INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
The accompanying notes should be read in connection with the financial statements.
The accompanying notes should be read in connection with the financial statements.
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – OVERVIEW
a) India Globalization Capital, Inc. (“IGC”)
Through our research on phytocannabinoids, we develop intellectual property for the treatment of life altering or life threatening conditions; and for the purpose of leasing, we build state-of-the-art farming facilities. In Malaysia, we develop and manage residential and commercial real estate. In India, we lease heavy equipment.
Our short-term plans are to develop, test, and patent phytocannabinoid-based pharmaceutical therapies. Our long-term plan is to establish IGC as a specialty pharmaceutical provider of phytocannabinoid-based pharmaceutical and nutraceutical products.
Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to India Globalization Capital, Inc., together with the subsidiaries listed on the Company’s Annual Report on Form 10-K. We exclude our investments and minority non-controlling interests, and any information provided by them is not incorporated by reference in this report, and you should not consider it a part of this report.
Our principal executive offices are located at 4336 Montgomery Avenue, Bethesda, Maryland 20814, and our telephone number is (301) 983-0998. We maintain a website at http://www.igcinc.us. The information contained on our website is not incorporated by reference in this report, and you should not consider it a part of this report.
Phytocannabinoid-based therapies
We have filed five provisional patents with the United States Patent and Trademark Office (“USPTO”), in the combination therapy space, for the indications of pain, medical refractory epilepsy, and cachexia as part of our intellectual property strategy focused on the phytocannabinoid-based health care industry. There is no guarantee that filing a provisional or a non-provisional patent application will result in a successful registration with the USPTO. As we develop our intellectual property, and expertise, we intend to build leading edge facilities that we can use to grow, extract, and supply pharmaceutical grade phytocannabinoids, when and if federal laws become more favorable. The table below provides a status of our patent filings:
Indication
|
Provisional Filing
|
PCT Filing
|
Subsequent Activity
|
Pain (Case 1)
|
9/16/14
|
9/16/15
|
US National Case Filed – 6/15/16
|
Seizures (Case 2)
|
6/15/15
|
6/14/16
|
US National Case Filed – 6/15/16
|
Seizures (Case 3)
|
4/1/15
|
4/1/16
|
PCT Application Published- 10/6/16
|
Eating Disorders (Case 4)
|
8/12/15
|
8/11/16
|
US and National Filing Anticipated 2/12/18
|
Seizures (Case 5)
|
6/15/16
|
Anticipated- 6/15/17
|
US and National Filing Anticipated 12/15/18
|
Cannabinoids are chemical compounds that exert a range of effects on the human body, including impacting the immune response, gastrointestinal maintenance and motility, muscle functioning, and nervous system response and functioning. Phytocannabinoids are cannabinoids that occur naturally in the cannabis plant, they are abundant in the viscous resin produced by glandular structures called trichomes. There are over 480 different compounds in the cannabis plant. Many of them have been identified as cannabinoids. Of these THC (delta-9-tetrahydrocannabinol) is the main psychoactive component (“high”) in the plant and is, broadly, pursued by the recreational users. The medical community, on the other hand broadly pursues many of the non-psychoactive phytocannabinoids, CBD (Cannabidiol) for example.
The pain market represents a significant component of the healthcare system and
The Journal of Pain
in September 2012 reported that the annual estimated national cost of pain ranges from $560 billion to $635 billion. This figure exceeds the entire cost of the nation’s priority health conditions. Additionally, The American Pain Society recommends that pain be made more visible and be categorized as the fifth vital sign; recognizing that terminal illnesses are often accompanied by unbearable levels that are so severe and difficult to treat that death seems preferable. According to the Arthritis Foundation, arthritis has been particularly problematic for women; since 1999 there has been a 22 percent increase in the number of women who attribute their disability to arthritis. Current treatment protocols such as the utilization of opioid-based drug therapies present several challenges and may result in debilitating consequences that affect patient day-to-day functioning and patients’ productivity. Commonly reported side effects include hallucinations, constipation, sedation, nausea, respiratory depression, and dysphoria. Our patent filing is based on a novel therapy that uses extracts from the cannabis plant for the treatment of psoriatic arthritis and scleroderma pain. The therapy uses a cream that is applied to the joints, using a variety of delivery mechanisms including a bio-adhesive patch.
