UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
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þ
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Annual
report under Section 13 or 15(d) of the Securities Exchange Act of
1934.
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For
the fiscal year ended March 31,
2009
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o
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Transition
report under Section 13 or 15(d) of the Exchange
Act.
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Commission
file number
000-1326205
INDIA
GLOBALIZATION CAPITAL, INC.
(Name of
small business issuer in its charter)
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Maryland
(State
or other jurisdiction of incorporation or organization)
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20-2760393
(I.R.S.
Employer Identification No.)
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4336 Montgomery Ave.
Bethesda, Maryland 20814
(Address
of principal executive offices)
(301) 983-0998
(Issuer’s
telephone number)
Securities
registered under Section 12(b) of the Exchange Act:
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Title of Each Class
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Name of exchange on which
registered
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Units,
each consisting of one share of Common Stock
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NYSE
Alternext
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and
two Warrants
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Common
Stock
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NYSE
Alternext
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Common
Stock Purchase Warrants
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NYSE
Alternext
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Securities
registered under Section 12(g) of the Exchange Act: None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o
Yes þ No
Indicate
by check mark whether the registrant : (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
þ
Yes
o No
Indicate
by check mark disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o Smaller
Reporting Company þ
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
o Yes
þ No
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common was last
sold, or the average bid and asked price of such common equity, as of the last
business day of the registrant’s most recently completed second fiscal quarter:
$30,395,717
As of May
31, 2009 there were 10,091,171 shares of common stock issued and
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
INDEX
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Page
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PART
I
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Item
1.
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3
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Item
1A.
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6
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Item
1B.
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10
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Item
2.
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10
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Item
3.
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10
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Item
4.
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10
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PART
II
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Item
5.
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11
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Item
6.
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12
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Item
7.
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17
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Item
7A.
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21
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Item
8.
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23
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Item
9.
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24
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Item
9A(T).
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24
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Item
9B.
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24
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PART
III
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Item
10.
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25
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Item
11.
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29
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Item
12.
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32
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Item
13.
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35
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Item
14.
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36
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PART
IV
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Item
15.
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38
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40
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Section
1350 Certification
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Section
1350 Certification
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PART
I
Item 1. Business
Background of India Globalization
Capital, Inc.
(IGC)
IGC, a
Maryland corporation, was organized on April 29, 2005 as a blank check
company formed for the purpose of acquiring one or more businesses with
operations primarily in India through a merger, capital stock exchange, asset
acquisition or other similar business combination or acquisition. On March 8,
2006, we completed an initial public offering. On February 19, 2007,
we incorporated India Globalization Capital, Mauritius, Limited (IGC-M), a
wholly owned subsidiary, under the laws of Mauritius. On March 7,
2008, we consummated the acquisition of 63% of the equity of Sricon
Infrastructure Private Limited (Sricon) and 77% of the equity of Techni Bharathi
Limited (TBL). The shares of the two Indian companies, Sricon and TBL, are held
by IGC-M. On February 19, 2009 IGC-M beneficially purchased 100% of
IGC Mining and Trading, Limited (IGC-IMT based in Chennai,
India). IGC-IMT was formed on December 16, 2008 as a privately held
start-up company engaged in the business of mining and trading. Its
current activity is to operate a shipping hub and export iron ore to
China. India Globalization Capital, Inc. (the Registrant, the
Company, or we) and its subsidiaries are significantly engaged in one segment,
infrastructure construction.
IGC’s
organizational structure is as follows:
Most of
the shares of Sricon and TBL acquired by IGC were purchased directly from the
companies. IGC purchased a portion of the shares from the existing owners of the
companies. The founders and management of Sricon own 37% of Sricon
and the founders and management of TBL own 23% of TBL.
The
acquisitions were accounted for under the purchase method of
accounting. Under this method of accounting, for accounting and
financial purposes, IGC-M, Limited was treated as the acquiring entity and
Sricon and TBL as the acquired entities. The financial statements
provided here and going forward are the consolidated statements of IGC, which
include IGC-M, Sricon, TBL and their subsidiaries. However,
historical description of our business for periods and dates prior to March 7,
2008 include information on Sricon and TBL.
Unless
the context requires otherwise, all references in this report to the “Company”,
“IGC”, “we”, “our”, and “us” refer to India Globalization Capital, Inc, together
with its wholly owned subsidiary IGC-M, and its direct and indirect subsidiaries
(Sricon, TBL and IGC-IMT).
