The accompanying notes should be read in connection with these consolidated financial statements.
The accompanying notes should be read in connection with these consolidated financial statements.
The accompanying notes should be read in connection with these consolidated financial statements.
The accompanying notes should be read in connection with these consolidated financial statements.
The accompanying notes should be read in connection with these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended March 31, 2018 and 2017
Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to India Globalization Capital, Inc., together with our subsidiaries.
NOTE 1 – BUSINESS ORGANIZATION AND CORPORATE UPDATE
a)
Business
IGC’s specialty alternative medicine business line commenced in late 2013 and includes eight patent filings with a lead, market-ready product called "Hyalolex
tm
." In studies, the active ingredients in Hyalolex
tm
, a unique formulation that utilizes micro non-toxic doses of cannabinoids in combination with other natural ingredients, has been shown to help alleviate symptoms of Alzheimer’s. IGC's product portfolio also include compounds intended to treat end points of Parkinson’s, pain, nausea, eating disorders, and epilepsy in dogs and cats. The Company has a legacy infrastructure commodity trading and heavy equipment rental business platform located in India and Hong Kong.
b)
Business Organization
IGC is a Maryland corporation formed in April 2005. The Company’s principal office in the U.S. is in Bethesda, Maryland, and in addition, it has a facility in Washington State. IGC’s back office is located in Kochi, Kerala India and many of the staff and advisors work from their home offices. The Company maintains a main website at http://www.igcinc.us and the corporate telephone number is +1-301-983-0998. The information contained on our websites,
www.igcinc.us
,
www.igcpharma.com
, and
www.hyalolex.com
, is not incorporated by reference in this report, and you should not consider it a part of this report.
As of March 31, 2018, the Company has operational subsidiaries located in India and Hong Kong with the subsidiary in Malaysia held for sale. The Company’s filings are available on
www.sec.gov
.
For more on corporate history, please check the website at
www.igcinc.us/igcpharma.com/companyoverview
.
c)
Corporate update
In February 2016, IGC acquired Cabaran Ultima Sdn. Bhd., a corporation organized and existing under the laws of Malaysia, from RGF Land Sdn. Bhd. in exchange of 998,571 shares of IGC’s common stock valued at $169,757 on closing date of the Share Purchase Agreement. We decided to exit the business at the end of March 2018 and expect to sell the subsidiary in the fiscal year 2019. As of March 31, 2018, we accounted the investment in Cabaran Ultima as “Investment Held for Sale” in the amount of $147,500.
In April 2017, we closed a non-operational Hong Kong based subsidiary that we incorporated in January 2013 named IGC Cleantech Ltd (“IGC-CT”). In November 30, 2017, TBL beneficially incorporated IGC Enterprises Ltd (“IGC-ENT”) in Hong Kong to keep conducting the commodity trading businesses, but from a more tax efficient structure. IGC-ENT reported $1.79 million in revenue in the fiscal year 2018.
In May 2017, the Company acquired exclusive rights to a patent filed by the University of South Florida titled “Cannabidiol and Synthetic Dronabinol for treatment of Alzheimer’s Disease.”
In the fiscal year 2018 the Company announced plans to build meaningful solutions to address issues facing the cannabis industry using distributed ledgers inherent in blockchain technology. These would include addressing issues such as product identification assurance (PIA) and product origin assurance, transactional difficulties, and inadequate product labeling. According to a recent study that was published in JAMA and detailed on
www.pennmedicine.org
, nearly 70% of all cannabidiol products sold online are either over or under labeled.
d)
Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“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.
e)
Company’s Fiscal Year
The Company’s fiscal year is the 52 or 53-week period that ends on the last day of March. The Company’s fiscal year 2018 consists of the 52 weeks ended on March 31, 2018. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in March and the associated quarters, months and periods of those fiscal years.
d)
Company’s Securities and Listings
We have one security listed on the NYSE American: Common Stock, $.0001 par value (ticker symbol: IGC) (“Common Stock”). This security is also available for trading on the Frankfurt, Stuttgart, and Berlin stock exchanges (ticker symbol: IGS1). We have redeemable warrants listed on the OTC markets (ticker symbol: IGC.WT. CUSIP number 45408X118 expiring on March 6, 2019) to purchase Common Stock.
We have Units consisting of one share of Common Stock and two redeemable warrants to purchase Common Stock that are not listed. The Unit holders are requested to contact the Company to get their existing Units separated into Common Stock and Warrants. The Company’s outstanding warrants are exercisable and may be exercised by contacting IGC or the transfer agent, Continental Stock Transfer & Trust Company. The Company has a right to call the warrants, provided the Common Stock has traded at a closing price of at least $8.50 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given. If the Company calls the warrants, either the holder will have to exercise the warrants by purchasing the Common Stock from the Company for $5.00 or the warrants will expire. In accordance with the terms of the outstanding warrant agreements between the Company and its warrant holders, the Company in its sole discretion may lower the price of its warrants at any time prior to their expiration date.
e)
Securities Update
On May 20, 2016, IGC entered into an At The Market (“ATM”) Agency Agreement with IFS Securities, Inc. (dba Brinson Patrick, a division of IFS Securities, Inc.) to offer and sell shares of our common stock having an aggregate offering price of up to $10 million from time to time through Brinson Patrick. During fiscal year 2017 and up to October 2017, the Company issued a total of 1,697,021 and 2,305,812 shares of common stock valued at $642,164 and $1,031,656 , respectively. On December 20, 2017, we entered into an At-the-Market Offering Agreement with The Benchmark Company LLC and Joseph Gunnar & Co., LLC, pursuant to which the Managers acted as the Company's sales agents with respect to the issuance and sale of up to $10,000,000 of the Company's shares of common stock, par value $0.0001 per share (the "Shares"), from time to time in an at-the-market public offering (the "Offering"). As of March 31, 2018, the Company has issued an aggregate 2,545,719 shares of common stock valued at $2,707,950.
Under the December 18, 2014 Purchase Agreement with Apogee, we issued to Apogee 1,200,000 shares of IGC’s common stock, valued at $888,000 for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC. The Purchase Agreement expired, and the Company is pursuing its rights under the terms of the Purchase Agreement to recover certain damages.
