UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended | |
| | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑
| September 30, 2021, Form 10-Q
INDIA GLOBALIZATION CAPITAL, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
Table of Contents
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Changes in Shareholder’s Equity (Deficit) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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| September 30, 2021, Form 10-Q
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain “forward-looking statements.” Additionally, we, or our representatives, may, from time to time, make other written or verbal forward-looking statements and discuss plans, expectations, and objectives regarding our business, financial condition, and results of operations. Without limiting the foregoing, statements that are in the future tense, and all statements accompanied by terms such as “believe,” “project,” “expect,” “trend,” “estimate,” “forecast,” “assume,” “intend,” “plan,” “target,” “anticipate,” “outlook,” “preliminary,” “will likely result,” “will continue” and variations of them and similar terms are intended to be “forward-looking statements” as defined by federal securities laws. Such statements are based on currently available information, which management has assessed but which is dynamic and subject to rapid change due to risks and uncertainties that affect our business.
For the next several years, we believe our success is highly correlated with improvement in the Hong Kong and Indian economies, particularly their recovery from the ongoing SARS-CoV-2 (“COVID-19”) pandemic and with the outcome of our clinical trials and secondarily on the sale of our products and services. The Company may not be able to complete human trials on our investigational drug candidates, or, once conducted, the results of human trials may not be favorable or as anticipated or may reflect lack of efficacy in humans or animals. Precautions including social distancing and travel restrictions, among others, surrounding the COVID-19 pandemic could lead to delays or expenses greater than anticipated or projected. Failure or delay with respect to any of the above factors could have a material adverse effect on our business, future results of operations, stock price, and financial condition.
Our projections and investments anticipate certain regulatory changes and stable pricing, which may not hold out over the next several years. We may not be able to protect our intellectual property adequately or receive patents. We may not receive regulatory approval for our products, or trials. The patent applications we have licensed may not be granted by the United States Patent and Trademark Office (“USPTO”), even if the Company is in full compliance with USPTO requirements. We may not have adequate resources including financial resources, to successfully conduct all requisite clinical trials, to bring a product based on the above-referenced patented formulations to market, or to pay applicable maintenance fees over time. We may not be able to successfully commercialize our products even if they are successful and receive regulatory approval, including, but not limited to, based on the Food & Drug Administration’s (“FDA”) current position on hemp and hemp-based products. Failure or delay with respect to any of the factors above could have a material adverse effect on our business, future results of operations, stock price, and financial condition.
This document also contains statements that are not approved by the FDA, including statements on hemp and hemp extracts and their potential efficacy on humans and animals. While these statements and claims are intended to be in compliance with federal and state laws, we cannot guarantee such compliance.
We caution you not to place undue reliance on forward-looking statements, which are based upon assumptions, expectations, plans and projections subject to risks and uncertainties, including those, if any, identified in the “Risk Factors” set forth in this report or in our annual report on Form 10-K for the fiscal year ended March 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on June 14, 2021, or in our quarterly report on Form 10-Q for the three months ended June 30, 2021, filed with the SEC on August 11, 2021, and in the documents incorporated by reference that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date when they are made. Except as required by federal securities law, we do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements.
| September 30, 2021, Form 10-Q
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
India Globalization Capital, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
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September 30, 2021 ($) |
March 31, 2021 ($) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable, net |
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Inventory |
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Investment in Non-marketable securities |
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Deposits and advances |
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Total current assets |
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Non-current assets: |
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Intangible assets, net |
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Property, plant and equipment, net |
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Non-marketable securities |
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Claims and advances |
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Operating lease asset |
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Total non-current assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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Accrued and other liabilities |
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Short-term loans |
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Total current liabilities |
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Non-current liabilities: |
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Long-term loans |
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Other liabilities |
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Operating lease liability |
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Total non-current liabilities |
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Total liabilities |
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Commitments and Contingencies – See Note 12 |
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Stockholders' equity: |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.
| September 30, 2021, Form 10-Q
India Globalization Capital, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except loss per share and share data)
(Unaudited)
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Three months ended September 30, |
Six months ended September 30, |
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2021 |
2020 |
2021 |
2020 |
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Revenue |
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Cost of revenue |
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Gross Profit |
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Selling, General and administrative expenses |
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Research and development expenses |
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Operating loss |
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Impairment of investment |
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Other income, net |
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Loss before income taxes |
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Income tax expense/benefit |
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Net loss attributable to common stockholders |
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Foreign currency translation adjustments |
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Comprehensive loss |
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Net Loss per share attributable to common stockholders: |
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Basic and Diluted |
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Weighted-average number of shares used in computing net loss per share amounts: |
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The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.
| September 30, 2021, Form 10-Q
India Globalization Capital, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
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Three months ended September 30, 2020 |
Number of Common Shares |
Common Stock and Additional Paid in Capital ($) |
Accumulated Deficit ($) |
Accumulated Other Comprehensive Loss ($) |
Total Stockholders' Equity ($) |
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Balances as of June 30, 2020 |
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Common stock-based compensation & expenses, net |
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Net loss |
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Loss on foreign currency translation |
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Balances as of September 30, 2020 |
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Three months ended September 30, 2021 |
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Balances as of June 30, 2021 |
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Common stock-based compensation & expenses, net |
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Issuance of common stock through offering (net of expenses) |
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Net loss |
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Loss on foreign currency translation |
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Balances as of September 30, 2021 |
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Six months ended September 30, 2020 |
Number of Common Shares |
Common Stock and Additional Paid in Capital ($) |
Accumulated Deficit ($) |
Accumulated Other Comprehensive Loss ($) |
Total Stockholders' Equity ($) |
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Balances as of March 31, 2020 |
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Common stock-based compensation & expenses, net |
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Common stock issued for investment |
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Net loss |
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Loss on foreign currency translation |
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Balances as of September 30, 2020 |
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Six months ended September 30, 2021 |
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Balances as of March 31, 2021 |
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Common stock-based compensation & expenses, net |
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Issuance of common stock through offering (net of expenses) |
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Other adjustments |
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Net loss |
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Gain on foreign currency translation |
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Balances as of September 30, 2021 |
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The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.
| September 30, 2021, Form 10-Q
India Globalization Capital, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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Six months ended September 30, |
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2021 ($) |
2020 ($) |
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Operating activities: |
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Net loss |
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Adjustment to reconcile net loss to net cash: |
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Depreciation and amortization |
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Provision for bad debt |
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Impairment of non-marketable securities |
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Common stock-based compensation and expenses |
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Forgiveness of PPP Loan |
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Changes in: |
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Accounts receivables |
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Inventory |
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Deposits and advances |
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Claims and advances |
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Accounts payable |
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Accrued and other liabilities |
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Operating lease asset |
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Net cash used in operating activities |
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Investing activities: |
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Purchase of property, plant, and equipment |
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Investment in/Proceed from marketable securities |
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Investment in non-marketable securities |
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Acquisition and filing cost of patents and rights |
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Net cash used in investing activities |
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Financing activities: |
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Issuance of equity stock through offering (net of expenses) |
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Proceeds from/Repayment of long- term loan |
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Net cash provided by financing activities |
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Effects of exchange rate changes on cash and cash equivalents |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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Supplementary information: |
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Non-cash items: |
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Common stock issued/granted for stock-based compensation, including patent acquisition |
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Amortization of operating lease |
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Forgiveness of PPP Loan |
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The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.
| September 30, 2021, Form 10-Q
India Globalization Capital, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021
(in thousands, except for share data and loss per share, unaudited)
Unless the context requires otherwise, all references in this report to “IGC,” “the Company,” “we,” “our” and/or “us” refer to India Globalization Capital, Inc., together with our subsidiaries and beneficially owned subsidiary. Our filings are available on www.sec.gov. The information contained on our various websites, including www.igcinc.us, is not incorporated by reference in this report, and you should not consider such information to be a part of this report. 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 such information to be a part of this report.