Approximately 50 million people worldwide are affected by epilepsy (Sanders, 2003). Epilepsy is thought to be due to multiple factors that include sodium, potassium, GABA (gamma amino butyric acid) and NMDA (N-Methyl-d-aspartate). It is believed, for example, that to maximally control epilepsy, modulation of one or more of these receptors is required and that mono therapy is adequate in up to 25% of patients. The onset of epileptic seizures can be life threatening, including long-term implications (Lutz, 2004) such as mental health problems, cognitive deficits and morphological changes (Swann, 2004, Avoli et. al., 2005). The onset of epilepsy also greatly affects lifestyle as sufferers live in fear of consequential injury or the inability to perform daily tasks (Fisher et. al., 2000). The scientific community (1980 Cunha et. al., 1986 Ames, 1990 Trembly et. al. recent testing by GW Pharmaceuticals, among others) have shown that Cannabidiol (CBD) has anti-convulsive properties in humans. Other studies, (Davis and Ramsey) have shown that tetrahydrocannabinol (THC) can also help reduce seizures. Two of our patent filings involving novel therapies use phytocannabinoid extracts from cannabis, in combination with other drugs, to treat medical refractory epilepsy in humans and seizures in dogs and cats.
Cachexia is a condition that accompanies severe illness such as cancer and results in the weakness and wasting away of the body. Cachexia physically weakens patients to the extent that response to standard treatments is poor. In the U.S., it is estimated that a population of approximately 1.3 million are experiencing cachexia associated with cancer, multiple sclerosis, Parkinson’s disease, HIV/AIDS and other progressive illnesses. Cachexia is secondary to an underlying disease such as cancer or AIDS and is a positive risk factor for death. As an example, cancer induced anorexia cachexia is responsible for about 20% of all cancer deaths. Our patent filing involves a novel therapy that uses phytocannabinoids to stimulate senses (smell and taste) with a combination of drugs to stimulate appetite. Our approach addresses the veterinarian market as dogs and cats also suffer from pain, epilepsy and cachexia and getting a product to market for the veterinarian industry is significantly less time consuming than getting products approved for human healthcare. We expect to file more patents and continue to develop intellectual property in this industry.
Real estate management and other businesses
In Malaysia, our subsidiary Cabaran Ultima is the project manager of an estimated $262 million five-star hotel planned to be built on approximately 6 plus acres in Genting highlands. Genting is a hill resort one hour from Kuala Lumpur that boasts many attractions including a casino and is home to the 20
th
Century Fox World theme park slated to open in 2017. The site is located within walking distance to the theme park and casino. We own 10% of the hotel project through our investment in a Malaysian company called Brilliant Hallmark with recourse to the land assets through a Tag Along Agreement in the event of non-performance. HBA Architecture, the hotel’s master planner and designer, have a prestigious design resume that includes numerous developments such as the Hilton Hanoi Opera Hotel Refurbishment in Vietnam, Marrisle Boutique Leisure Resort and Club Med Gongshan Island Resort, both located in China. During the build-out phase we expect to receive revenue from project management and after it is built, from the disposition of the hotel. In Malaysia, we expect to evaluate other resort projects and develop this side of the business.
In Hong Kong, through a majority owned subsidiary called Golden Gate that we renamed as IGC International, we operated an electronics business. Most of our revenue in fiscal 2016 come from that business. We had no revenue from Golden Gate since the quarter ended June 30, 2016. We have moved away from the electronics business as there is a macroeconomic slow-down in the electronics sector and without scale meaningfully competing is difficult.
The purchase price of the acquisition consisted of up to 1,209,765 shares of our common stock, valued at approximately $1,052,496 on the closing date of the acquisition. The terms of the Acquisition Agreement called for the delivery of 205,671 shares of IGC common stock at the signing of the Agreement and the remaining 1,004,094 shares were contingent on the electronics business meeting annual thresholds for revenue and profit through fiscal year ending on March 31, 2017. The contingent shares were not delivered as IGC International was unable to meet the targets. We are in negotiations for the return of all or some part of the initial 205,671 shares that were delivered to the principals of Golden Gate at the signing of the acquisition. We have no disputes with the initial principals of Golden Gate and the decision to curtail this business was mutual.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and preparation of financial statements
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and respective footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 filed with the SEC on July 14, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation. The Company’s current fiscal year ends on March 31, 2017.