Under the February 11, 2016 Purchase Agreement with Cabaran Ultima, we issued 998,571 shares of IGC’s common stock valued at $169,757 for the purchase of 100% ownership interest in Ultima. We decided to exit the business at the end of March 2018 and sell Cabaran. This entity is held for sale.
For a description of the Bricoleur Partners, L.P. loan and shares issued to Bricoleur please see Note 7 Notes Payable and Loans-Others.
As previously reported, in August 2016, we subscribed to 10% of Brilliant Hallmark, Sdn. Bhd. a corporation organized and existing under the laws of Malaysia (“Brilliant”) by issuing 4,000,000 shares of IGC’s common stock with a fair market value of $1,880,000. On April 3, 2017, IGC sold back its ten percent holding in Brilliant Hallmark for a consideration of 4,000,000 shares of IGC’s Common Stock that were returned and retired, thereby reducing the outstanding IGC common stock. The Brilliant Hallmark investment reduced our balance sheet by $1.88 million, once the IGC common stock that we received in exchange for the asset, was retired. The Company did not record a gain or loss from this transaction.
As of March 31, 2018, the Company has 99,227 Units and 30,764,192 shares of Common Stock issued and outstanding. In addition, the Company has 11,656,668 outstanding public Warrants to purchase 1,165,667 shares of common stock at $50.00 a share, which trade on the OTC markets and are set to expire on March 6, 2019. In fiscal years 2018 and 2017, to attract and retain our advisors, we issued 490,000 and 160,000 stock options, respectively, at a weighted average exercise price of $0.34 and expiring in 2023. For more information please see “Note 16. Stock – Based Compensation” in our Consolidated Financial Statements contained herein in Part II, Item 8
.
f)
List of Subsidiaries
The table below lists our subsidiaries.
Subsidiaries (3)
|
|
Immediate
holding company
|
|
Country of
Incorporation
|
|
Percentage of holding
as of March 31, 2018
|
|
|
Percentage of holding
as of March 31, 2017
|
|
IGC – Mauritius
(“IGC-M”)
|
|
IGC
|
|
Mauritius
|
|
|
100
|
|
|
|
100
|
|
Techni Bharathi Private Limited
(“TBL”)
|
|
IGC-M
|
|
India
|
|
|
0
|
|
|
|
100
|
|
Techni Bharathi Private Limited
(“TBL”)
|
|
IGC
|
|
India
|
|
|
100
|
|
|
|
0
|
|
India Mining and Trading Private Limited
(“IGC-IMT”)
|
|
IGC-M
|
|
India
|
|
|
100
|
|
|
|
100
|
|
IGC Materials Private Limited
(“IGC-MPL”)
|
|
IGC-M
|
|
India
|
|
|
100
|
|
|
|
100
|
|
IGC Logistic Private Limited
(“IGC-LPL”)
|
|
IGC-M
|
|
India
|
|
|
100
|
|
|
|
100
|
|
IGC Cleantech Limited
(“IGC-CT”)
|
|
IGC-M
|
|
Hong Kong
|
|
|
0
|
|
|
|
100
|
|
IGC Enterprises Limited
(“IGC-ENT”) (1)
|
|
TBL
|
|
Hong Kong
|
|
|
100
|
|
|
|
0
|
|
Cabaran Ultima Sdn. Bhd.,
(“Ultima”) (2)
|
|
IGC
|
|
Malaysia
|
|
|
100
|
|
|
|
100
|
|
RGF Cabaran Sdn. Bhd. (“RGF”)
|
|
Ultima
|
|
Malaysia
|
|
|
0
|
|
|
|
51
|
|
RGF Construction Sdn. Bhd.
|
|
RGF
|
|
Malaysia
|
|
|
0
|
|
|
|
75
|
|
(1)
|
Beneficially owned by Techni Bharathi Private Limited (“TBL”)
|
(2)
|
Cabaran Ultima is recorded as investment held for sale in the balance sheet for the year ended March 31, 2018. Hence, it is not consolidated.
|
(3)
|
IGC-M, IGC-IMT, IGC-LPL, IGC-MPL are non-operating subsidiaries and don’t have a material impact on the balance sheet or statement of operations.
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries that are more than 50% owned and controlled. The financial statements of the parent company and its majority owned or controlled subsidiaries have been combined on a line by line basis by adding together the book values of all items of assets, liabilities, incomes and expenses after eliminating all inter-company balances and transactions and resulting unrealized gain or loss. Operating results of companies acquired are included from the dates of acquisition. Transactions between the Company and its subsidiaries are eliminated in the consolidated financial statements.
b) Non-controlling interests
Non-controlling interests in the Company’s consolidated financial statements result from the accounting for non-controlling interests in its subsidiaries. Non-controlling interests represent the subsidiaries’ earnings and components of other comprehensive income that are attributed to the non-controlling parties’ equity interests. The non-controlling interest disclosed in the accompanying financial statements for fiscal year 2017 represented the non-controlling interest in Cabaran Ultima’s subsidiaries and the profits or losses associated with the non-controlling interest in those operations. As of the year end March 31, 2018, IGC does not have any non- controlling interest in its books of accounts.
c) Reclassifications
In the fiscal year 2018, land owned by IGC’s wholly owned subsidiary Techni Bharathi Private Limited in Nagpur, India, previously recorded as investment under non-current asset, has been reclassified as Property, Plant and Equipment under non-current assets as we are pursuing options to monetize this asset. In the fiscal year 2018, $1.8 million Note Payable was reclassified to current liabilities from non-current liabilities. Please see “Note 25 – Subsequent Event” in Part II, Item 8 in our Consolidated Financial Statements contained herein for more information.
d) Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (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 used for, but not limited to: allowance for uncollectible accounts receivable; future obligations under employee benefit plans; the useful lives of property, plant, equipment; intangible assets; the valuation of assets and liabilities acquired in a business combination; impairment of goodwill and investments; recoverability of advances; the valuation of options granted and warrants issued; and income tax and deferred tax valuation allowances. 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 consolidated financial statements.
e) Revenue recognition
IGC recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability of the sales price is reasonably assured. Revenue from sale of goods is recognized when substantial risks and rewards of ownership are transferred to the buyer under the terms of the contract.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP and is effective on January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its financial statements.
f) Basic and diluted loss per share
In accordance with ASC Topic 280 – "Earnings Per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method). The computation of basic loss per share for the year ended March 31, 2018 excludes potentially dilutive securities of 1,836,335 shares underlying share purchase warrants, options, and convertible notes, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted. Please refer “Note – 20, Reconciliation of EPS” for more information.
g) Income taxes
The Company accounts for income taxes under the asset and liability method, in accordance with ASC 740, Income Taxes, which requires an entity to recognize deferred tax liabilities and assets. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. A valuation allowance is established and recorded when management determines that some or all of the deferred tax assets are not likely to be realized and therefore, it is necessary to reduce deferred tax assets to the amount expected to be realized.