NOTE 1 – BUSINESS DESCRIPTION
Business
Since 2014, we have focused a portion of our business on the application of phytocannabinoids such as Tetrahydrocannabinol (“THC”) and Cannabidiol (“CBD”), among others, in combination with other compounds, to address efficacy for various ailments and diseases such as Alzheimer's disease. As previously disclosed, IGC submitted IGC-AD1, our investigational drug candidate for Alzheimer’s, to the U.S. Food and Drug Administration (“FDA”) under Section 505(i) of the Federal Food, Drug, and Cosmetic Act and received approval on July 30, 2020, to proceed with the Phase 1 trial, on Alzheimer’s patients.
On September 7, 2021, the Company announced the completion of all dose escalation studies associated with the Phase 1 trial. Based on this study and subject to FDA concurrence, the cannabis-based investigational drug IGC-AD1 was generally safe and well-tolerated by the Alzheimer’s trial participants. The Company has filed the safety and tolerability data with the FDA as part of its Annual Report. In addition, the trial on the secondary endpoints, such as pharmacokinetics, genotyping, neuropsychiatric inventory, and measurement of suicide severity, have also been completed. We expect to report this data as it becomes available and after submission to the FDA. The Company is motivated by the potential that, with future successful results from appropriate further trials, IGC-AD1 could contribute to relief for some of the 50 million people around the world expected to be impacted by Alzheimer’s disease by 2030 (WHO, 2020).
The Company has filed thirteen patent applications to address various diseases such as Alzheimer's, Central Nervous System (“CNS”) disorders, pain, stammering, seizures in cats and dogs, eating disorders, stress-relief and calm-restoring beverage, and fatigue. As of September 30, 2021, we have three patents.
In addition, we license a patent filing from the University of South Florida titled “Ultra-Low dose THC as a potential therapeutic and prophylactic agent for Alzheimer’s Disease.” The U.S. Patent and Trademark Office (“USPTO”) issued a patent (#11,065,225) for this filing on July 20, 2021. The granted patent relates to IGC’s proprietary formulation, IGC-AD1, intended to assist in the treatment of individuals living with Alzheimer’s disease.
The Company is developing three brands, including Holief™, among others. Holief is a non-GMO, vegan, natural, women’s line of over-the-counter (“OTC”) products aimed at addressing dysmenorrhea and premenstrual symptoms (“PMS”) in women. Holief, in development, seeks to connect, via a cloud-based platform, women with health care professionals who can help address dysmenorrhea or period cramps, and PMS. Approximately 31.3 million (Statista, 2021) women in America suffer from dysmenorrhea and PMS.
Since our inception, the Company has operated its Infrastructure business segment from India. The infrastructure business segment 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. Information about our infrastructure products and service offerings is available at www.igcinc.us. Unfortunately, the infrastructure sector has been severely hampered by the COVID-19 pandemic, especially in India and Hong Kong where the business is based.
COVID-19 update
Our infrastructure business is based in the state of Kerala, India, which is among the Indian states most affected by COVID-19, and Hong Kong with strict quarantine and travel restrictions. The restrictions continue to adversely impact our infrastructure business, financial condition, liquidity, and operations. While IGC remains committed to its Infrastructure business line and intends to continue pursuing the execution of construction contracts, the purchase and resale of physical commodities used in infrastructure, and the rental of heavy construction equipment as the pandemic allows, we have limited visibility into when economic conditions will recover in India and Hong Kong.
| September 30, 2021, Form 10-Q
In response, we have oriented our current focus on a) the human trials on IGC-AD1 and getting an Alzheimer’s drug through trials and eventually to market, subject to FDA approval, and b) launching a cannabinoid-based women’s wellness line of products designed to assist in managing PMS and Dysmenorrhea.
Business Organization
As of September 30, 2021, the Company had the following direct operating subsidiaries: Techni Bharathi Private Limited (“TBL”), IGCare, LLC (“IGCare"), Holi Hemp, LLC (“Holi Hemp”), IGC Pharma, LLC (“IGC Pharma”), SAN Holdings, LLC (“SAN Holdings”), Sunday Seltzer, LLC (“Sunday Seltzer”) and Colombia-based beneficially owned subsidiary Hamsa Biochem SAS (“Hamsa”). The Company’s fiscal year is the 52-week 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.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying condensed consolidated Balance Sheet as of September 30, 2021, condensed consolidated statements of operations for the three and six months ended September 30, 2021, and 2020, condensed consolidated statements of changes in stockholders’ deficit for the three and six months ended September 30, 2021, and 2020, and condensed consolidated statements of cash flows for the six months ended September 30, 2021, and 2020, are unaudited. The Condensed Consolidated balance sheet as of March 31, 2021, which has been derived from audited financial statements, and these accompanying 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 Securities Exchange Commission (“SEC”). 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 fiscal year ended March 31, 2021 (“Fiscal 2021”) contained in the Company’s Form 10-K for Fiscal 2021, filed with the SEC on June 14, 2021, 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. Intercompany accounts and transactions have been eliminated. In the opinion of the Management, the interim statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
Use of estimates
The preparation of financial statements in conformity with 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; sales returns; normal loss during production; 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 condensed consolidated financial statements.
| September 30, 2021, Form 10-Q
Presentation and functional currencies
IGC operates in India, U.S., Colombia and Hong Kong and a 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 our 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.
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.
No impairment has been recorded for the six months ended September 30, 2021, and 2020.
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.
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 more than 20% and the Company has a significant influence, the Company has accounted for the investment based on the equity method in accordance with ASC Topic 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 accounts for the investment in accordance with ASC Topic 321, “Investments-Equity Securities”.
As of September 30, 2021, the Company does not have any investment in marketable securities.
| September 30, 2021, Form 10-Q
Stock – based compensation
The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC Topic 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. Generally, 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.
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 $
Inventory
Inventory is valued at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Inventory consists of raw materials, finished goods related to wellness products, hand sanitizers, finished hemp-based products, beverages, among others as well as work-in-progress such as extracted crude oil, hemp-based isolate, growing crops, harvested crops and 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 do not have a readily available market. Hence, the Company values its harvested crops at cost. Please refer to Note 3 – “Inventory”, for further information.
Abnormal amounts of idle facility expense, freight, handling costs, scrap, discontinued products and wasted material (spoilage) are expensed in the period they are incurred.
Fair value of financial instruments
ASC 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.
| September 30, 2021, Form 10-Q
Loss per share
The computation of basic loss per share for the six months ended September 30, 2021, excludes potentially dilutive securities of approximately
Cybersecurity
We have a cybersecurity policy in place and have taken cybersecurity measures that we expect are likely to safeguard the Company against breaches. In the six months ended September 30, 2021, there were no impactful breaches in cybersecurity.
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 in the last month of the fiscal 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 a 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 in light of the known impact to date of the COVID-19 pandemic 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 similar expenses exceeding $2,500 per trademark. Management may also capitalize trademarks and similar expenses up to $2,500 per trademark based on its potential and benefit in coming years.
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.
| September 30, 2021, Form 10-Q
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 have 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 the 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. 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 tolling services is recognized when the performance obligation, such as processing of the material, has been completed and output material has been transferred to the customer. We license our products to processors. The royalty income from licensing is recognized once goods have been sold by the processor to its customers.