The consolidated financial statements include the accounts of the Company and all of its subsidiaries that are more than 50% owned and controlled. Operating results of companies acquired are included from the dates of acquisition. Transactions between the Company and its subsidiaries have been eliminated in the consolidated financial statements.
IGC operates in India, Hong Kong, China and Malaysia and a substantial portion of the Company’s sales are denominated in INR, HKD, RMB and RM, as of those respective operations. As a result, changes in the relative values of the U.S. dollar and INR, HKD, RMB or the RM affect revenues and profits as the results are translated into U.S. dollars in the consolidated and pro forma financial statements.
Earnings per common share
Basic earnings per share is computed by dividing net income/(loss) applicable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the additional dilution from all potentially dilutive securities such as stock warrants and options.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable, net of allowances, amounted to $0.66 million and $0.96 million, as of December 31, 2016, and March 31, 2016, respectively. The accounts receivable net of reserves for the quarter ended December 31, 2016 comes primarily from the construction and rental of heavy construction equipment. The Company maintains an allowance for doubtful accounts based on present and prospective financial condition of the customer and their inherent credit risk.
NOTE 4 – OTHER CURRENT AND NON-CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Advance to suppliers and services
|
|
$
|
335
|
|
|
$
|
316
|
|
Security/statutory advances
|
|
|
29
|
|
|
|
14
|
|
Advances to employees
|
|
|
60
|
|
|
|
878
|
|
Prepaid /accrued interest
|
|
|
1
|
|
|
|
1
|
|
Deposit and other current assets
|
|
|
5
|
|
|
|
17
|
|
Total
|
|
$
|
430
|
|
|
$
|
1,226
|
|
The increase in Advance to suppliers and services comes from our subsidiary in Malaysia. Advances to Employees represent advances made to employees of Ironman by Ironman, prior to its acquisition by IGC.
Other non-current assets consist of the following:
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Statutory/Other advances
|
|
$
|
491
|
|
|
$
|
507
|
|
Total
|
|
$
|
491
|
|
|
$
|
507
|
|
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL
The movement in intangible assets and goodwill is given below.
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Intangible assets at the beginning of the period
|
|
$
|
|
|
|
$
|
306
|
|
Amortization
|
|
|
|
)
|
|
|
(159
|
)
|
Effect of foreign exchange translation
|
|
|
-
|
|
|
|
(34
|
)
|
Total Intangible assets
|
|
$
|
-
|
|
|
$
|
113
|
|
Goodwill of IGC International Ltd
|
|
|
-
|
|
|
|
983
|
|
Goodwill of Cabaran Ultima SDN BHD
|
|
|
198
|
|
|
|
198
|
|
Total Goodwill
|
|
$
|
198
|
|
|
$
|
1,181
|
|
The value of intangible assets, associated with the acquisition of Ironman, as of December 31, 2016, and March 31, 2016 amounted to zero and $113 thousand.
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Category
|
|
Useful Life (years)
|
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Building (flat)
|
|
25
|
|
|
$
|
235
|
|
|
$
|
1,239
|
|
Plant and machinery
|
|
20
|
|
|
|
1,634
|
|
|
|
6,666
|
|
Computer equipment
|
|
3
|
|
|
|
150
|
|
|
|
218
|
|
Office equipment
|
|
5
|
|
|
|
112
|
|
|
|
114
|
|
Furniture and fixtures
|
|
5
|
|
|
|
67
|
|
|
|
119
|
|
Vehicles
|
|
5
|
|
|
|
283
|
|
|
|
346
|
|
Assets under construction
|
|
N/A
|
|
|
|
942
|
|
|
|
4,886
|
|
Total
|
|
|
|
|
$
|
3,423
|
|
|
$
|
13,588
|
|
Less: Accumulated depreciation
|
|
|
|
|
$
|
(2481
|
)
|
|
$
|
(6,514
|
)
|
Net Assets
|
|
|
|
|
$
|
942
|
|
|
$
|
7,074
|
|
Depreciation and amortization expense for the nine months ended December 31, 2016 and 2015 was $392 thousand and $448 thousand respectively. Capital work-in-progress represents advances paid towards the acquisition of property and equipment and the cost of property and equipment not put to use before the balance sheet date.