In evaluating a tax position for recognition, management evaluates whether it is more-likely-than-not that a position will be sustained upon examination, including resolution of related appeals or litigation processes, based on technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold, the tax position is measured and recognized in the Company’s financial statements as the largest amount of tax benefit that, in management’s judgment, is greater than 50% likely of being realized upon settlement. As of March 31, 2018, and 2017, there was no significant liability for income tax associated with unrecognized tax benefits.
h) Cash and cash equivalents
For financial statement purposes, the Company considers all highly liquid debt instruments with maturity of three months or less, to be cash equivalents. The Company maintains its cash in bank accounts in the United States of America, Mauritius, India, Hong Kong, and Malaysia, which at times may exceed applicable insurance limits.
i) Foreign currency transactions
IGC operates in India, Hong Kong and Malaysia and a substantial portion of the Company’s sales are denominated in INR, HKD and RM, as of those respective operations. As a result, changes in the relative values of the U.S. dollar and the INR, the HKD or the RM affect revenues and profits as the results are translated into U.S. dollars in the consolidated and pro forma financial statements.
The accompanying financial statements are reported in U.S. dollars. The INR, HKD, and the RM are the functional currencies for the Company. The translation of the functional currencies into U.S. dollars is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues, costs and expenses using average exchange rates prevailing during the reporting periods. Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive income/(loss), a separate component of shareholders’ equity. The exchange rates used for translation purposes are as follows:
|
|
|
|
Period End Average Rate
|
|
|
|
Period End Rate
|
|
Period
|
|
|
|
(P&L rate)
|
|
|
|
(Balance sheet rate)
|
|
Year ended March 31, 2018
|
|
INR
|
|
64.46
|
|
per
|
|
USD
|
|
INR
|
|
65.11
|
|
per
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HKD
|
|
7.55
|
|
per
|
|
USD
|
|
HKD
|
|
7.85
|
|
per
|
|
USD
|
|
|
|
RM
|
|
4.17
|
|
per
|
|
USD
|
|
RM
|
|
3.86
|
|
per
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2017
|
|
INR
|
|
67.01
|
|
per
|
|
USD
|
|
INR
|
|
64.85
|
|
per
|
|
USD
|
|
|
|
RMB
|
|
6.69
|
|
per
|
|
USD
|
|
RMB
|
|
6.95
|
|
per
|
|
USD
|
|
|
|
HKD
|
|
7.76
|
|
per
|
|
USD
|
|
HKD
|
|
7.77
|
|
per
|
|
USD
|
|
|
|
RM
|
|
4.20
|
|
per
|
|
USD
|
|
RM
|
|
4.42
|
|
per
|
|
USD
|
|
j) Accounts receivable
Accounts receivable from customers in the renting and trading business were recorded at the invoiced amount, taking into consideration any adjustments made for returns. Also, the Company evaluates the collectability of selected accounts receivable on a case-by-case basis and makes adjustments to the bad debt reserve for expected losses. For all other accounts, the Company estimates reserves for bad debts based on general aging, experience and past-due status of the accounts. When applicable, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to make required payments. The allowance for doubtful accounts is determined by evaluating the relative credit worthiness of each client, historical collections experience and other information, including the aging of the receivables. If circumstances related to customers change, estimates of recoverability would be further adjusted.
Regarding our collection policy on commodity trading receivables, there are three types of trades: (1) payment guaranteed through letters of credit, (2) deposit or spot payment on delivery or (3) delivery on credit. With the first type of trade: our policy for collection was to ask the customer to open a letter of credit with a bank. The typical terms of the letter of credit were that 100% of the payment was made when the material was shipped. With the second type of trade, customers paid on delivery. On the third type of trade, our policy was to allow the customer to have a payment credit term of 90 days.
k)
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. We classify our marketable securities as available-for-sale in accordance with FASB ASC Topic 320, “Investments — Debt and Equity Securities”. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders’ equity, net of related tax effects.
We have recorded our investment in Cabaran Ultima as “Investment held for sale” in the amount of $147,500. Management expects to sell 100% of its stake in Cabaran Ultima in the fiscal year 2019.
Other Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs. The Company’s equity in the earnings/(losses) of affiliates is included in the statement of income and the Company’s share of net assets of affiliates is included in the balance sheet. Where the Company’s ownership interest is in excess of 20% and the Company enjoys significant interest, the Company has accounted for the investment based on the equity method. In the fiscal year 2018, the Company concluded that it does not have significant influence over Midtown Partner LLC (“MTP”). Hence, we did not reflect any changes in MTP’s earnings/(losses) in our books. The investment is valued at the same value as in 2017.
l) Property, plant and equipment (PP&E)
Property and equipment are recorded at cost net of accumulated depreciation and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Land
|
More than 100 years
|
Buildings
|
5-25 years
|
Plant and machinery
|
10-20 years
|
Computer equipment
|
3-5 years
|
Office equipment
|
3-5 years
|
Furniture and fixtures
|
5-10 years
|
Vehicles
|
5-10 years
|
Working Facility
|
10-20 years
|
Upon retirement or disposition, cost and related accumulated depreciation of the property and equipment are de-recognized from the books of accounts and the gain or loss is reflected in the results of operation. Cost of additions and substantial improvements to property and equipment are capitalized in the books of accounts. The cost of maintenance and repairs of the property and equipment are charged to operating expenses as incurred.
m) Fair value of financial instruments
FASB ASC No. 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.