Net sales disaggregated by significant products and services for the six months ended September 30, 2021, and 2020 are as follows:
|
(in thousands) Six months ended September 30, |
||||||||
|
2021 ($) |
2020 ($) |
|||||||
|
Infrastructure segment |
||||||||
|
Rental income (1) |
||||||||
|
Construction income (2) |
||||||||
|
Purchase and resale of physical commodities (3) |
||||||||
|
Life Sciences segment |
||||||||
|
Wellness and Lifestyle (4) |
||||||||
|
Tolling/White labeling service (5) |
||||||||
|
Total |
||||||||
(1) Rental income consists of income from rental of heavy construction equipment.
(2) Construction income consists of the execution of contracts directly or through subcontractors.
(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 wellness and lifestyle segment such as sale of hand sanitizer, bath bombs, lotion, gummies, beverages, hemp crude extract, hemp isolate, and hemp distillate and royalty income from the sale of Hyalolex™, now named Hyalolex™ Drops of Clarity™.
(5) Relates to income from tolling and white label services.
Leases
Lessor Accounting
Under the current ASU 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.
| September 30, 2021, Form 10-Q
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 most 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.
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 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 Topic 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 September 30, 2021.
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. Please refer “Note 9 - Leases”, for further information.
Recently issued accounting pronouncements
Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
| September 30, 2021, Form 10-Q
NOTE 3 – INVENTORY
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Raw materials |
||||||||
|
Work-in-Progress |
||||||||
|
Finished goods |
||||||||
|
Total |
||||||||
Inventory in the form of work-in-progress as of September 30, 2021, is comprised of, but not limited to, harvested hemp crop hemp-based extracts , among other. Inventory also includes cost related to growing crops like seeds, fertilizer, other raw materials, labor, farm related overheads and the depreciation of farming equipment, hand sanitizers, gummies, lotions, beverages, and personal protection equipment, among others.
During the six months ended September 30, 2021, inventory write down was of approximately $
NOTE 4 – DEPOSITS AND ADVANCES
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Advances to suppliers and consultants |
||||||||
|
Advances for property, plant and equipment |
||||||||
|
Other receivables |
||||||||
|
Prepaid expense and other current assets |
||||||||
|
Total |
||||||||
The Advances to suppliers and consultants primarily relate to advances to suppliers in our Life Sciences and Infrastructure segment. Advances for Property, Plant and Equipment include an advance paid for equipment. Prepaid expense and other current assets include approximately $32 thousand statutory advances as of September 30, 2021, as compared to $
NOTE 5 – INTANGIBLE ASSETS
|
Amortized intangible assets |
(in thousands) |
|||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Patents |
||||||||
|
Other intangibles |
||||||||
|
Accumulated amortization |
( |
) |
( |
) |
||||
|
Total amortized intangible assets |
||||||||
|
Indefinite lived intangible assets |
||||||||
|
Patents |
||||||||
|
Other intangibles |
||||||||
|
Total unamortized intangible assets |
||||||||
|
Total intangible assets |
||||||||
| September 30, 2021, Form 10-Q
The value of intangible assets includes the cost of acquiring patent rights, supporting data, and the expense associated with filing
The amortization of patent and patent rights with finite life is up to
The Company regularly reviews its intangible assets to determine if any intangible asset is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period and concluded that, as of September 30, 2021, there was no impairment.
|
Estimated amortization expense |
(in thousands) ($) |
|||
|
For the year ended 2022 |
||||
|
For the year ended 2023 |
||||
|
For the year ended 2024 |
||||
|
For the year ended 2025 |
||||
|
For the year ended 2026 |
||||
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
|
(in thousands, except useful life) |
|||||||||||
|
Useful Life (years) |
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||||
|
Land |
|
|
|
||||||||
|
Buildings & facilities |
|
|
|
||||||||
|
Plant and machinery |
|
|
|
||||||||
|
Computer equipment |
|
|
|
||||||||
|
Office equipment |
|
|
|
||||||||
|
Furniture and fixtures |
|
|
|
||||||||
|
Vehicles |
|
|
|
||||||||
|
Construction in progress |
|
|
|
||||||||
|
Total gross value |
|
|
|||||||||
|
Less: Accumulated depreciation |
( |
( |
) |
||||||||
|
Total property, plant and equipment, net |
|
|
|||||||||
The depreciation expense in the three months ended September 30, 2021, and 2020, amounted to approximately $
| September 30, 2021, Form 10-Q
NOTE 7 – INVESTMENTS IN NON-MARKETABLE SECURITIES
Short-term investment
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Investment in Evolve I (i) |
||||||||
|
Total |
||||||||
| (i) | |
Long-term investment
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Investment in equity shares of unlisted company |
||||||||
|
Total |
||||||||
The Company regularly reviews its investment portfolio to determine if any security is permanently impaired, which would require the Company to record an impairment charge in the period.
NOTE 8 – CLAIMS AND ADVANCES
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Claims receivable (1) |
||||||||
|
Non-current deposits |
- | |||||||
|
Non-current advances (2) |
||||||||
|
Total |
||||||||
| (1) | The claims receivable is due from the Cochin International Airport (“CIA”) that is partially owned by the State Government of Kerala. While the Company has initiated collection proceedings in the Commercial Court of Ernakulam, the Company believes it will be difficult to receive the amount in the next 12 months because of the time required for legal collection proceedings. The decrease in claims receivable was mainly due to foreign exchange translation as a result of a decrease in value of Indian Rupee. |
| (2) | Includes $ |
NOTE 9 – LEASES
The Company has short-term leases primarily consisting of spaces with the remaining lease term being less than or equal to 12 months. The total short-term lease expense and cash paid for the six months ended September 30, 2021, and 2020 are approximately $
| September 30, 2021, Form 10-Q
America: In November 2019, the Company entered into an lease agreement with a lease term of less than 12 months. This lease was amended in March 2020, with a new lease term from March 1, 2020, to November 30, 2025. The annual lease expense is approximately $
Asia: The Company renewed three lease agreements for terms between three to four years expiring between 2023 and 2024. The total annual lease expense is approximately $
|
(in thousands) Three months ended September 30, 2021 ($) |
(in thousands) Six months ended September 30, 2021 ($) |
|||||||
|
Operating lease costs |
||||||||
|
Short term lease costs |
||||||||
|
Variable lease costs |
||||||||
|
Total lease costs |
||||||||
Right of use assets and lease liabilities for our operating leases were recorded in the consolidated balance sheet as follows:
|
(in thousands) |
(in thousands) |
|||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Assets |
||||||||
|
Operating lease asset |
||||||||
|
Total lease assets |
||||||||
|
Liabilities |
||||||||
|
Current liabilities: |
||||||||
|
Accrued liabilities and others (current portion – operating lease liability) |
||||||||
|
Noncurrent liabilities: |
||||||||
|
Operating lease liability (non-current portion – operating lease liability) |
||||||||
|
Total lease liability |
||||||||
|
(in thousands) As of September 30, 2021 ($) |
||||
|
Supplemental cash flow and non-cash information related to leases is as follows: |
||||
|
Cash paid for amounts included in the measurement of lease liabilities |
||||
|
–Operating cash flows from operating leases |
||||
|
Right-of-use assets obtained in exchange for operating lease obligations |
||||
| September 30, 2021, Form 10-Q
|
As of September 30, 2021, the following table summarizes the maturity of our lease liabilities: |
||||
|
Sep-22 |
||||
|
Sep-23 |
||||
|
Sep-24 |
||||
|
Sep-25 |
||||
|
Sep-26 |
||||
|
Less: Present value discount |
( |
) |
||
|
Total lease liabilities |
NOTE 10 – ACCRUED AND OTHER LIABILITIES
|
(in thousands) |
||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
|||||||
|
Compensation and other contributions |
||||||||
|
Provision for expenses |
||||||||
|
Other current liability |
||||||||
|
Total |
||||||||
Compensation and other contribution related liabilities consist of accrued salaries to employees. Provision for expenses include provision for legal, professional, and marketing expenses. Other current liability also includes $
NOTE 11 – LOANS AND OTHER LIABILITIES
Forgiveness of Paycheck Protection Program Promissory Note:
On May 3, 2020, the Company signed the Paycheck Protection Program Promissory Note (the “PPP Note”) and Agreement for a loan of approximately $
Loan as of September 30, 2021:
On June 11, 2020, the Company received an Economic Injury Disaster Loan (“EIDL”) for approximately $
| September 30, 2021, Form 10-Q
Other Liability:
|
(in thousands) |
||||||||
|
As of |
||||||||
|
September 30, 2021 ($) |
March 31, 2021 ($) |
|||||||
|
Statutory reserve |
||||||||
|
Total |
||||||||
The statutory reserve is a gratuity reserve for employees in our subsidiaries in India.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
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. There are no such matters that are deemed material to the condensed consolidated financial statements as of September 30, 2021, except as disclosed below.