Our
Securities
We have
three securities listed on the NYSE Alternext: (1) common stock, $.0001 par
value (ticker symbol: IGC), (2) redeemable warrants to purchase common stock
(ticker symbol: IGC.WS) and (3) units consisting of one share of common stock
and two redeemable warrants to purchase common stock (ticker symbol:
IGC.U). On March 8, 2006, we sold 11,304,500 units in our initial
public offering. These 11,304,500 units include 9,830,000 units sold to
the public and the over-allotment option of 1,474,500 units exercised by the
underwriters of the public offering. The units may be separated into common
stock and warrants. Each warrant entitles the holder to purchase one
share of common stock at an exercise price of $5.00. The warrants
expire on March 3, 2011, or earlier upon redemption. The
registration statement for initial public offering was declared effective on
March 2, 2006. The warrants are exercisable and may be exercised by
contacting the Company or the transfer agent Continental Stock Transfer &
Trust Company. We have 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 we call the
warrants, the holder will either have to redeem the warrants by purchasing the
common stock from us for $5.00 or the warrants will expire.
On March
7, 2008, we bought and redeemed a total of 6,159,346 shares. As a
result, of the redemption and the subsequent issuance of an aggregate of 210,000
shares of common stock in private placements, including the issuance to Red Chip
Companies described below, on December 31, 2008, we had 8,780,107 shares
outstanding (including shares sold to our founders in a private placement prior
to the public offering) and 24,874,000 shares of common stock were reserved for
issuance upon exercise of redeemable warrants and underwriters’ purchase
option.
On
January 9, 2009 we completed an exchange of 11,943,878 public and private
warrants for 1,311,064 new shares of common stock. Following the
issuance of the shares relating to the warrant exercise, we have 10,091,971
shares of common stock outstanding and warrants to purchase 11,855,122 shares of
common stock outstanding. For details relating to the warrant
exercise, see our December 31, 2008 10Q and the Warrant Tender Offer section of
this annual report.
Overview
Sricon
Infrastructure Private Limited (“Sricon”) was incorporated as a private limited
company on March 3, 1997 in Nagpur, India. Sricon is an engineering
and construction company that is engaged in three business areas: 1) civil
construction of highways and other heavy construction, 2) mining and quarrying
and 3) the construction and maintenance of high temperature cement and steel
plants. Sricon’s present and past clients include various Indian
government organizations. It has the prior experience to bid on
contracts that are priced at a maximum of about $116
million. As indicated in previous press releases and quarterly
reports, in October 2008 lack of available credit drove Sricon to curtail much
of its construction activity, as it was unable to provide Bank Guarantees for
construction contracts, and to focus on long term recurring contracts such as
maintenance of high temperature cement factories. This led to a sharp
decline in overall revenue. Sricon took several steps to curtail its
expenses including lay offs. Sricon also turned its attention to
pursuing claims against the contracting agencies for delays it had suffered on
some of its contracts. Due to arbitration requirements in our
contract agreements, we expect our claims to be resolved in arbitration. Sricon
claims losses from having to maintain equipment and personnel during the delay
period, as well as opportunity costs. There can be no assurance that
Sricon will be successful in its claims. While the cost associated
with delays is accounted in the relevant period, any revenue from claims is not
accounted until and unless they are paid.
Techni
Bharathi Limited (“TBL”) was incorporated as a public (but not listed on the
stock market) limited company on June 19, 1982 in Cochin, India. TBL
is an engineering and construction company engaged in the execution of civil
construction and structural engineering projects. TBL has a focus in
the Indian states of Andhra Pradesh, Karnataka, Assam and Tamil Nadu. Its
present and past clients include various Indian government
organizations. The overall lack of liquidity led TBL to curtail its
construction contracts and cut its costs through layoffs. TBL is
re-focused on smaller construction contracts and the settlement of
claims.
IGC-M,
through its subsidiaries in India, is also involved in the building of rock
quarries and the export of iron ore. IGC-M operates a shipping hub in
the Krishnapatnam port on the west coast of India. We aggregate
ore from smaller mines before shipping to China. We are also engaged
in the production of rock aggregate. Rock aggregate is used in the
construction of roads, railways, dams, and other infrastructure
development. We are in the process of developing several quarries
through partnerships with landowners.