As of March 31, 2018, and 2017, the carrying amounts of the Company’s financial instruments, which included cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items.
n) Concentration of credit risk and significant customers
Financial instruments, which potentially expose the Company to concentrations of credit risk, are primarily comprised of cash and cash equivalents, investments, derivatives, accounts receivable and unbilled accounts receivable. The Company places its cash, investments and derivatives in highly rated financial institutions. The Company adheres to a formal investment policy with the primary objective of preservation of principal, which contains credit rating minimums and diversification requirements. Management believes its credit policies reflect normal industry terms and business risk. The Company does not anticipate non-performance by the counterparties and, accordingly, does not require collateral. During the fiscal year 2018, sales were spread across customers in Asia and the credit concentration risk is low.
o)
Segment information
FASB ASC No. 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 two reportable segments:
legacy infrastructure and specialty alternative medicine.
p) Employee benefits plan
In the United States, we provide health insurance, life insurance, and a 401-K plan wherein the Company matches up to 6% of the employee’s pretax contribution up a maximum of $18,000. In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company. In addition, all employees receive benefits from a provident fund, a defined contribution plan. The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary. The contribution is made to the Government’s provident fund.
q) Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
r)
Accounting for goodwill and related impairment
Goodwill represents the excess cost of an acquisition over the fair value of our share of net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is disclosed separately. Goodwill is stated at cost less impairment losses incurred, if any.
The Company adopted the provisions of ASC 350, “Intangibles – Goodwill and Others” (previously referred to as SFAS No. 142, “Goodwill and Other Intangible Assets,” which sets forth the accounting for goodwill and intangible assets subsequent to their acquisition. ASC 350 requires that goodwill and indefinite-lived intangible assets be allocated to the reporting unit level, which the Company defines as each subsidiary. ASC 350 also prohibits the amortization of goodwill and indefinite-lived intangible assets upon adoption but requires that they be tested for impairment at least annually, or more frequently as warranted, at the reporting unit level. The Company does not have any goodwill on March 31, 2018.
The analysis of fair value is based on the estimate of the recoverable value of the underlying assets. For long-lived assets such as land, the Company obtains appraisals from independent professional appraisers to determine the recoverable value. For other assets such as receivables, the recoverable value is determined based on an assessment of the collectability and any potential losses due to default by the counter parties. Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.
s) 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.
t) Recently issued and adopted accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Newly issued ASUs not listed below are expected to have no impact on the Company’s consolidated financial position and results of operations, because either the ASU is not applicable, or the impact is expected to be immaterial.
Recognition and Measurement of Financial Assets and Financial Liabilities:
In January 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This ASU requires entities to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (DVA) when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. It will also require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the current available-for-sale category. The Company is evaluating the effect that ASU 2015-03 will have on its Consolidated Financial Statements.
Leases
: In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification (ASC) Topic 840, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. There are additional optional practical expedients that an entity may elect to apply. We anticipate that the adoption of Topic 842 will materially affect our Consolidated Balance Sheets. We are in the process of implementing changes to our systems and processes in conjunction with our review of existing lease agreements. We will adopt Topic 842 effective January 1, 2019 and expect to elect certain available transitional practical expedients.
Income Tax
:
In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16) "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory." ASU 2016-16 generally accelerates the recognition of income tax consequences for asset transfers between entities under common control. Entities are required to adopt using a modified retrospective approach with a cumulative adjustment to open retained earnings in the year of adoption for previously unrecognized income tax expense. We adopted ASU 2016-16 effective January 1, 2018.
Intangibles-Goodwill and Other
:
In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019; early adoption is permitted. We currently do not anticipate that the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements.
Stock Based Compensation
: In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which modifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards, and classification in the statement of cash flows. The Company will adopt ASU 2016-09 in its first quarter of 2018. Currently, excess tax benefits or deficiencies from the Company’s equity awards are recorded as additional paid-in capital in its Consolidated Balance Sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the reporting periods in which vesting occurs. As a result, subsequent to adoption the Company’s income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards.
NOTE 3 – ACQUISITIONS
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”). The purchase price of the acquisition consisted of 998,571 shares of our common stock, valued at approximately $169,757 on the closing date of the Share Purchase Agreement.
In 2017, the Company sold Brilliant Hallmark and therefore some of the real estate management business of Cabaran was curtailed. Hence, rather than look for new business opportunities, the IGC Board decided to exit the
real estate management industry and sell Cabaran. In fiscal year ended March 31, 2018, Cabaran is held for sale. The investment in Cabaran has been valued at $147,500 and the Company is confident that it can sell Cabaran for its carrying value.
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
WIP of components for Hyalolex
tm
|
|
$
|
486,497
|
|
|
|
-
|
|
Total
|
|
$
|
486,497
|
|
|
$
|
-
|
|
The Company’s policy, consistent with ASC 300, is to book the cost of producing components and completed products as inventory. The products and its components have a dual purpose over the next 24 months: they will either be sold or used to demonstrate the product to various entities including dispensary owners, growers, processors, doctors, nurse practitioners, among others.
Management will evaluate the policy with regard to inventory periodically. We had
$486,497 of inventory and
no inventory
in the fiscal years ending 2018
and 2017, respectively.
NOTE 5 – OTHER CURRENT AND NON-CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Advance to suppliers & for services
|
|
$
|
298,853
|
|
|
$
|
240,968
|
|
Statutory advances
|
|
|
44,439
|
|
|
|
14,216
|
|
Deposit and other current assets
|
|
|
11,349
|
|
|
|
155,224
|
|
Total
|
|
$
|
354,641
|
|
|
$
|
410,408
|
|
Other Non-current assets consist of the following:
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Non-current deposits
|
|
$
|
18,051
|
|
|
|
-
|
|
Other advances
|
|
|
466,511
|
|
|
$
|
539,720
|
|
Total
|
|
$
|
484,562
|
|
|
$
|
539,720
|
|
On May 21, 2012, TBL entered into an agreement with Weave & Weave for the purchase of land valued at $614,350. TBL gave Weave and Weave an advance of $376,286. As of the date of this filing, the parties are in the process of negotiating a settlement that includes the purchase and sale of land or the refund of the advance given by TBL. We believe the amount is recoverable.