As of September 30, 2021, several law firms have filed shareholder lawsuits, two of which have been consolidated and remain pending, citing, among other things, the Company’s September 25, 2018, press release and the NYSE American delisting proceedings initiated in October 2018 (and overturned in February 2019) and subsequent fall in share price. The Company filed a motion to dismiss on October 11, 2019, which the court denied on January 29, 2021. Class Action Defendants, including the Company, have reached a preliminary agreement in principle to settle the litigation, subject to agreement to final settlement terms and approval by the United States District Court for the District of Maryland. The Company anticipates that a final settlement will be executed and approved sometime in Fiscal 2022, although there can be no assurance thereof. The Company has created a provision for $
In the U.S., we provide health insurance, life insurance, and a 401(k) plan wherein the Company matches up to
NOTE 13 – SECURITIES
As of September 30, 2021, the Company was authorized to issue up to
We have one security listed on the NYSE American: common stock, $.0001 par value (ticker symbol: IGC). This security also trades on the Frankfurt, Stuttgart, and Berlin stock exchanges (ticker symbol: IGS1). The Company also has
On January 13, 2021, the Company entered into a Sales Agreement (the “Agreement”) with The Benchmark Company, LLC (the “Sales Agent”) pursuant to which the Sales Agent is acting as the Company’s sales agent with respect to the issuance and sale of up to $
| September 30, 2021, Form 10-Q
NOTE 14 – STOCK-BASED COMPENSATION
As of September 30, 2021, under both the Company’s previous 2008 and current 2018 Omnibus Incentive Plans, a total of
The options are fair valued using a Black-Scholes Pricing Model with the following assumptions:
|
Granted in Fiscal 2022 |
Granted in Fiscal 2021 |
|||||||
|
Expected life of options |
|
|
||||||
|
Vested options |
% |
% |
||||||
|
Risk free interest rate |
% |
% |
||||||
|
Expected volatility |
% |
% |
||||||
|
Expected dividend yield |
||||||||
The expense associated with share-based payments to employees, directors, advisors, and contractors is allocated over the vesting or service period and recognized in the Selling, general and administrative expenses (including research and development). For the six months ended September 30, 2021, the Company’s share-based expense and option-based expense shown in Selling, general and administrative expenses (including research and development) was $
The expense associated with share-based payments to employees, directors, advisors, and contractors is allocated over the vesting or service period and recognized in the Selling, general and administrative expenses (including research and development). For the six months ended September 30, 2020, the Company’s share-based expense and option-based expense shown in selling, general and administrative expenses (including research and development) was $
|
Non-vested shares |
Shares (in thousands) (#) |
Weighted average grant date fair value ($) |
||||||
|
Non-vested shares as of March 31, 2021 |
||||||||
|
Granted |
||||||||
|
Vested |
( |
) |
( |
) |
||||
|
Cancelled/forfeited |
( |
) | ( |
) |
||||
|
Non-vested shares as of September 30, 2021 |
||||||||
|
Options |
Shares (in thousands) (#) |
Weighted average grant date fair value ($) |
Weighted average exercise price ($) |
|||||||||
|
Options outstanding as of March 31, 2021 |
||||||||||||
|
Granted |
||||||||||||
|
Exercised |
- | - | - | |||||||||
|
Cancelled/forfeited |
- | - | - | |||||||||
|
Options outstanding as of September 30, 2021 |
||||||||||||
There was a combined unrecognized expense of $
| September 30, 2021, Form 10-Q
NOTE 15 – FAIR VALUE OF FINANCIAL INSTRUMENTS
As of September 30, 2021, the Company’s marketable securities, if any, may consist of liquid funds, which have been classified as Level 1 of the fair value hierarchy because they have been valued using quoted prices in active markets. The Company’s cash and cash equivalents have also been classified as Level 1 on the same principle. Financial instruments are classified as current if they are expected to be liquidated within the next twelve months. The Company’s remaining investments have been classified as Level 3 instruments as there is little or no market data. Level 3 investments are valued using cost-method. For further information refer to Note 7, “Investments in Non-Marketable Securities.”
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and March 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company used to determine such fair value:
(in thousands)
|
Level 1 ($) |
Level 2 ($) |
Level 3 ($) |
Total ($) |
|||||||||||||
|
September 30, 2021 |
||||||||||||||||
|
Cash and cash equivalents: |
||||||||||||||||
|
Total cash and cash equivalents |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
-Marketable securities |
||||||||||||||||
|
-Non-marketable securities |
||||||||||||||||
|
Total Investments |
||||||||||||||||
|
Level 1 ($) |
Level 2 ($) |
Level 3 ($) |
Total ($) |
|||||||||||||
|
March 31, 2021 |
||||||||||||||||
|
Cash and cash equivalents: |
||||||||||||||||
|
Total cash and cash equivalents |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
-Marketable securities |
||||||||||||||||
|
-Non-marketable securities |
||||||||||||||||
|
Total investments |
||||||||||||||||
NOTE 16 – SEGMENT INFORMATION
FASB ASC 280, “Segment Reporting” establishes standards for reporting information about reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group (“CODM”), in deciding how to allocate resources and in assessing performance. The CODM evaluates revenues and gross profits based on product lines and routes to market. Based on our integration and Management strategies, we operate in
The Company’s CODM is the Company’s chief executive officer (“CEO”). The CEO reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. Therefore, and before our Life Sciences segment started, the Company had determined that it operated in a single operating and reportable segment. As of the date of this report and in preparation for the new and different source of revenue, the Company has determined that it operates in
| September 30, 2021, Form 10-Q
The following provides information required by ASC 280-10-50-38 “Entity-wide Information”:
1)
Product & Service
|
(in thousands) |
||||||||
|
Segments |
Six months ended September 30, 2021 ($) |
Percentage of Total Revenue (%) |
||||||
|
Infrastructure segment |
% |
|||||||
|
Life Sciences segment |
% |
|||||||
|
Total |
% |
|||||||
|
(in thousands) |
||||||||
|
Segments |
Six months ended September 30, 2020 ($) |
Percentage of Total Revenue (%) |
||||||
|
Infrastructure segment |
% |
|||||||
|
Life Sciences segment |
% |
|||||||
|
Total |
% |
|||||||
For information for revenue by product and service, refer Note 2, “Summary of Significant Accounting Policies”.