NOTE 7 – INVESTMENTS – OTHERS
Investments – others for each of the periods ended December 31, 2016 and March 31, 2016 consisted of the following:
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Investment in equity shares of an unlisted company
|
|
$
|
25
|
|
|
$
|
26
|
|
Investment in Land
|
|
|
5,205
|
|
|
|
5,149
|
|
Total
|
|
$
|
5,230
|
|
|
$
|
5,175
|
|
NOTE 8 – SHORT-TERM BORROWINGS
The Company had no short-term borrowings during the quarter ended December 31, 2016 and $28 thousand as of March 31, 2016.
NOTE 9 – OTHER CURRENT AND NON-CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Statutory payables
|
|
$
|
14
|
|
|
$
|
32
|
|
Employee related liabilities
|
|
|
287
|
|
|
|
518
|
|
Other liabilities /expenses payable
|
|
|
-
|
|
|
|
1
|
|
Total
|
|
$
|
301
|
|
|
$
|
551
|
|
Other non-current liabilities consist of the following:
|
|
As of December 31, 2016
|
|
|
As of March 31, 2016
|
|
Creditors
|
|
$
|
-
|
|
|
$
|
37
|
|
Acquisition related liabilities
|
|
|
-
|
|
|
|
874
|
|
Total
|
|
$
|
-
|
|
|
$
|
911
|
|
Sundry creditors consist primarily of creditors to whom amounts are due for supplies and materials received in the normal course of business
.
NOTE 10 – RELATED PARTY TRANSACTIONS
As of December 31, 2016, the Company has (i) a balance due of $93 thousand payable to our CEO inclusive of certain unpaid salaries from previous years and (ii) a long-term loan of $446 thousand due to the Director of Cabaran (RM 2 million).
In addition, the CEO is a guarantor of a loan taken by the Company for an amount of $100 thousand that carries an interest of 4%.
We pay Integrated Global Networks LLC (“IGN”), an affiliate of Mr. Mukunda, $4.5 thousand per month for office space and certain general and administrative services. We believe, based on rents and fees for similar services in the Washington, D.C. metropolitan area, that the fee charged by IGN is at least as favorable as we could have obtained from an unaffiliated third party. The agreement is on a month-to-month basis and may be terminated by the Board of Directors at any time without notice.
Please see Note 13 – Common Stock regarding stock grant to Cherin Group LLC.
NOTE 11 – NOTES PAYABLE AND LOANS – OTHERS
The Company has an unsecured Note Payable to a third-party investor in the amount of $1.8 million, which was initially due July 31, 2016. As in the past, we are in negotiations to extend and potentially modify the loan to accommodate the Company’s and the investor’s needs. Starting in August 2016, the Company and the investor mutually agreed to making monthly interest payments of 30,000 shares of IGC common stock. During the quarter ended December 31, 2016, the Company issued a total of 90,000 shares valued at $33 thousand, which constituted an element of interest. The Company does not expect that the loan will be paid within the next twelve months. A revised due date is expected to be set and the form of payment potentially revised to repayment by common stock.
Other long-term borrowings to meet our working capital requirements include $623 thousand from various individuals including one of our previous directors who has loaned the Company $40 thousand at 10% annual interest payable on April 25, 2018. All these loans have a term of five years, carry interest between 0% and 15%, carry no prepayment penalties, and may be repaid by the Company at any time.
NOTE 12 – COMMITMENTS AND CONTINGENCY
IGC is not aware of any significant contingencies or commitments as of December 31, 2016, other than contingencies and or additional litigation, under various jurisdictions, in connection with the matters pertaining to Ironman as discussed elsewhere is this document.
NOTE 13 – COMMON STOCK
Currently, the Company has its Common Stock $.0001 par value (trading symbol: IGC) (“Common Stock”) listed on the NYSE MKT. Its redeemable warrants to purchase Common Stock (trading symbol: IGC.IW) and its Units trade now on the OTC Markets.
Effective March 31, 2014, the Company and Bricoleur Partners, L.P. agreed to amend the outstanding $1.8 million promissory note (“2012 Security”), subject to the same terms of the 2012 Agreement and Amendments No. 1 and No. 2 thereto, to extend the maturity date of the 2012 Security from July 31, 2014 to July 31, 2016 and are currently negotiating a further extension. During the quarter ended December 31, 2016, the Company issued 90,000 shares valued at $32.7 thousand to this debt holder, which constituted an element of repayment of interest.