NOTE 6 – INTENTIONALLY LEFT IN BLANK
NOTE 7 – NOTES PAYABLE AND LOANS - OTHERS
Since October 16, 2009, the Company has had a no-interest note with Bricoleur Partners, L.P. (‘Bricoleur’) in the amount of $1.8 million. The maturity date of the loan has been extended various times, and, as of March 31, 2018, Bricoleur’s position is that the loan is outstanding. From 2009 to March 31, 2018, the Company has paid shares for renewals and as a “penalty” for every month that the loan has been outstanding. From October 16, 2009 through March 31, 2018, the Company has issued approximately 1.9 million shares valued at approximately $2.7 million, based on the market value of the shares at each instance of issuance. According to the IRS rules these amounts are non-deductible for the Company. Since August 2016, the Company has issued 30,000 shares for every month the loan has been outstanding. In fiscal years 2017 and 2018, the Company issued a total of 333,956 and 360,000 shares valued at $129,816 and $191,100, respectively. In November 2017, the Company asked the shareholders to vote for a resolution that allowed the Company to deliver up to an additional 2,000,000 shares of the Company to Bricoleur. After several adjournments to garnish support from shareholders, this resolution failed to pass. Despite the categorization of the share issuances under the broad category of interest on past financial statements, the Company believes that these payments of shares constitute a repayment of debt, at least in substantial part. The Company expects to aggressively pursue this position. However, there can be no guarantee of success. Please see Note 25 – Subsequent Events for an update on the matter.
The Company’s total cash interest expense for the years ended March 31, 2018 and 2017 was $30,742 and $93,648. The cash interest in fiscal 2018 was reduced because we were able to repay some high interest loans.
As of March 31, 2018, the Company has four loans categorized as Loans Others from related parties totaling $427,500 at an average annual interest rate of 7.5%:
Loan 1: We have a loan from an individual for $50,000, at an annual interest rate of 15%, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
Loan 2: We have a loan of $70,000 from an affiliate of our CEO, at an annual interest rate of 15%, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
Loan 3: We have a working capital loan with a balance of $107,500 as of March 31, 2018, from an affiliate of our CEO, at an annual interest rate of zero percent, due February 23, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
Loan 4: We have a working capital loan with a balance of $200,000 as of March 31, 2018, from the spouse of our CEO, at an annual interest rate of zero percent, due October 31, 2022. There is no prepayment penalty. The assets of the Company secure the loan.
NOTE 8 – OTHER CURRENT AND NON-CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
As of March 31,
|
|
Particulars
|
|
2018
|
|
|
2017
|
|
Statutory payables
|
|
$
|
3,899
|
|
|
$
|
15,203
|
|
Employee related liabilities
|
|
|
203,731
|
|
|
|
676,511
|
|
Accrued expenses
|
|
|
286,054
|
|
|
|
181,465
|
|
Total
|
|
$
|
493,684
|
|
|
$
|
873,179
|
|
Employee related liabilities consists of unpaid salary payable to employees. Accrued expenses consist primarily of amounts payable against services related to audit, legal, marketing, etc., in the normal course of business.
Other non-current liabilities consist of the following:
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Statutory reserve
|
|
$
|
14,896
|
|
|
$
|
-
|
|
Total
|
|
$
|
14,896
|
|
|
$
|
-
|
|
NOTE 9 – OTHER INCOME (NET) & INVESTMENTS / ASSOCIATES / JOINT VENTURES
The total other income for the fiscal years 2018 and 2017 is $3,143 and $215,955, respectively. In the fiscal year 2018, other income (net) consists of $30,742 interest paid for loans, $4,824 interest received from cash deposits, and $29,061 other income like rent and others. In the fiscal year 2017 other income (net) consists of $223,464 interest paid, $121,677 interest and other income received and $317,742 as one- time non-cash gain.
NOTE 10 – 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 maturity. Such financial instruments are classified as current and are expected to be liquidated within the next twelve months.
NOTE 11 – INTANGIBLE ASSETS & GOODWILL
The movement in goodwill and intangible assets is given below:
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Intangible assets
|
|
$
|
-
|
|
|
$
|
113,321
|
|
Amortization
|
|
|
-
|
|
|
|
(113,321
|
)
|
Cost of Patent Acquisition and Filing
|
|
|
127,826
|
|
|
|
-
|
|
Total Intangible assets
|
|
$
|
127,826
|
|
|
$
|
-
|
|
Goodwill
|
|
|
-
|
|
|
|
198,169
|
|
Total Goodwill
|
|
$
|
-
|
|
|
$
|
198,169
|
|
The value of intangible assets for the fiscal years 2018 and 2017 amounted to $127,826 and $Nil, respectively. The value of the intangibles includes the acquisition of patent rights, data, and the filing of patents. The amortization of intangibles is over 15 years. The amount of goodwill in fiscal 2017 is associated with Cabaran Ultima.
NOTE 12 – RELATED PARTY TRANSACTIONS
We pay an affiliate of our CEO $4,500 per month for office space and certain general and administrative services rendered in Maryland. In addition, we pay another affiliate of our CEO $6,100 per month for office and facilities in Washington State. We believe, based on rents and fees for similar services in the Washington, D.C. metropolitan area, and Washington State that the fee charged by the affiliates are at least as favorable as we could have obtained from an unaffiliated third party and these payments are not considered, or meant to be compensation to our CEO. The rental agreement for the Maryland location is on a month-to-month basis and may be terminated by our Board of Directors of the Company at any time without notice. The rental agreement for Washington State facilities expires on December 31, 2018 and may be renewed by mutual consent. During the fiscal year ended March 31, 2018, the total rent paid to the affiliates were $54,000 for the office space (and services) in Maryland, and $73,200, plus a one-time renewal fee of $106,283, for the facilities in Washington State. We expect that these expenses will remain at approximately this level during the fiscal year ending March 31, 2019. As of March 31, 2018, the Company has a net unpaid balance of $97,379 in compensation to our CEO.
Please refer to Note 7 for information about
Loans by Related Parties.
Loans to Related Parties
On April 30, 2015, , we loaned Apogee Financial Services $70,000 as working capital for Midtown partners. The loan is outstanding as of March 31, 2018.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
No significant commitments or contingencies were made or existed during fiscal years 2018 or 2017.