Core
Business Areas
Our core
business areas include the following:
Highway and heavy
construction:
The
Indian government has articulated a plan to build and modernize Indian
infrastructure. The government’s plan, calls for spending over $475
billion over the next five years for the expansion and construction of rural
roads, major highways, airports, seaports, freight corridors, railroads and
townships.
Mining
and Quarrying
As Indian
infrastructure modernizes, the demand for raw materials like stone aggregate,
coal, ore and similar resources is projected to increase. In 2006, according to
the Freedonia Group, India was the fourth largest stone aggregate market in the
world with demand of up to 1.1 billion metric tons. We are in the
process of teaming with landowners to build out rock quarries; in addition we
have licenses for the installation and production of rock aggregate
quarries. Our mining and trading activity centers on the export
of Iron ore to China. India is the fourth largest producer of
ore.
Construction
and maintenance of high temperature plants
We have
an expertise in the civil engineering, construction and maintenance of high
temperature plants. This requires specialized skills to build and maintain
high temperature chimneys and kilns.
Customers
Over the
past 10 years, Sricon has qualified in all states in India and has worked in
several, including Maharashtra, Gujarat, Orissa and Madhya
Pradesh. The National Highway Authority of India (NHAI) awards
interstate highway contracts on a national level, while intra-state contracts
are awarded by state agencies. The National Thermal Power Corporation (NTPC)
awards contacts for civil work associated with power plants. The National
Coal Limited (NCL) awards large mining contracts. Our customers include, or have
included, NHAI, NTPC, and various state public works departments. Sricon
is registered across India and is qualified to bid on contracts anywhere in
India. For the export of iron ore from India, we are developing
customers in China.
Contract
bidding process
In order
to create transparency, the Indian government has centralized the contract
awarding process for building inter-state
roads. The new process is as follows: At the “federal” level, as an
example, NHAI publishes a Statement of Work for an interstate highway
construction project. The Statement of Work has a detailed
description of the work to be performed as well as the completion time frame.
The bidder prepares two proposals in response to the Statement of Work. The
first proposal demonstrates technical capabilities, prior work experience,
specialized machinery, and manpower required, and other criteria required to
complete the project. The second proposal includes a financial
bid. NHAI evaluates the technical bids and short lists technically
qualified companies. Next, the short list of technically qualified companies
are invited to place a detailed financial bid and show adequate
financial strength in terms of revenue, net worth, credit lines,
and balance sheets. Typically, the lowest bid wins the contract. Also,
contract bidders must demonstrate an adequate level of capital reserves such as
the following: 1) An earnest money deposit between 2% to 10%
of project costs, 2) performance guarantee of between 5% and 10%, 3)
adequate working capital and 4) additional capital for plant and
machinery. Bidding qualifications for larger NHAI projects
are set by NHAI which are imposed on each contractor. As the
contractor executes larger highway projects, the ceiling is increased by
NHAI.
Our
Growth Strategy and Business Model
Our
business model for the construction business is simple. We bid on
construction, over burden removal at mining sites and or maintenance
contracts. Successful bids increase our backlog of orders,
which favorably impacts our revenues and margins. The
contracting process typically takes approximately six months. Over the
years, we have been successful in winning one out of every seven bids on
average. We currently have one bid team. In the
next year we will focus on the following: 1) build out between two and five rock
quarries, begin production and obtain long term contracts for the sale of rock
aggregate, 2) leverage our shipping hub, develop a second shipping hub, obtain
long term contracts for the delivery and sale of iron ore, 3) execute and expand
recurring contracts for infrastructure build out, 4) aggressively pursue the
collection of accounts receivables and delay claims.
Competition
We operate in an industry that is
fairly competitive. However, there is a large gap in the supply of
well qualified and financed contractors and the demand for contractors.
Large domestic and international firms compete for jumbo contracts over $250
million in size, while locally based contractors vie for contracts less than $5
million. The recent capital markets crisis has made it more difficult for
smaller companies to maturate into mid-sized companies, as their access to
capital has been restrained. Therefore, we would like to be positioned in the $5
million to $50 million contract range, above locally based contractors and below
the large firms, creating a distinct technical and financial advantage in this
market niche. Rock aggregate is supplied to the industry through
small crushing units, which supply low quality material. Frequently,
high quality aggregate is unavailable, or is transported over large
distances. We fill this gap by providing high quality material in
large quantities. We compete on price, quantity and
quality. Iron ore is produced in India and exported to
China. While this is a fairly established business, we compete by
aggregating ore from smaller suppliers who do not have access to customers in
China. Further, at our second shipping hub we expect to install a crusher that
can grind ore pebbles into dust, again providing a value added service to the
smaller mine owners.