2)
|
(in thousands) |
||||||||||
|
Segments |
Country |
Six months ended September 30, 2021 ($) |
Percentage of Total Revenue (%) |
|||||||
|
Asia |
(1) India |
% |
||||||||
|
(2) Hong Kong |
- |
% |
||||||||
|
America |
U.S. and Colombia |
% |
||||||||
|
Total |
% |
|||||||||
|
(in thousands) |
||||||||||
|
Segments |
Country |
Six months ended September 30, 2020 ($) |
Percentage of Total Revenue (%) |
|||||||
|
Asia |
(1) India |
% |
||||||||
|
(2) Hong Kong |
% |
|||||||||
|
America |
U.S. and Colombia |
% |
||||||||
|
Total |
% |
|||||||||
| September 30, 2021, Form 10-Q
3)
|
(in thousands) |
||||||||||||
|
Nature of assets |
USA (Country of Domicile) ($) |
Foreign Countries (India, Hong Kong, and Colombia) ($) |
Total as of September 30, 2021 ($) |
|||||||||
|
Intangible assets, net |
||||||||||||
|
Property, plant and equipment, net |
||||||||||||
|
Non-marketable securities |
||||||||||||
|
Claims and advances |
||||||||||||
|
Operating lease asset |
||||||||||||
|
Total non-current assets |
||||||||||||
|
(in thousands) |
||||||||||||
|
Nature of assets |
USA (Country of Domicile) ($) |
Foreign Countries (India, Hong Kong, and Colombia) ($) |
Total as of March 31, 2021 ($) |
|||||||||
|
Intangible assets, net |
||||||||||||
|
Property, plant and equipment, net |
||||||||||||
|
Non-marketable securities |
||||||||||||
|
Claims and advances |
||||||||||||
|
Operating lease asset |
||||||||||||
|
Total non-current assets |
||||||||||||
NOTE 17 – SUBSEQUENT EVENTS
None.
| September 30, 2021, Form 10-Q
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of the Company's consolidated financial condition, and results of operations and cash flows, and should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q for the three months and the six months ended September 30, 2021, and the Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on June 14, 2021 (the “2021 Form 10-K”). The Company’s actual results could differ materially from those discussed here. Factors that could cause differences include those discussed in the “Forward-Looking Statements” and “Risk Factors” sections, as well as discussed elsewhere in this report. The risks and uncertainties can cause actual results to differ significantly from those in our forward-looking statements or implied in historical results and trends. 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 the three months ended September 30, 2021, and September 30, 2020, was from our Life Sciences segment, which includes a biopharmaceutical component, and a wellness and lifestyle business, which involves:
|
(i) |
development of potential new drugs, subject to applicable regulatory approvals, that use ultra-low doses of phytocannabinoids including cannabidiol (“CBD”) and tetrahydrocannabinol (“THC”), among others, in combination with other compounds, believed to assist in managing symptoms of diseases like Alzheimer’s, |
|
|
(ii) |
hand sanitizers and several hemp-based CBD products and brands, in various stages of development, for sale online and/or through stores, |
|
(iii) |
wholesale of hemp extracts including hemp crude extract, and hemp isolate, among others, |
|
(iv) |
white labeling of hemp-based products, and |
|
(v) |
the offering of tolling services like extraction and distillation to hemp-farmers and retailers. |
The Company’s second segment, the infrastructure segment, involves:
|
(i) |
Execution of Construction Contracts – The Company is executing a road building contract in Kerala, India valued at approximately $1.2 million. Work on this project is sporadic based on COVID-19 restrictions. The Company intends to continue operations in this business line as the COVID-19 pandemic permits. |
|
|
(ii) |
Purchase and Resale of Physical Commodities Used in Infrastructure – This business line includes the purchase and resale of commodities, including steel, wooden doors, marble, and tiles, among others. This work has been adversely affected due to COVID-19. There was no revenue from this business line during the three months ended September 30, 2021, in part due to the COVID-19 pandemic. The Company intends to continue operations in this business line as the COVID-19 pandemic permits. |
|
|
(iii) |
Rental of Heavy Construction Equipment – We own heavy construction equipment such as motor grader and rollers, that we rent to construction contractors. This business is seasonal and had minimal revenue during the three months ended September 30, 2021, in part due to the COVID-19 pandemic. The Company intends to continue operations in this business line as the COVID-19 pandemic permits. |
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.
| September 30, 2021, Form 10-Q
Company Highlights
|
● |
On October 28, 2021, the Company won Best CBD Topical award for its broad-spectrum hemp extract cream called Holi Wonder™ at the USA CBD Expo event held in Chicago, Illinois, U.S. |
|
● |
On October 5, 2021, the Company received a Good Manufacturing Practice [GMP] certification for its facilities in Vancouver, Washington, U.S. where it makes its products. |
|
● |
On September 17, 2021, the Company filed a provisional patent application with the USPTO for our IGC-513 for compositions and methods for treating patients with Dementia due to Alzheimer's disease. |
|
● |
On September 7, 2021, the Company announced the completion of its Phase 1 clinical trial on IGC’s tetrahydrocannabinol (“THC”)- based investigational new drug, IGC-AD1, intended to alleviate certain symptoms of individuals who have Alzheimer’s disease. The primary endpoint of this Phase 1 trial was safety and tolerability. Based on this study and subject to FDA concurrence the cannabis-based investigational drug IGC-AD1 was generally safe and well-tolerated by the Alzheimer’s trial participants. The safety and tolerability data has been filed with the FDA in IGC’s Annual Report. The trial’s secondary endpoints including pharmacokinetics, genotyping, neuropsychiatric inventory, and measurement of suicide severity, have also been completed. We expect to report this data as it becomes available and after submission to the FDA. As previously disclosed, IGC submitted IGC-AD1, its investigational drug candidate for Alzheimer’s, to the FDA under Section 505(i) of the Federal Food, Drug, and Cosmetic Act. IGC received approval to proceed with the Phase 1 trial, on Alzheimer’s patients, from the FDA on July 30, 2020. |
|
● |
During the six months ended September 30, 2021, the Company raised approximately $4.1 million of net proceeds from the issuance of equity stock. The Company had entered an “at the market” (“ATM”) offering pursuant to the Sales Agreement (the “Agreement”) entered on January 13, 2021, with The Benchmark Company, LLC (the “Sales Agent”) for the issuance and sale of up to $75,000,000 of the Company’s shares of common stock, par value $0.0001 per share (the “Shares”). |
|
● |
On June 10, 2021, the Company received forgiveness for the full amount borrowed as per the PPP Note of approximately $430 thousand. The PPP Note was established under the CARES Act and administered by the SBA. |
Strategy
We have a two-pronged strategy for our Life Sciences biopharmaceutical component: the initial prong is to investigate IGC-AD1 for safety and efficacy in managing the symptoms of Alzheimer’s disease. This involves conducting Phase 1 through Phase 3 trials on IGC-AD1 over the next several years, subject to FDA regulatory approval and adequate funding, with the anticipated goal of demonstrating safety and efficacy and potentially obtaining FDA approval for IGC-AD1 as a phytocannabinoid-based formulation that can help manage some symptoms for patients suffering from Alzheimer’s disease. The second prong is to investigate the potential efficacy of IGC-AD1 on memory and on decreasing or managing plaques and tangles, some of the hallmarks of Alzheimer’s disease.
Our pipeline of investigational phytocannabinoid formulations also includes pain creams and tinctures for pain relief. We believe that the biopharmaceutical component of our Life Sciences strategy will take several years to implement and involves considerable risk; however, we believe it may involve more significant defensible growth potential and first-to-market advantage.
Our consumer service and products strategy includes advancing the women’s line of products under the brand www.holief.com and developing and creating a cloud-based platform that connects women with health care professionals who can help with PMS and dysmenorrhea.