NOTE 14 – PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
|
|
|
|
|
As of March 31,
|
|
Category
|
|
Useful Life (years)
|
|
|
2018
|
|
|
2017
|
|
Land
|
|
|
N/A
|
|
|
$
|
5,174,611
|
|
|
|
-
|
|
Buildings & Facilities
|
|
|
25
|
|
|
|
954,801
|
|
|
$
|
241,181
|
|
Plant and machinery
|
|
|
20
|
|
|
|
1,703,226
|
|
|
$
|
1,710,055
|
|
Computer equipment
|
|
|
3
|
|
|
|
159,473
|
|
|
|
157,349
|
|
Office equipment
|
|
|
5
|
|
|
|
114,979
|
|
|
|
119,528
|
|
Furniture and fixtures
|
|
|
5
|
|
|
|
64,851
|
|
|
|
70,368
|
|
Vehicles
|
|
|
5
|
|
|
|
291,884
|
|
|
|
292,764
|
|
Facility under construction
|
|
|
N/A
|
|
|
|
374,045
|
|
|
|
957,880
|
|
Total
|
|
|
|
|
|
$
|
8,837,870
|
|
|
|
3,549,125
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
$
|
(2,601,031
|
)
|
|
$
|
(2,595,189
|
)
|
Total Net PP&E
|
|
|
|
|
|
$
|
6,236,839
|
|
|
$
|
953,936
|
|
Depreciation and amortization expense for the fiscal years ended March 31, 2018 and March 31, 2017 was $19,414 and $396,346, respectively. Capital work-in-progress represents advances paid towards the acquisition of property and equipment and the cost of property and equipment not used before the balance sheet date.
NOTE 15 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
During the fiscal years 2018 and 2017, the Company recorded selling, general and administrative expenses of $1,870,477 and $2,271,690, respectively. Selling, general and administrative expenses consist of expenses related to public company, research and development, employee related expenses and depreciation.
NOTE 16 – STOCK-BASED COMPENSATION
As of March 31, 2018, a total of 1,455,000 shares of common stock have been awarded and there are no shares of common stock available for future grants of options or stock awards. As of March 31, 2018, we also have outstanding options to purchase 650,000 common stock, expiring between October 31, 2022 and October 31, 2023, with weighted average exercise price of $0.34 per share.
The fair value of options was valued at $0.2 million using a Black-Scholes Pricing Model with the following assumptions:
|
|
Granted in Fiscal 2018
|
|
Expected life of options
|
|
7 years
|
|
Vested options
|
|
|
100
|
%
|
Risk free interest rate
|
|
|
0.70
|
%
|
Expected volatility
|
|
|
119.5
|
%
|
Expected dividend yield
|
|
Nil
|
|
Amounts recognized in the additional paid up capital with respect to our stock-based compensation plans and option-based compensation were as follows:
Stock-based compensation
|
|
Year ended March 31
|
|
|
|
2018
|
|
|
2017
|
|
Cost of Sales
|
|
$
|
40,600
|
|
|
$
|
-
|
|
Selling, general and Administrative (including Research and Development)
|
|
|
218,623
|
|
|
|
306,680
|
|
Total stock-based compensation to employees
|
|
$
|
259,223
|
|
|
$
|
306,680
|
|
Option-based compensation
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
$
|
29,209
|
|
|
$
|
-
|
|
Selling, general and Administrative (including Research and Development)
|
|
|
42,808
|
|
|
|
9,396
|
|
Intangible Assets
|
|
|
21,000
|
|
|
|
13,600
|
|
Total option-based compensation to advisors & contractors
|
|
$
|
93,017
|
|
|
$
|
22,996
|
|
The cost associated with stock compensation to employees is allocated over one-year, consistent with the current vesting period of one-year. Over the next three quarters, we expect to recognize a total of $439,599 and $105,884 of stock-based compensation and option-based compensation, respectively.
NOTE 17 – EMPLOYEE BENEFITS
In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company.
|
|
Year Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Projected Benefit Obligation (PBO) at the beginning of the year
|
|
$
|
12,459
|
|
|
$
|
11,877
|
|
Service cost
|
|
|
700
|
|
|
|
696
|
|
interest cost
|
|
|
1003
|
|
|
|
971
|
|
Benefits paid
|
|
|
-
|
|
|
|
(1,018
|
)
|
Actuarial (gain)/loss
|
|
|
811
|
|
|
|
(67
|
)
|
PBO at the end of the year
|
|
$
|
14,973
|
|
|
$
|
12,459
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
14,399
|
|
|
$
|
12,852
|
|
Net gratuity cost for the years ended March 31, 2018 and 2017 included:
|
|
Year Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Service cost
|
|
$
|
700
|
|
|
$
|
696
|
|
Interest cost
|
|
|
1,003
|
|
|
|
971
|
|
Expected return on plan assets
|
|
|
(1,020
|
)
|
|
|
(1,045
|
)
|
Actuarial (gain)/loss
|
|
|
811
|
|
|
|
(67
|
)
|
Net gratuity cost
|
|
$
|
1,494
|
|
|
$
|
555
|
|
The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:
|
|
Year Ended March 31,
|
|
|
|
|
2018
|
|
|
|
2017
|
|
Discount rate
|
|
|
7.50
|
%
|
|
|
8
|
%
|
Rate of increase in compensation levels
|
|
|
7
|
%
|
|
|
7
|
%
|
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards.
The expected payout of the accumulated benefit obligation as of March 31 is as follows.
|
|
As of March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Expected contribution during the year ending Year 1
|
|
$
|
4,826
|
|
|
$
|
4,642
|
|
Expected benefit payments for the years ending March 31:
|
|
|
|
|
|
|
|
|
Year 2
|
|
$
|
1,522
|
|
|
$
|
1,464
|
|
Year 3
|
|
|
497
|
|
|
|
478
|
|
Year 4
|
|
|
4,473
|
|
|
|
4,303
|
|
Year 5
|
|
|
337
|
|
|
|
324
|
|
Thereafter
|
|
$
|
5,643
|
|
|
$
|
5,428
|
|
Provident fund
.
In addition to the above benefits, all employees in India receive benefits from a provident fund, a defined contribution plan. The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary. The contribution is made to the Government’s provident fund.