Seasonality
The
construction industry (road building) typically experiences recurring and
natural seasonal patterns throughout India. The North East Monsoons,
historically, arrive on June 1, followed by the South West Monsoons, which
usually lasts intermittently until September. Historically, the
monsoon months are slower than the other months because of the
rains. Activity such as engineering, maintenance of high temperature
plants, and export of iron ore are less susceptible to the rains. The
reduced paced in construction activity has historically been used to bid and win
contracts. The contract bidding activity is typically very high during the
monsoon season in preparation for work activity when the rains
abate. During the monsoon season the rock quarries operate to build
up and distribute reserves to the various construction sites.
Employees
and Consultants
As of
March 31, 2009, we employed a work force of approximately 400 employees and
contract workers worldwide. Employees are typically skilled workers
including executives, welders, drivers, and other specialized experts. Contract
workers require less specialized skills. We make diligent efforts to comply with
all employment and labor regulations, including immigration laws in the many
jurisdictions in which we operate. In order to attract and retain
skilled employees, we have implemented a performance based incentive program,
offered career development programs, improved working conditions, and
provided United States work assignments, technology training, and other fringe
benefits. We are hoping that our efforts will make our companies more
attractive. While we have not done so yet, we are exploring adopting
best practices for creating and providing vastly improved labor camps for our
labor force. We are hoping that our efforts will make our companies
“employers of choice” and best of breed. As of March 31, 2009 our
Executive Chairman and Chief Executive Officer is Ram Mukunda and our Chairman
is Ranga Krishna. Our Managing Director for Construction is Ravindra
Lal Srivastava, our Managing Director for Materials, Mining and Trading is P. M.
Shivaraman. Our Treasurer and Principal Accounting officer is
John Selvaraj. Our General Manager of Accounting based in India is
Santhosh Kumar. We also utilize the services of several consultants
who provide USGAAP systems expertise and SOX expertise, among
others.
Environmental
Regulations
India has
very strict environmental, occupational, health and safety
regulations. In most instances, the contracting agency regulates and
enforces all regulatory requirements. We internally monitor and
manage regulatory issues on a continuous basis, and we believe that we are in
compliance in all material respects with the regulatory requirements of the
jurisdictions in which we operate. Furthermore, we do not believe that
compliance will have a material adverse effect on our business
activities.
Information
and timely reporting
Our
operations are located in India where the accepted accounting standards is
Indian GAAP, which in many cases, is not congruent to
USGAAP. Indian accounting standards are evolving towards adopting
IFRS (International Financial Reporting Standards). We
annually conduct PCAOB (USGAAP) audits for the company. We
acknowledge that this process is at times cumbersome and places significant
restraints on our existing staff. We believe we are still 12 to 18
months away from having processes and adequately trained personal in place to
meet the reporting timetables set out by the U.S. reporting
requirements. Until then we expect to file for extensions to meet the
reporting timetables. We will make available on our website, www.indiaglobalcap.com,
our annual reports, quarterly reports, proxy statements as well as up to- date
investor presentations. Our SEC filings are also available at
www.sec.gov.
Item 1A. Risk Factors
THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY, ITS
BUSINESS, CONDITION AND PROSPECTS (FINANCIAL AND OTHERWISE). THESE RISK FACTORS
ARE NOT NECESSARILY EXHAUSTIVE AND ADDITIONAL RISK FACTORS, IF ANY,
MAY BE MATERIAL OR HAVE SIGNIFICANCE TO AN INDIVIDUAL INVESTOR. MANY
INVESTMENT OPPORTUNITIES INVOLVE RISK FACTORS
OR A RISK OF LOSS AND THE EXISTENCE OF THE NORMAL AND CERTAIN
EXTRAORDINARY RISKS.
Any
downgrading of India’s debt rating by an international rating agency, or an
increase in interest rates in India, could have a negative impact on our ability
to borrow in India.