We believe that the additional investment in clinical trials, research, and development (“R&D”), facilities, marketing, and advertising, and the acquisition of products and businesses supporting our Life Sciences segment, are likely to be critical to the development and delivery of innovative products and positive patient and customer experiences. Part of our strategy is to leverage our R&D and our intellectual property to develop products that we believe are likely to be well-differentiated and -supported by science through planned pre-clinical and clinical trials. We believe this strategy has the potential to improve existing products and lead to the creation of new products, which, based on scientific study and research, may offer positive results for the management of certain conditions, symptoms, and side effects.
| September 30, 2021, Form 10-Q
COVID-19 Update
Our infrastructure business is based in the state of Kerala, India, which is among the Indian states most affected by COVID-19, and Hong Kong with strict quarantine and travel restrictions. The restrictions continue to adversely impact our infrastructure business, financial condition, liquidity, and operations. While IGC remains committed to its Infrastructure business line and intends to continue pursuing the execution of construction contracts, the purchase and resale of physical commodities used in infrastructure, and the rental of heavy construction equipment as the pandemic allows, we have limited visibility into when economic conditions will recover in India and Hong Kong.
In response, we have oriented our current focus on a) the human trials on IGC-AD1 and getting an Alzheimer’s drug through trials and to market, subject to FDA approval, and b) launching a cannabinoid-based women’s wellness line of products designed to assist in managing PMS and Dysmenorrhea.
Results of Operations for the Three Months Ended
September 30, 2021, and September 30, 2020
The historical results presented below are not necessarily indicative of the results that may be expected for any future period. The following table presents an overview of our results of operations for the three months ended September 30, 2021 and September 30, 2020:
Statement of Operations (in thousands, unaudited)
|
Three months ended September 30, |
||||||||||||||||
|
2021 ($) |
2020 ($) |
Change ($) |
Percent Change |
|||||||||||||
|
Revenue |
56 | 125 | (69 | ) | (55 |
)% |
||||||||||
|
Cost of revenue |
(18 | ) | (99 |
) |
81 | (82 |
)% |
|||||||||
|
Gross profit |
38 | 26 | 12 | 46 |
% |
|||||||||||
|
Selling, general and administrative expenses |
(4,110 | ) | (1,483 |
) |
(2,627 | ) | 177 |
% |
||||||||
|
Research and development expenses |
(276 | ) | (219 |
) |
(57 | ) | 26 |
% |
||||||||
|
Operating loss |
(4,348 | ) | (1,676 |
) |
(2,672 | ) | 159 |
% |
||||||||
| Impairment of investment | 0 | - | - | - | ||||||||||||
|
Other income, net |
4 | 19 | (15 | ) | (79 |
)% |
||||||||||
|
Loss before income taxes |
(4,344 | ) | (1,657 |
) |
(2,687 | ) | 162 |
% |
||||||||
|
Net loss |
(4,344 | ) | (1,657 |
) |
(2,687 | ) | 162 |
% |
||||||||
Revenue – Revenue in the quarter ended September 30, 2021, and September 30, 2020, was primarily derived from our Life Sciences segment, which involved sales of products such as lotion, gummies, and alcohol-based hand sanitizers, among others. Revenue was approximately $56 thousand and $125 thousand for the three months ended September 30, 2021, and the three months ended September 30, 2020, respectively.
Revenue in the Life Sciences segment in the three months ended September 30, 2020, was $58 thousand as compared to $53 thousand in the three months ended September 30, 2021, albeit with a change in product mix. Revenue in our Infrastructure segment for the three months ended September 30, 2020, was $67 and $3 thousand in the three months ended September 30, 2021. The revenue relates to the execution of a construction contract. Primarily due to COVID-19, we have limited visibility on when either of our segments will stabilize, generate significant revenue, and become predictable. We expect volatility in both segments in the foreseeable future. We expect to be opportunistic in providing personal protection equipment, including hand sanitizers, as areas reopen from the pandemic.
Cost of revenue – Cost of revenue amounted to approximately $18 thousand for the three months ended September 30, 2021, compared to $99 thousand in the three months ended September 30, 2020. The cost of revenue in the three months ended September 30, 2021, is primarily attributable to raw materials that are required to produce our products.
| September 30, 2021, Form 10-Q
Selling, general and administrative expenses (SG&A)– SG&A expenses consist primarily of employee-related expenses, sales commission, professional fees, legal fees, marketing, other corporate expenses, allocated general overhead and provisions, depreciation and write-offs relating to doubtful accounts and advances, if any. SG&A expenses increased by approximately $2.6 million or 177% to approximately $4.1 million for the three months ended September 30, 2021, from approximately $1.48 million for the three months ended September 30, 2020.
The $2.6 million increase in SG&A is attributable to the following: approximately $1.7 million to a provision for stolen inventory at our vendor’s premises, approximately $352 thousand relates to provision of previously announced legal settlements and associated legal expenses, approximately $125 thousand for an IRS tax penalty, and non-cash increase of $223 thousand and $55 thousand for Common stock-based compensation and depreciation respectively. The remaining increase of about $153 thousand in the quarter is related to marketing and other operating expenses.
Research and Development expenses– Research and Development (“R&D”) expenses were attributed to conducting the Phase 1 trial on patients suffering from Alzheimer’s disease and product research in our Life Sciences segment. The R&D expenses for the three months ended September 30, 2021, are approximately $276 thousand and approximately $219 thousand for the three months ended September 30, 2020. The cost associated with this work is mostly associated with the clinical trial on patients suffering from Alzheimer’s disease, research comprising of plant extracts that could be productized and data to support the efficacy of the extracts, product research, designing, formulating and market analysis. We expect R&D expenses to increase with progression in trials on IGC-AD1, subject to FDA approval.
Other income, net – Other net income increased by approximately $15 thousand or 79% during the three months ended September 30, 2021. The total other income for the three months ended September 30, 2021, and 2020 is approximately $4 thousand and $19 thousand, respectively. Other income includes interest income, rental income, and income from sale of scrap, among others.
Results of Operations for the Six Months Ended
September 30, 2021, and September 30, 2020
The historical results presented below are not necessarily indicative of the results that may be expected for any future period. The following table presents an overview of our results of operations for the six months ended September 30, 2021 and September 30, 2020:
Statement of Operations (in thousands, unaudited)
|
Six months ended September 30, |
||||||||||||||||
|
2021 ($) |
2020 ($) |
Change ($) |
Percent Change |
|||||||||||||
|
Revenue |
133 | 709 | (576 | ) | (81 |
)% |
||||||||||
|
Cost of revenue |
(69 | ) | (637 |
) |
568 | (89 |
)% |
|||||||||
|
Gross profit |
64 | 72 | (8 | ) | (11 | )% | ||||||||||
|
Selling, general and administrative expenses |
(5,886 | ) | (3,238 |
) |
(2,648 | ) | 82 |
% |
||||||||
|
Research and development expenses |
(720 | ) | (441 |
) |
(279 | ) | 63 |
% |
||||||||
|
Operating loss |
(6,542 | ) | (3,607 |
) |
(2,935 | ) | 81 |
% |
||||||||
|
Impairment of investment |
(37 | ) | - | - | 100 |
% |
||||||||||
|
Other income, net |
447 | 68 | 379 | 557 |
% |
|||||||||||
|
Loss before income taxes |
(6,132 | ) | (3,539 |
) |
(2,593 | ) | 73 |
% |
||||||||
|
Net loss |
(6,132 | ) | (3,539 |
) |
(2,593 | ) | 73 |
% |
||||||||
Revenue – Revenue in the six months ended September 30, 2021, was primarily derived from our Life Sciences segment, which involved sales of products such as lotion, gummies, and alcohol-based hand sanitizers, among others. Revenue was approximately $133 thousand and $709 thousand for the six months ended September 30, 2021, and the six months ended September 30, 2020, respectively.
| September 30, 2021, Form 10-Q
Revenue in the Life Sciences segment in the six months ended September 30, 2020, was $642 thousand as compared to $115 thousand in the six months ended September 30, 2021, albeit with a change in product mix. Revenue in our Infrastructure segment for the six months ended September 30, 2020, and September 30, 2021, was $67 and $18 respectively. Such revenue relates to execution of a construction contract. Primarily due to COVID-19, we have limited visibility on when either of our segments will stabilize, generate significant revenue, and become predictable. We expect volatility in both segments in the foreseeable future. We expect to be opportunistic in providing personal protection equipment, including hand sanitizers, as the country reopens from the pandemic.