NOTE 18 – INCOME TAXES
Income tax expense/(benefit) for each of the years ended March 31 consists of the following:
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
Foreign
|
|
|
464
|
|
|
|
14,431
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Net Current
|
|
$
|
464
|
|
|
|
14,431
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Net Deferred
|
|
|
|
|
|
|
-
|
|
Total tax provision
|
|
$
|
464
|
|
|
$
|
14,431
|
|
The significant components of deferred income tax expense/(benefit) from operations before non-controlling interest for each of the years ended March 31 are approximated as following:
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Deferred tax expense/(benefit)
|
|
$
|
|
|
|
$
|
-
|
|
Net operating loss carry forward
|
|
|
577,111
|
|
|
|
652,283
|
|
Foreign Tax Credits
|
|
|
|
|
|
|
-
|
|
Less: Valuation Allowance
|
|
|
577,111
|
|
|
|
652,283
|
|
Net deferred tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
The table below sets forth the approximate income tax expense/(benefit) for 2018 and 2017 computed by applying the applicable United States federal income tax rate and is reconciled to the tax expense/(benefit) computed at the effective income tax rate:
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Computed expected income tax expense/(benefit)
|
|
$
|
577,111
|
|
|
$
|
652,283
|
|
State tax benefit net of federal tax
|
|
|
|
|
|
|
-
|
|
Change in valuation allowance
|
|
|
577,111
|
|
|
|
652,283
|
|
Deferred expenses from foreign acquisition
|
|
|
-
|
|
|
|
-
|
|
Impairment loss on goodwill
|
|
|
-
|
|
|
|
-
|
|
Impairment loss on investments
|
|
|
-
|
|
|
|
410
|
|
Capitalized interest costs
|
|
|
-
|
|
|
|
-
|
|
Deferred tax assets from foreign subsidiaries
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
Effective income tax rate
|
|
|
(0.0
|
%)
|
|
|
(0.0
|
%)
|
The approximate deferred tax assets and liabilities as of March 31 consist of the following tax effects relating to temporary differences and carry forwards:
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Current deferred tax liabilities/(assets):
|
|
|
|
|
|
|
Deferred Acquisition Costs – Foreign taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Valuation allowance
|
|
|
-
|
|
|
|
-
|
|
Net current deferred tax liabilities/(assets)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities/(assets):
|
|
|
|
|
|
|
|
|
Deferred acquisition costs- foreign taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Net operating losses
|
|
|
577,111
|
|
|
|
652,283
|
|
Valuation allowance
|
|
|
(577,111
|
)
|
|
|
(652,283
|
)
|
Non-current net deferred tax liabilities/(assets)
|
|
$
|
-
|
|
|
$
|
-
|
|
The company provides a full allowance against any tax benefit which may be realized in the future, if ever. Therefore, the financial statements do not reflect any current or deferred provisions for income taxes.
NOTE 19 – 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
Segments
|
|
Fiscal Year Ended
March 31, 2018
|
|
|
Percentage of Total Revenue
|
|
|
|
|
|
|
|
|
Legacy infrastructure
|
|
$
|
2,192,590
|
|
|
|
100
|
%
|
Alternative therapies
|
|
|
-
|
|
|
|
0
|
%
|
Total
|
|
$
|
2,192,590
|
|
|
|
100
|
%
|
2(a) The table below shows the revenue attributed to the country of domicile (USA) and foreign countries. Revenue is attributed to an individual country if the invoice made to the customer originates in that country. The basis for originating an invoice is the underlining agreement.
Segments
|
|
Country
|
|
Fiscal Year Ended
March 31, 2018
|
|
|
Percentage of
Total Revenue
|
|
|
|
|
|
|
|
|
|
|
Asia (1)
|
|
India
|
|
$
|
395,444
|
|
|
|
18
|
%
|
(2)
|
|
Hong Kong
|
|
|
1,797,146
|
|
|
|
82
|
%
|
U.S.A
|
|
|
|
|
0.0
|
|
|
|
0
|
%
|
Total
|
|
|
|
$
|
2,192,590
|
|
|
|
100
|
%
|
2(b) The table below shows the long-term assets other than financial instruments held in the country of domicile and foreign countries.
Nature of Assets
|
|
USA (Country of Domicile)
|
|
|
Foreign Countries (India)
|
|
|
Total
|
|
Intangible assets
|
|
$
|
127,826
|
|
|
|
|
|
$
|
127,826
|
|
Property, plant and equipment, net
|
|
|
1,000,962
|
|
|
|
5,235,877
|
|
|
|
6,236,839
|
|
Investments
|
|
|
773,111
|
|
|
|
25,811
|
|
|
|
798,922
|
|
Other non-current assets
|
|
|
-
|
|
|
|
484,562
|
|
|
|
484,562
|
|
Total long-term assets
|
|
$
|
1,901,899
|
|
|
$
|
5,746,250
|
|
|
$
|
7,648,149
|
|
NOTE 20 – RECONCILIATION OF EPS
For the fiscal years 2018 and 2017, the basic shares include founder’s shares, shares sold in the market, shares sold in a private placement, shares sold in the IPO, shares sold in the registered direct, shares arising from the exercise of warrants issued in the placement of debt, shares issued in connection with debt, shares issued for investments and acquisitions, and shares issued to employees, directors, advisors and vendors.
The weighted average number of shares outstanding for the fiscal years 2018 and 2017 used for the computation of basic EPS is 27,937,287 and 25,658,544 shares, respectively.
Due to the loss incurred during the year ended March 31, 2018, the computation of fully diluted loss per share excludes potentially dilutive securities of 1,806,567 shares consisting of options, warrants, and 29,768 shares from the conversion of outstanding units, because their inclusion would be anti-dilutive.
NOTE 21 – INVESTMENTS – OTHERS
Investments – others for each of the years ended March 31, 2018 and 2017 consists of the following:
|
|
Year Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Investment in equity shares of unlisted company & associates
|
|
$
|
25,811
|
|
|
$
|
63,392
|
|
Investment in affiliate
|
|
|
773,111
|
|
|
|
773,111
|
|
Investment in land
|
|
|
-
|
|
|
|
5,174,611
|
|
Total
|
|
$
|
798,922
|
|
|
$
|
6,011,114
|
|
Investment in land has been reclassified to Property Plant and Equipment.
NOTE 22 – INVESTMENT HELD FOR SALE
In Malaysia, our wholly owned subsidiary Cabaran Ultima, operates a real estate management business. Our board decided to exit this business and as of March 31, 2018, we accounted for our investment in Cabaran Ultima as “Investment Held for Sale” amounting to $147,500. We expect to sell Cabaran Ultima in the fiscal year 2019.