On August 22, 2013 and June 8, 2014, IGC entered into two respective At the Market (“ATM”) Agency Agreements with Enclave Capital LLC having an aggregate offering price of up to $4 million and 1.5 million from time to time, respectively, for a total of $5.5 million of gross proceeds from the combined ATM agreements. On May 20, 2016, IGC entered into a new At-The-Market Agency Agreement (“ATM Agreement”) with IFS Securities, Inc. (dba Brinson Patrick, a division of IFS Securities, Inc.), as sales agent (“Brinson Patrick” or the “Agent”), having an aggregate offering price of up to $10 million from time to time through Brinson Patrick. IGC intends to use the net proceeds from the sale of securities offered for working capital needs, repayment of indebtedness and other general corporate purposes. During the quarter ended December 31, 2016, the Company issued 506,460 shares of Common Stock valuated at $196 thousand under this agreement.
Under the December 18, 2014 Purchase Agreement with Apogee, we issued 1,200,000 common shares of IGC valued at $888 thousand for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC. We are not seeking to consummate the acquisition of the remaining interest in Midtown Partners at this time. IGC is negotiating a settlement with Apogee.
On June 12, 2013, we signed an agreement with Cherin Group LLC (“Cherin”) for accounting advisory and related consulting services. Pursuant to the agreement, in the quarter ended December 31, 2016, IGC has booked a liability for a total of 250,000 shares to Cherin valued at approximately $40 thousand as part of compensation for his consulting services.
For additional information, please refer to Note 23 below.
NOTE 14 – STOCK-BASED COMPENSATION
On April 1, 2009, the Company adopted ASC 718, “Compensation-Stock Compensation” (previously referred to as SFAS No. 123 (revised 2004),
Share Based Payment)
. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. As of December 31, 2016, there were no shares of common stock available for future grants of options or stock awards.
NOTE 15 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $960 thousand for the nine months ended December 31, 2016 as compared to $1,268 thousand for December 31, 2015. Selling, general and administrative expenses include compensation expenses to management, legal and professional expenses, investor-relations expenses, acquisition related expenses and travel expenses.
NOTE 16 –RESERVED FOR FUTURE USE
NOTE 17 – OTHER INCOME
Other income for the three-month period ended December 31, 2016 amounts to $359 thousand and includes realization of other comprehensive income from disposal of Ironman, income received from the supply of skilled operators for the heavy equipment rental business and from the rent of the apartment belonging to TBL, which is located in Kochi, India.
NOTE 18 – RECONCILIATION OF EPS
The historical weighted average per share for our shares through December 31, 2016, was applied using the treasury method of calculating the fully diluted shares. The weighted average number of shares outstanding as of December 31, 2016 and 2015 used for the computation of basic earnings per share (“EPS”) is 27,446,095 and 16,224,906, respectively. Due to the loss incurred during the three-month period ended December 31, 2016, all of the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.
NOTE 19 – INCOME TAXES
The Company adopted ASC 740, Accounting for Uncertainty in Income Taxes. In assessing the recoverability of its deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent on the generation of future
taxable
income during the periods in which those temporary differences become deductible. The management considers historical and projected future taxable income, and tax planning strategies in making this assessment.
The Company’s effective tax rate was 0% for both the quarters ended December 31, 2016 and 2015. The Company has US deferred tax assets, which have been offset by valuation allowance because of historical and expected losses. As the Company reverses its losses and becomes profitable, we will reassess the likelihood of recovering a portion or all of the deferred tax assets. The remaining balance of deferred tax assets, which appear on the balance sheet are from foreign based operations in which utilization is highly probable in offsetting future foreign income taxes.
The Company recorded no income tax gain/expense resulting from operational results of its foreign entities for both three-month periods ended December 31, 2016 and 2015. As of December 31, 2016, and 2015, there was no significant liability for income tax associated with unrecognized tax benefits. As of December 31, 2016, IGC could not use its net operating losses.
NOTE 20 – SEGMENT INFORMATION
Accounting pronouncements establish standards for the manner in which public companies report information about operating segments in annual and interim financial statements. Operating segments are component of an enterprise that have distinct financial information available and evaluated regularly by the chief operating decision-maker (“CODM”) to decide how to allocate resources and evaluate performance. The Company’s CODM is considered to be the Company’s chief executive officer (“CEO”). The CEO reviews financial information presented on an entity level basis for purposes of making operating decisions and assessing financial performance. Therefore, the Company has determined that it operates in a single operating and reportable segment.
