deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. The management considers historical and projected future taxable income, and tax planning strategies in making this assessment.
The Company’s effective tax rate was 0% for both the quarters ended June 30, 2017 and 2016. The Company has US deferred tax assets, which have been offset by valuation allowance because of historical and expected losses. As the Company reverses its losses and becomes profitable, we will reassess the likelihood of recovering a portion or all of the deferred tax assets. The remaining balance of deferred tax assets, which appear on the balance sheet, are from foreign based operations in which utilization is highly probable in offsetting future foreign income taxes.
The Company recorded an income tax gain/expense of $0 resulting from operational results of its foreign entities for both three-month periods ended June 30, 2017 and 2016. As of June 30, 2017 and 2016, there was no significant liability for income tax associated with unrecognized tax benefits. As of June 30, 2017, IGC could not use its net operating losses.
NOTE 20 – SEGMENT INFORMATION
Accounting pronouncements establish standards for the manner in which public companies report information about operating segments in annual and interim financial statements. Operating segments are components of an enterprise that have distinct financial information available and evaluated regularly by the chief operating decision-maker ("CODM") to decide how to allocate resources and evaluate performance. The Company's CODM is considered to be the Company's chief executive officer ("CEO"). The CEO reviews financial information presented on an entity level basis for purposes of making operating decisions and assessing financial performance. Therefore, the Company has determined that it operates in a single operating and reportable segment.
The following provides information required by ASC 280-10-50-38 Entity-Wide Information:
1)
The table below shows revenue reported by product and service:
Product & Service
|
|
Amount
|
|
|
% on total revenues
|
|
|
|
|
|
|
|
|
Rental
|
|
|
10,930
|
|
|
|
21
|
%
|
Real estate
|
|
|
41,996
|
|
|
|
79
|
%
|
TOTAL
|
|
$
|
52,926
|
|
|
|
100
|
%
|
2(a) The table below shows the revenue attributed to the country of domicile (USA) and foreign countries. Revenue is attributed to an individual country if the invoice made to the customer originates in that country. The basis for originating an invoice is the underlining agreement.
Geographic Location
|
|
Amount
|
|
|
% on total revenues
|
|
India
|
|
$
|
10,930
|
|
|
|
21
|
%
|
Malaysia
|
|
|
41,996
|
|
|
|
79
|
%
|
TOTAL
|
|
$
|
52,926
|
|
|
|
100
|
%
|
2(b) The table below shows the long-term assets other than financial instruments held in the country of domicile and foreign countries.
Nature of Assets
|
|
USA (Country of Domicile)
|
|
|
Foreign Countries (India and Malaysia)
|
|
|
Total
|
|
Goodwill
|
|
$
|
|
|
|
$
|
198,169
|
|
|
$
|
198,169
|
|
Property, Plant and Equipment , Net
|
|
|
893,211
|
|
|
|
58,798
|
|
|
|
952,009
|
|
Investments in Affiliates
|
|
|
773,111
|
|
|
|
|
|
|
|
773,111
|
|
Investments Others
|
|
|
5,174,611
|
|
|
|
65,167
|
|
|
|
5,239,778
|
|
Other Non Current Assets
|
|
|
130,898
|
|
|
|
541,244
|
|
|
|
672,142
|
|
Total Long Term Assets
|
|
$
|
6,971,831
|
|
|
$
|
863,378
|
|
|
$
|
7,835,209
|
|
NOTE 21 – CERTAIN AGED RECEIVABLES
The receivable and other assets as of June 30, 2017 and March 31, 2017, include certain aged receivables in the amount of $
430,689
. The aged receivables are due from the Cochin International Airport. Cochin International Airport is partially owned by the State Government of Kerala. The receivables have been due for periods in excess of one year as of June 30, 2017. These receivables are included in accounts receivable and have been classified as current because the arbitration process has concluded and ruling was given in our favor. The Company continues to carry the full value of the receivables without interest and without any impairment, because the Company believes that there is minimal risk that this organization will become insolvent and unable to make payment.
NOTE 22 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company’s current assets and current liabilities approximate their carrying value because of their short-term nature. Such financial instruments are classified as current and are expected to be liquidated within the next twelve months.
NOTE 23 – LEFT INTENTIONALLY BLANK
NOTE 24 – INVESTMENT IN AFFILIATES
Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued 1,200,000 common shares of IGC valued at $888,000 for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC. The Purchase Agreement expired on June 30, 2015, and the Company is pursuing its rights under the terms of the Purchase Agreement to recover certain damages.