As we
scale our operations we may increase the amount of money we borrow for working
capital and leasing of equipment. Any adverse revisions to India’s credit
ratings for domestic and international debt by international rating agencies as
well as an increase in Indian interest rates may adversely impact our ability to
finance growth through debt and could lead to a tightening of our margins,
adversely affecting our operating income.
A
change in government policy, a down turn in the Indian economy or a natural
disaster could adversely affect our business, financial condition, results of
operations and future prospects.
Our
construction business is dependent on the government of India as well as the
state governments for contracts. Their operations and financial
results may be affected by changes in the government’s policy towards building
infrastructure. In addition, the slow down in the Indian economy has
caused the government to slow down the pace of infrastructure building, which if
unchanged could adversely affect our future performance. We foresee
no immediate changes to government policy or market conditions that would
adversely affect our ability to conduct business other than limited access to
credit.
Political,
economic, social and other factors in India may adversely affect
business.
Our
ability to grow our business may be adversely affected by political, economic,
social and religious factors, changes in Indian law or regulations and the
status of India’s relations with other countries. In addition, the economy of
India may differ favorably or unfavorably from the U.S. economy in such respects
as the rate of growth of gross domestic product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
According to the World Factbook published by the United States Central
Intelligence Agency, the Indian government has exercised and continues to
exercise significant influence over many aspects of the economy, and
privatization of government-owned industries proceeds at a slow pace.
Accordingly, Indian government actions in the future could have a significant
effect on the Indian economy, which could have a material adverse affect on our
ability to achieve our business objective.
Since
mid-1991, the Indian government has committed itself to implementing an economic
structural reform program with the objective of liberalizing India’s exchange
and trade policies, reducing the fiscal deficit, controlling inflation,
promoting a sound monetary policy, reforming the financial sector, and placing
greater reliance on market mechanisms to direct economic activity. A significant
component of the program is the promotion of foreign investment in key areas of
the economy and the further development of, and the relaxation of restrictions
in, the private sector. These policies have been coupled with the express
intention to redirect the government’s central planning function away from the
allocation of resources and toward the issuance of indicative guidelines. While
the government’s policies have resulted in improved economic performance, there
can be no assurance that the economic improvement will be sustained. Moreover,
there can be no assurance that these economic reforms will persist, and that any
newly elected government will continue the program of economic liberalization of
previous governments. Any change may adversely affect Indian laws and policies
with respect to foreign investment and currency exchange. Such changes in
economic policies could negatively affect the general business and economic
conditions in India, which could in turn adversely affect our
business.
Terrorist
attacks and other acts of violence or war within India or involving India and
other countries could adversely affect the financial markets and our
business.
Terrorist
attacks and other acts of violence could have the direct effect of destroying
our plant and property causing a loss and interruption of
business. According to the World Factbook, religious and border
disputes persist in India and remain pressing problems. For example, India has
from time to time experienced civil unrest and hostilities with neighboring
countries such as Pakistan. The longstanding dispute with Pakistan over the
border Indian state of Jammu and Kashmir, a majority of whose population is
Muslim, remains unresolved. If the Indian government is unable to control the
violence and disruption associated with these tensions, the results could
destabilize the economy and, consequently, adversely affect our
business.
Since
early 2003, there have also been military hostilities and civil unrest in
Afghanistan, Iraq more recently Pakistan and other Asian countries. These events
could adversely influence the Indian economy and, as a result, negatively affect
our business.
While we may have insurance to cover
some of these risks and can file claims against the contracting agencies, there
can be no guarantee that we will be able to collect in a timely
manner. Further, India has a fairly active insurgency and a fairly
active communist following. Any uprising from these groups can delay
our roadwork and disrupt our business. Terrorist attacks, insurgencies or the
threat of violence could slow down road building activity and the materials
business adversely affecting our business.
Exchange
controls that exist in India may limit our ability to utilize our cash flow
effectively following a business combination.
We are
subject to India’s rules and regulations on currency conversion. In India, the
Foreign Exchange Management Act or FEMA, regulates the conversion of the Indian
rupee into foreign currencies. However, comprehensive amendments have
been made to FEMA to support the economic liberalization. Companies
are now permitted to operate in India without any special restrictions,
effectively placing them on par with wholly Indian owned companies. In addition,
foreign exchange controls have been substantially relaxed. Notwithstanding these
changes, the Indian foreign exchange market is not yet fully developed and we
cannot assure you that the Indian authorities will not revert back to regulating
companies and imposing new restrictions on the convertibility of the Indian
rupee. Any future restrictions on currency exchanges may limit our ability to
use our cash flow for the distribution of dividends to our stockholders or to
fund operations we may have outside of India.