The following provides information required by ASC 280-10-50-38 Entity-Wide Information:
1)
|
The table below shows revenue reported by product and service:
|
Product & Service
|
|
Amount
|
|
|
% on total revenues
|
|
Trading
|
|
$
|
-
|
|
|
|
-
|
|
Rental / Lease /Real estate
|
|
|
487
|
|
|
|
100
|
%
|
TOTAL
|
|
$
|
487
|
|
|
|
100
|
%
|
2(a) The table below shows the revenue attributed to the country of domicile (USA) and foreign countries. Revenue is attributed to an individual country if the invoice made to the customer originates in that country. The basis for originating an invoice is the underlying agreement.
Geographic Location
|
|
Amount
|
|
|
% on total revenues
|
|
Hong Kong
|
|
$
|
-
|
|
|
|
-
|
|
India and Malaysia
|
|
|
487
|
|
|
|
100
|
%
|
TOTAL
|
|
$
|
487
|
|
|
|
100
|
%
|
2(b) The table below shows the long-term assets and other than financial instruments held in the country of domicile and foreign countries.
Nature of Assets
|
|
USA (Country of Domicile)
|
|
|
Foreign Countries
|
|
|
Total
|
|
Property, Plant and Equipment, Net
|
|
$
|
881
|
|
|
$
|
61
|
|
|
$
|
942
|
|
Investments in Affiliates
|
|
|
2,453
|
|
|
|
-
|
|
|
|
2,453
|
|
Investments Others
|
|
|
-
|
|
|
|
5,230
|
|
|
|
5,230
|
|
Deferred Tax Assets
|
|
|
-
|
|
|
|
19
|
|
|
|
19
|
|
Other Non-Current Assets
|
|
|
-
|
|
|
|
491
|
|
|
|
491
|
|
Total Long Term Assets
|
|
$
|
3,334
|
|
|
$
|
5,801
|
|
|
$
|
9,135
|
|
3) For the quarter ended December 31, 2016 we had one main customer in Malaysia and five in India. Most of revenue came from the one main customer in Malaysia.
NOTE 21 – CERTAIN AGED RECEIVABLES
The receivable and other assets as of December 31, 2016, and March 31, 2016, include certain aged receivables in the amount of $411 thousand. The aged receivables are due from the Cochin International Airport. Cochin International Airport is partially owned by the State Government of Kerala. The receivables have been due for periods in excess of one year as of December 31, 2016. These receivables are included in accounts receivable and have been classified as current because the arbitration process has concluded and ruling was given in our favor. The Company continues to carry the full value of the receivables without interest and without any impairment, because the Company believes that there is minimal risk that this organization will become insolvent and unable to make payment.
NOTE 22 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company’s current assets and current liabilities approximate their carrying value because of their short-term nature. Such financial instruments are classified as current and are expected to be liquidated within the next twelve months.
NOTE 23 – ACQUISITIONS AND DISPOSITIONS
Cabaran Ultima Sdn. Bhd.
On February 11, 2016, we completed the acquisition of 100% of the outstanding share capital of Cabaran Ultima Sdn. Bhd., a corporation organized and existing under the laws of Malaysia (“Ultima”), from RGF Land Sdn. Bhd. (“Land”), the sole shareholder of Ultima, pursuant to the terms of a Share Purchase Agreement among the parties. Ultima is a real estate development and international project management company incorporated in Kuala Lumpur, Malaysia. Ultima is an international real estate project management company with expertise in (i) building agro-infrastructure for growing medicinal plants and botanical extraction, (ii) construction of high-end luxury complexes such as service apartments, luxury condominiums and hotels, and (iii) design management of other large-scale infrastructure.