Cost of revenue – Cost of revenue amounted to approximately $69 thousand for the six months ended September 30, 2021, compared to $637 thousand in the six months ended September 30, 2020. The cost of revenue in the six months ended September 30, 2021, is primarily attributable to raw materials required to produce our products.
Selling, general and administrative expenses – Selling, general and administrative expenses consist primarily of employee-related expenses, sales commission, professional fees, legal fees, marketing, other corporate expenses, allocated general overhead and provisions, depreciation and write-offs relating to doubtful accounts and advances, if any. Selling, general and administrative expenses increased by approximately $2.6 million or 82% to approximately $5.9 million for the six months ended September 30, 2021, from approximately $3.2 million for the six months ended September 30, 2020.
The $2.6 million increase in SG&A is attributable to the following: approximately $1.7 million to a provision for stolen inventory at our vendor’s premises, approximately $352 relates to provision of previously announced legal settlements and associated legal expenses, approximately $125 thousand for an IRS tax penalty, and non-cash increase of $183 thousand and $135 thousand for Common stock-based compensation and depreciation respectively. The remaining increase of about $134 thousand in six month is related to marketing and other operating expenses.
Research and Development expenses – R&D expenses were attributed to conducting the Phase 1 trial on patients suffering from Alzheimer’s disease and product research in our Life Sciences segment. The R&D expenses for the six months ended September 30, 2021, are approximately $720 thousand and approximately $441 thousand for the six months ended September 30, 2020. The cost associated with this work is mostly associated with the clinical trial on patients suffering from Alzheimer’s disease, research comprising of plant extracts that could be productized and data to support the efficacy of the extracts, product research, designing, formulating and market analysis. We expect R&D expenses to increase with progression in trials on IGC-AD1.
Impairment of investment – On May 12, 2020, the Company acquired approximately 19.8% shareholding in Evolve I, Inc. However, based on an assessment of the business environment, the Company decided to dispose the holding and exit the acquisition. During the six-months ended September 30, 2021, the Company received back partial shares of IGC common stock, which had been given pursuant to the SSA, in exchange for the return of its shareholding in Evolve. Accordingly, the Company cancelled the partial shares received by it and impaired its remaining investment of approximately $37 thousand.
Other income, net – Other net income increased by approximately $379 thousand during the six months ended September 30, 2021. The total other income for the six months ended September 30, 2021, and 2020 is approximately $447 thousand and $68 thousand, respectively. Other income includes interest income, rental income, and income from sale of scrap, among others. During the six months ended September 30, 2021, the other income included approximately $430 thousand related to forgiveness of PPP Note.
Liquidity and Capital Resources
Our sources of liquidity are cash and cash equivalents, funds raised through the ATM offering, cash flows from operations, short-term and long-term borrowings, and short-term liquidity arrangements. The Company continues to evaluate various financing sources and options to raise working capital to help fund current research and development programs and operations. The Company does not have any material long-term debt, capital lease obligations or other long-term liabilities, except as disclosed in this report. Please refer to Note 12, “Commitments and contingencies”, Note 11, “Loans and Other Liabilities” and Note 9, “Leases” in Item 1 of this report for further information on Company commitments and contractual obligations.
While the Company believes its existing balances of cash, cash equivalents and marketable securities and other short-term liquidity arrangements will be sufficient to satisfy its working capital needs, capital asset purchases, debt repayments, investments, including but not limited to, mutual funds, treasury bonds, cryptocurrencies, and other asset classes, clinical trials and other liquidity requirements, if any, associated with its existing operations over the next 12 months, it will raise money as and when it is able to do so. The Company continues to utilize the ATM to raise capital. Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, suppliers, industry, legal expenses, and workforce.
| September 30, 2021, Form 10-Q
Please refer to Item 1A. “Risk Factors” for further information on the risks related to the Company.
|
(in thousands, unaudited) |
||||||||||||||||
|
As of September 30, 2021 ($) |
As of March 31, 2021 ($) |
Change |
Percent Change |
|||||||||||||
|
Cash and cash equivalents |
14,399 | 14,548 | (149 | ) | (1 |
)% |
||||||||||
|
Working capital |
19,689 | 21,149 | (1,460 | ) | (7 |
)% |
||||||||||
Cash and cash equivalents
Cash and cash equivalents decreased by approximately $149 thousand to $14.39 million in the three months ended September 30, 2021, from $14.5 million as of March 31, 2021, a decrease of approximately 1%.
The major decrease was due to approximately $125 thousand in purchase of property, plant, and equipment and a net cash loss of approximately $4.15 million, part of which was set-off with approximately $4.1 million of net proceeds from the issuance of equity stock through an ATM offering. Of the $3.8 million net cash loss, approximately $1.7 million relates to a provision for inventory stolen at the vendor premises and approximately $152 thousand relates to one-off settlement related legal expense.
Summary of Cash flows
|
(in thousands, unaudited) |
||||||||||||||||
|
Six months ended September 30, |
||||||||||||||||
|
2021 |
2020 |
Change |
Percent Change |
|||||||||||||
|
Cash used in operating activities |
(4,153 | ) | (6,450 |
) |
2,297 | (36 |
)% |
|||||||||
|
Cash used in investing activities |
(140 | ) | (195 |
) |
55 | (28 |
)% |
|||||||||
|
Cash provided by financing activities |
4,144 | 530 | 3,614 | 682 |
% |
|||||||||||
|
Effects of exchange rate changes on cash and cash equivalents |
- | 8 | (8 | ) | (100 |
)% |
||||||||||
|
Net decrease in cash and cash equivalents |
(149 | ) | (6,107 |
) |
5,958 | (98 | )% | |||||||||
|
Cash and cash equivalents at the beginning of period |
14,548 | 7,258 | 7,290 | 100 |
% |
|||||||||||
|
Cash and cash equivalents at the end of the period |
14,399 | 1,151 | 13,248 | 1,151 |
% |
|||||||||||
Operating Activities
Net cash used in operating activities for the six months ended September 30, 2021, was approximately $4.1 million. This consists of a net loss of approximately $6 million and non-cash items totaling approximately $2.2 million, which in turn consist of an amortization/depreciation charge of approximately $320 thousand, stock-based expenses totaling approximately $549 thousand, approximately $1.7 million for a provision related to stolen inventory, approximately $37 thousand related to impairment of investment and gain due to forgiveness of PPP Note of approximately $430 thousand. Changes in operating assets and liabilities had a net negative impact of approximately $216 thousand on cash, of which approximately $20 thousand is related to inventory.
Net cash used in operating activities for the six months ended September 30, 2020, was approximately $6.4 million. This consists of a net loss of approximately $3.5 million and non-cash items totaling approximately $550 thousand, which in turn consist of an amortization/depreciation charge of approximately $185 thousand and stock-based expenses totaling approximately $365 thousand. Changes in operating assets and liabilities had a negative impact of approximately $3.5 million on cash, of which approximately $2.4 million was due to an increase in inventory.