Below is the balance sheet of unaudited financials of Cabaran Ultima as of March 31, 2018.
Particulars
|
|
FYE March 31, 2018 (unaudited)
|
|
|
FYE March 31, 2017
(audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash & cash equivalents
|
|
$
|
663
|
|
|
$
|
456,556
|
|
Accounts receivable, net of allowances
|
|
|
-
|
|
|
|
230,136
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
30,103
|
|
Total current assets
|
|
$
|
663
|
|
|
|
716,795
|
|
Property, plant & equipment (net)
|
|
|
-
|
|
|
|
8,128
|
|
Investment-others
|
|
|
-
|
|
|
|
37,479
|
|
Total assets
|
|
$
|
663
|
|
|
|
762,402
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
-
|
|
|
|
|
|
Trade payable
|
|
$
|
15,892
|
|
|
$
|
351,466
|
|
Other current liabilities
|
|
|
34,753
|
|
|
|
15,840
|
|
Total current liabilities
|
|
$
|
50,645
|
|
|
|
367,306
|
|
Long term borrowings
|
|
|
-
|
|
|
|
452,080
|
|
Total liabilities
|
|
|
50,645
|
|
|
|
819,386
|
|
Stockholders' equity:
|
|
|
-
|
|
|
|
-
|
|
Common stock
|
|
|
517,866
|
|
|
|
452,080
|
|
Retained Earnings
|
|
|
(567,848
|
)
|
|
|
(500,228
|
)
|
Total equity
|
|
|
(49,982
|
)
|
|
|
(48,148
|
)
|
Non-controlling interest
|
|
|
-
|
|
|
|
(8,836
|
)
|
Total stockholders' equity
|
|
|
(49,982
|
)
|
|
|
(56,984
|
)
|
Total liabilities and stockholder's equity
|
|
$
|
663
|
|
|
$
|
762,402
|
|
Below is the unaudited profit and loss for Cabaran Ultima for the fiscal year ended March 31, 2018.
|
|
Year ended March 31,
|
|
|
|
2018
(unaudited)
|
|
|
2017
(audited)
|
|
Revenues
|
|
$
|
12
|
|
|
$
|
244,152
|
|
Cost of revenues
|
|
|
-
|
|
|
|
(183,186
|
)
|
Gross profit/(loss)
|
|
|
12
|
|
|
|
60,966
|
|
Selling, general and administrative expenses
|
|
|
(4,051
|
)
|
|
|
(64,208
|
)
|
Loss on investments / associates /joint ventures
|
|
|
|
|
|
|
(527
|
)
|
Operating income/(loss)
|
|
$
|
(4,039
|
)
|
|
$
|
(3,769
|
)
|
Other Income/(net)
|
|
|
-
|
|
|
|
14
|
|
Income before income taxes and minority interest attributable to non-controlling interest
|
|
$
|
(4,039
|
)
|
|
$
|
(3,755
|
)
|
Income taxes benefit/ (expense)
|
|
|
-
|
|
|
|
(14,535
|
)
|
Net income/(loss)
|
|
$
|
(4,039
|
)
|
|
$
|
(18,290
|
)
|
Non-controlling interests in earnings of subsidiaries
|
|
|
-
|
|
|
|
2,074
|
|
Net income / (loss) attributable to common stockholders
|
|
$
|
(4,039
|
)
|
|
$
|
(20,364
|
)
|
NOTE 23 – CERTAIN AGED RECEIVABLES
The receivable and other assets as of March 31, 2018 and 2017, include certain aged receivables in the amount of $428,969. 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 March 31, 2018. These receivables are included in Accounts Receivable and have been classified as current for the following reasons:
The Company’s subsidiary in India, TBL, worked on the building of an airport runway at the Cochin International Airport. During the execution of these projects the clients of the Company requested several changes to the engineering drawings. The claims of the Company against each of the clients involve reimbursement of expenses associated with the change orders and variances as well as compensation for delays caused by the client. The delay part of the claim involves equipment that is idle on the job, including interest or lease charges for the equipment while it is idle, and workers that are idle, among others. The expense reimbursement involves cost of new material including any escalation in the cost of materials, usage of equipment, personnel and other charges that were incurred as a result of the delays caused by the change orders. These invoices were disputed by the clients and referred to arbitration. The process of arbitration involves each party choosing an arbitrator and the arbitrators appointing a third chief arbitrator. Each party then presents its case over several months and the arbitrator makes an award.
The receivables occurred and became due when TBL won the arbitration award against Cochin International Airport on July 22, 2009. The arbitration awards stipulate that interest be accrued for the period of non-payment. However, the receivables do not have an interest component as the Company will try and use the accrued interest as negotiating leverage for an earlier payment. Although the receivables are contractually due, and hence its classification as current, it may take the Company anywhere from the next 30 days to 6 months to actually realize the funds, depending on final verdict to happen in few months. The Company continues to carry the full value of the receivables without interest and without any impairment because it believes that there is minimal risk that these organizations will become insolvent and unable to make payment.
NOTE 24 – INVESTMENT IN AFFILIATES
Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued Apogee 1,200,000 of IGC’s Common Stock valued at $888,000 for the purchase of 24.9% ownership interest in Midtown Partners & Co., LLC (MTP). During the fiscal year 2018, after considering several factors, the Company concluded that it no longer had considerable influence over MTP. Hence, we did not record any impact of MTP’s earnings/(losses) and instead we maintained the same value as of March 31, 2017 or ($773,111). Please see Note 12-Related Party Transactions for more information on Midtown Partner.
NOTE 25 – SUBSEQUENT EVENTS
On May 11, 2018, the SEC declared effective the Company’s registration statement on Form S3 for $30,000,000 filed on April 2, 2018.
On May 2, 2018, the Company filed a lawsuit in the Circuit Court for Montgomery County, Maryland, seeking a declaratory judgment that the shares issued to Bricoleur by the Company represent payment on the loan and damages for improper lending practices under Maryland law. The lawsuit is currently pending.
On April 11, 2018, the Audit Committee of our Board of Directors approved the appointment of Manohar Chowdhry & Associates (“MCA”) as our new independent registered public accounting firm for the fiscal years ended March 31, 2018 and March 31, 2019.