Purchase price of the acquisition consisted of up to 998,571 shares of our common stock, valued at approximately $170 thousand on the closing date of the acquisition and the same will be discharged as follows:
|
|
All amounts in USD
|
|
Particulars
|
|
Fair Value
|
|
IGC Stock Consideration
|
|
$
|
170
|
|
Total Purchase Consideration
|
|
$
|
170
|
|
The purchase has been preliminarily allocated to the acquired assets and liabilities, as follows:
|
|
All amounts in USD
|
|
Particulars
|
|
Fair Value
|
|
Property, Plant and Equipment
|
|
$
|
1
|
|
Trade and other receivables
|
|
|
12
|
|
Reimbursement Account
|
|
|
64
|
|
Cash and bank balances
|
|
|
16
|
|
Deposit & Prepayment
|
|
|
6
|
|
Trade and other payables
|
|
|
(133
|
)
|
Other payables
|
|
|
(12
|
)
|
Non-Controlling interest
|
|
|
18
|
|
Goodwill
|
|
|
198
|
|
Total Purchase Consideration
|
|
$
|
170
|
|
The above purchase price allocation includes provisional amounts for certain assets and liabilities. The purchase price allocation will continue to be refined primarily in the areas of goodwill and other identifiable intangibles, if any. During the measurement period, the Company expects to receive additional detailed information to refine the provisional allocation above. Non-controlling interests are valued based on the proportional interest in the fair value of the net assets of the acquired entity.
Ultima is subject to legal and regulatory requirements, including but not limited to those related to taxation matters, in the jurisdiction in which it operates. The Company has conducted a preliminary assessment of liabilities arising out of these matters and has recognized provisional amounts in its initial accounting for the Acquisition for all identified liabilities in accordance with the requirements of ASC Topic 805. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the Acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the Acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized.
The following unaudited pro-forma results of the operations of the Company for the nine-month period ended December 31, 2016 and 2015 assume that the Ultima acquisition occurred during the beginning of the comparable period.
|
|
Nine months ended December 31,
|
|
Particulars
|
|
2016
|
|
|
2015
|
|
Pro forma revenue
|
|
$
|
487
|
|
|
$
|
5,288
|
|
Pro forma other income
|
|
|
373
|
|
|
|
(119
|
)
|
Pro forma net income attributable to IGC Stockholders
|
|
|
(1,110
|
)
|
|
|
(1,689
|
)
|
Pro forma earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
(0.10
|
)
|
Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.10
|
)
|
Golden Gate Electronics Ltd
On May 31, 2014, the Company acquired 51% of the issued and outstanding share capital of Golden Gate Electronics Limited, a corporation organized and existing under the laws of Hong Kong, now known as IGC International. IGC-INT, headquartered in Hong Kong, operates an e-commerce platform for trading of commodities and electronic components.
The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations”. The total purchase price has been allocated to IGC-INT’s net tangible assets based on their estimated fair values at the date of acquisition. The Purchase Price Allocation is based upon preliminary estimates and assumptions that may be subject to change during the measurement period (up to one year from the Acquisition Date). The Company generally does not expect the goodwill recognized to be deductible for income tax purposes. The results of operations of IGC-INT for the month of December 2014 have been included in the consolidated results as shown in the Statement of Operations included herein. The assets and liabilities of IGC-INT have been recorded in the Consolidated Balance Sheet of the Company as of December 31, 2014.
Purchase price of the acquisition consisted of up to 1,209,765 shares of our common stock, valued at approximately $1,052 thousand on the closing date of the acquisition and the same will be discharged as follows:
|
|
All amounts in USD
|
|
Particulars
|
|
Fair Value
|
|
IGC Stock Consideration
|
|
$
|
179
|
|
Estimated earn out payment (in the form of Stock)
|
|
|
873
|
|
Total Purchase Consideration
|
|
$
|
1,052
|
|
The purchase has been preliminarily allocated to the acquired assets and liabilities, as follows:
|
|
All amounts in USD
|
|
Particulars
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
$
|
167
|
|
Property, Plant and Equipment
|
|
|
82
|
|
Accounts Receivable
|
|
|
428
|
|
Inventory
|
|
|
749
|
|
Other Assets
|
|
|
211
|
|
Accounts Payable
|
|
|
(163
|
)
|
Loans-Others
|
|
|
(1,322
|
)
|
Other Current Liabilities
|
|
|
(15
|
)
|
Non-Controlling Interest
|
|
|
(67
|
)
|
Goodwill
|
|
|
982
|
|
Total Purchase Consideration
|
|
$
|
1,052
|
|
The above purchase price allocation includes provisional amounts for certain assets and liabilities. The purchase price allocation will continue to be refined primarily in the areas of goodwill and other identifiable intangibles, if any. During the measurement period, the Company expects to receive additional detailed information to refine the provisional allocation above. Non-controlling interests are valued based on the proportional interest in the fair value of the net assets of the acquired entity.