Investing Activities
Net cash used in investing activities for the six months ended September 30, 2021, was approximately $140 thousand, which is comprised of expenses of approximately $15 thousand for the acquisition and filing expenses related to patents and purchase of property, plant and equipment of approximately $125 thousand.
| September 30, 2021, Form 10-Q
Net cash used in investing activities for the six months ended September 30, 2020, was $195 thousand, which is comprised of approximately $48 thousand for the acquisition and filing expenses related to patents and trademarks, purchase of property, plant and equipment of $1.2 million and investments of approximately $149 thousand in non-marketable securities and proceeds of $1.2 million in marketable securities.
Financing Activities
Net cash provided by financing activities was approximately $4.1 million for the six months ended September 30, 2021, which is comprised of net proceeds from issuance of equity stock through ATM offering, net of all expenses related to issuance of stock.
Net cash provided by financing activities was $530 thousand for the six months ended September 30, 2020, which is comprised of proceeds from loans.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
Critical Accounting Policies
While all accounting policies impact the financial statements, certain policies may be viewed as critical. Critical accounting policies are those that are both most important to the portrayal of financial condition and results of operations and that require Management’s most subjective or complex judgments and estimates. Our Management believes the policies that fall within this category are the policies on revenue recognition, inventory, accounts receivable, foreign currency translation, impairment of long-lived assets and investments, stock-based compensation, and cybersecurity. We have a cybersecurity policy in place and have taken cybersecurity measures that we expect are likely to safeguard the Company against breaches. There were no impactful breaches in cybersecurity during the six months ended September 30, 2021.
Please see our disclosures in Note 2 – Summary of Significant Accounting Policies to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report, in the Notes to the Audited Consolidated Financial Statements in the 2021 Form 10-K, as well as Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Form 10-K, for a discussion of all our critical and significant accounting policies.
Recent Accounting Pronouncements
The recent accounting pronouncements are discussed in Note 2 – Summary of Significant Accounting Policies to the Notes to the Unaudited Condensed Consolidated Financial Statements in this report and in the Notes to the Audited Consolidated Financial Statements in Part II of our Annual Report on Form 10-K for fiscal year ended March 31, 2021, filed with the SEC on June 14, 2021.
| September 30, 2021, Form 10-Q
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 3 does not apply to us because we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Management maintains disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to Management, including our Chief Executive Officer (our principal executive officer) and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our Management, including the Chief Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed in the reports filed or submitted by us under the Exchange Act was recorded, processed, summarized and reported within the requisite time periods and that such information was accumulated and communicated to our Management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Our Management, including our Chief Executive Officer and Principal Financial Officer, evaluated our “internal control over financial reporting” as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal control over financial reporting occurred during the three months ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| September 30, 2021, Form 10-Q
PART II – OTHER INFORMATION
Item 1. 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.
As of September 30, 2021, the Company and one of its officers are parties to the following litigation matters:
Apogee Financial Investments, Inc., et al. v. India Globalization Capital, Inc., et al., Civil Action No. 1:21-cv-03809 (U.S. District Court for the Southern District of New York). On April 29, 2021, Apogee Financial Investments, Inc. (“Apogee”) and John R. Clarke (“Clarke”) filed a complaint against the Company and IGC’s President and Chief Executive Officer, Ram Mukunda (“Mukunda”) (the “Apogee Litigation”). The litigation was originally initiated by IGC on February 8, 2021 (India Globalization Capital, Inc. v. Apogee Financial Investments, Inc., Civil Action No. 1:21-cv-01131, U.S. District Court for the Southern District of New York), wherein IGC alleged that Apogee breached a purchase agreement dated December 18, 2014 related to IGC’s intended purchase of a business known as Midtown Partners & Co., LLC (“Midtown”). In response to the original lawsuit filed by IGC, Apogee and Clarke filed a counterclaim as well as the Apogee Litigation. On May 21, 2021, IGC and Mukunda filed a partial motion to dismiss both the counterclaim and the Apogee Litigation. Before the Court ruled on the motion to dismiss, on June 28, 2021, Apogee and Clarke filed an amended complaint claiming that IGC and Mukunda fraudulently induced Apogee into entering the purchase agreement for the sale of Midtown and breached the purchase agreement. Apogee and Clarke also seek a declaratory judgment and indemnification for certain alleged losses they claim to have suffered. Finally, Clarke claims that he is entitled to shares of IGC common stock as wages. On July 23, 2021, IGC and Mukunda again moved to partially dismiss the counterclaim and the Apogee Litigation. The Company considers the counterclaim and the Apogee Litigation to be ordinary, routine litigation incidental to the business. The Company and Mukunda deny any and all liability and, in particular, deny many of the factual allegations contained in the Apogee Litigation. Both the Company and Mukunda intend to vigorously defend the litigation and are represented by counsel for that purpose.
As of September 30, 2021, the Company and two of its officers are parties to two shareholder lawsuits:
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. On May 13, 2019, the plaintiff filed an amended complaint against IGC, Ram Mukunda, and Claudia Grimaldi, (collectively, the “Class Action Defendants”). The plaintiff 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 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. Throughout the Tchatchou litigation, the Class Action Defendants have denied any and all liability and denied any violation of the law.
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. Throughout the Harris-Carr litigation, the Class Action Defendants have denied any and all liability and denied any violation of the law.
On April 6, 2021, the plaintiffs and the Class Action Defendants reached a preliminary agreement in principle to settle all pending shareholder litigation, including the Tchatchou and Harris-Carr matters described above. The settlement is subject to the agreement and execution of formal settlement documentation and approval by the United States District Court for the District of Maryland. At present, a significant portion of the settlement is expected to be paid by the Company’s insurance policy. The Company and the Class Action Defendants are represented by counsel in the litigation.
| September 30, 2021, Form 10-Q
Item 1A. Risk Factors
In addition to the Risk Factors reported herein, if any, you should carefully consider the risk factors identified in the Company’s 2021 annual report on Form 10-K, filed with the SEC on June 14, 2021, the Risk Factors identified in our Form 10-Q filed with the SEC on August 11, 2021, together with all other information included in this report in evaluating our 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.”
The Company incorporates by reference as if fully set forth and restated herein all Risk Factors identified in our 2021 Form 10-K and the Risk Factors identified in our Form 10-Q filed with the SEC on August 11, 2021. Additionally, risks and uncertainty of which we are unaware or which currently we deem immaterial also may become important factor that affects us. The Risk Factor stated and incorporated herein is not intended to represent the universe of Risk Factors that may be relevant to the evaluation of our company and our common stock, and the public is directed to any Risk Factor or other disclaimer included in any other public announcement, SEC filing, and press release by the Company for any additional Risk Factors or disclaimers related to those specific announcements, filings, and press releases.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
|
Exhibit |
|
|
Number |
Exhibit Description |
|
3.1 |
|
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3.2 |
|
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3.3 |
|
|
4.1 |
|
|
10.01* |
2014 Employment Agreement between India Globalization Capital, Inc. and Ram Mukunda. |
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31.1* |
Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer. |
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31.2* |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer. |
|
32.1** |
|
|
101.INS* |
Inline XBRL Instance Document. |
|
101.SCH* |
Inline XBRL Taxonomy Extension Schema Document. |
|
101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
104* |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
** Furnished herewith.
| September 30, 2021, Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
INDIA GLOBALIZATION CAPITAL, INC. |
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Date: October 29, 2021 |
By: |
/s/ Ram Mukunda |
|
Ram Mukunda |
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|
President and Chief Executive Officer (Principal Executive Officer) |
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|
Date: October 29, 2021 |
By: |
/s/ Claudia Grimaldi |
|
Claudia Grimaldi |
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|
Vice President (Principal Financial Officer) |
| September 30, 2021, Form 10-Q