IGC-INT is subject to legal and regulatory requirements, including but not limited to those related to taxation matters, in the jurisdiction in which it operates. The Company has conducted a preliminary assessment of liabilities arising out of these matters and has recognized provisional amounts in its initial accounting for the Acquisition for all identified liabilities in accordance with the requirements of ASC Topic 805. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the Acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the Acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized.
The following unaudited pro-forma results of the operations of the Company for the nine-months ended December 31, 2016 and 2015 assume that the IGC-INT acquisition occurred during the beginning of the comparable period.
|
|
Nine months ended December 31,
|
|
Particulars
|
|
2016
|
|
|
2015
|
|
Pro forma revenue
|
|
$
|
487
|
|
|
$
|
4,999
|
|
Pro forma other income
|
|
|
373
|
|
|
|
(119
|
)
|
Pro forma net income attributable to IGC Stockholders
|
|
$
|
(1,110
|
)
|
|
$
|
(1,385
|
)
|
Pro forma Earnings per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
(0.09
|
)
|
Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.09
|
)
|
As previously announced we have curtailed activity in IGC-INT and for the quarter ended December 31, 2016 we have no revenue. We also impaired the goodwill associated with the acquisition. We are working on required paperwork that will effectively transfer Golden Gate back to the managing director in return for some or all of the IGC common stock that was initially awarded as part of the acquisition. We have realigned our resources to the phytocannabinoid industry and real estate development and international project management industry.
HK Ironman
On December 30, 2011, the Company acquired 100% of the issued and outstanding shares of capital stock of H&F Ironman Limited (“HK Ironman”), a Hong Kong company. HK Ironman owns 95% equity in H&F Venture Trade Ltd. aka Linxi Hefei Economic and Trade Co. (“PRC Ironman”). One of IGC’s areas of focus is the export of iron ore to China. HK Ironman through its subsidiary, PRC Ironman, operates a beneficiation plant in China, which converts low-grade iron ore to high-grade iron ore through a dry and wet separation processes. This Acquisition is intended to provide IGC with a platform in China to expand its business and ship low-grade iron ore, which is available for export in India, to China and convert the iron ore to a higher-grade iron ore before selling it to customers in China.
The date of Acquisition, December 30, 2011, is the date on which the Company obtained control of HK Ironman by acquiring control over the majority of the Board of Directors of HK Ironman. The Acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805, “Business Combination.” For further information on this acquisition and on purchase price allocation, please refer to Form 10-K for fiscal year ended 2012 filed with the SEC on July 16, 2012. In February 2015, IGC filed a lawsuit in the circuit court of Maryland against 24 defendants related to the acquisition of Ironman seeking to have the court order rescission of the underlying Acquisition Agreement and to void any past or future transfer of IGC shares to the defendants-sellers.
Effective December 30, 2016, IGC redeemed and subsequently retired as required by Maryland State law, approximately 2,200,000 shares of its own common stock issued in connection with its purchase of Ironman for all tangible operating assets of Ironman as a treasury stock transaction thus reducing IGC investment in Ironman to zero while still pursuing any and all legal avenues to recover as many of the originally issued shares of 3,150,000.
The impact of such transaction is expressed in the following summary of key Balance Sheet items for each period presented.
Balance sheet items:
|
|
December 31, 2016
|
|
|
Proforma March 31, 2016
|
|
Current Assets
|
|
$
|
1,837
|
|
|
$
|
2,877
|
|
Total Assets
|
|
|
11,170
|
|
|
|
10,637
|
|
Stockholders’ Equity
|
|
|
7,540
|
|
|
|
6,203
|
|
Proforma operating statements are not required as all period presented include the operations of Ironman on a consolidated basis. With respect to subsequent periods, Ironman will no longer be consolidated and proformas for comparative purposes will be provided for each statement of operations presented. With respect to the statements of operations presented here in the net losses attributable to Ironman for the three months and nine months ended December 31, 2016 are $124 thousand and $324 thousand, respectively.
NOTE 24 – INVESTMENT IN AFFILIATES
Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued 1,200,000 common shares of IGC valued at $888 thousand for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC. Pending downward adjustments subject to certain balance sheet items of MTP a total of 500,000 shares of IGC common stock have been held back. Pending the resolution of these balance sheet items, the shares that have been held back may be cancelled. Further, the Company has written down the investment to an expected net realizable value Any recoveries arising from this dispute will be credited to income.