Changes
in the exchange rate of the Indian rupee may negatively impact our revenues and
expenses.
Our
operations are primarily located in India and we receive payment in Indian
rupees. As the results of operations are reported in US dollars, to
the extent that there is a decrease in the exchange rate of Indian rupees into
US dollars, such a decrease could have a material impact on our operating
results or financial condition.
Returns
on investment in Indian companies may be decreased by withholding and other
taxes.
Our
investments in India will incur tax risk unique to investment in India and in
developing economies in general. Income that might otherwise not be subject to
withholding of local income tax under normal international conventions may be
subject to withholding of Indian income tax. Under treaties with
India and under local Indian income tax law, income is generally sourced in
India and subject to Indian tax if paid from India. This is true whether or not
the services or the earning of the income would normally be considered as from
sources outside India in other contexts. Additionally, proof of payment of
withholding taxes may be required as part of the remittance procedure. Any
withholding taxes paid by us on income from our investments in India may or may
not be creditable on our income tax returns.
We intend
to avail ourselves of income tax treaties with India and minimize any Indian
withholding tax or local taxes. However, there is no assurance that
the Indian tax authorities will always recognize such treaties and its
applications. We have also created a foreign subsidiary in Mauritius, in
order to limit the potential tax exposure.
The
cost of obtaining bank financing may reduce our income.
TBL and,
to a lesser extent, Sricon, have restructured some of their bank debt and may,
in the future, face higher interest rates or will require higher collateral with
the banks. This increases the cost of money for the construction
business and could decrease our margins. IGC expects to provide
collateral support for two to three years, by which time we expect the credit
worthiness of the construction business to increase to adequate
levels. Further, collateral that has been provided to the banks
consists mostly of real estate, which has fallen in value, thus reducing our
ability to borrow.
Availability
of raw materials at competitive prices.
Construction
contracts are primarily dependent on adequate and timely supply of raw
materials, such as cement, steel and aggregates, at competitive prices. As the
demand from competing larger and well-established firms increases for procuring
raw materials, we could face an increase in the price of raw materials that may
negatively impact profitability.
Some
of our business is dependent on contracts awarded by the Government and its
agencies.
The
construction business is dependent on central and state budget allocations to
the infrastructure sector. We derive the bulk of our construction revenue from
contracts awarded by the central and state governments of India and their
agencies. If there are delays in the payment of invoices by the
government, our working capital requirements could increase.
Compliance
with the Foreign Corrupt Practices Act could adversely impact our competitive
position. Failure to comply could subject us to penalties and other adverse
consequences.
We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States public companies from engaging in bribery of or other
prohibited payments to foreign officials to obtain or retain business. While we
will take precautions to educate the employees of our subsidiaries of the
Foreign Corrupt Practices Act, there can be no assurance that we or the
employees or agents of our subsidiaries will not engage in such conduct, for
which we might be held responsible. We could suffer penalties that may have a
material adverse effect on our business, financial condition and results of
operations.
We may issue shares of our capital
stock, including through convertible debt securities, which would reduce the
equity interest of our stockholders and likely cause a change in control of our
ownership.
Our
certificate of incorporation authorizes the issuance of up to
75,000,000 shares of common stock, par value $.0001 per share and
1,000,000 shares of preferred stock, par value $.0001 per share. There
are currently approximately 50,000,000 authorized but unissued shares of our
common stock available for issuance (after appropriate reservation for the
issuance of shares upon full exercise of our outstanding warrants and the
purchase option granted to Ferris, Baker Watts, Inc. and shares authorized for
issuance under our 2008 Omnibus Incentive Plan) and all of the
1,000,000 shares of preferred stock available for issuance. We have
recently issued 200,000 shares of our common stock in connection with a private
placement of debt securities and may engage in similar private placements in the
future. The issuance of additional shares of our common stock
including upon conversion of any debt securities:
|
•
|
may
significantly reduce the equity interest of our existing shareholders;
and
|
|
|
•
|
may
adversely affect prevailing market prices for our common stock, warrants
or units.
|
We
may issue notes or other debt securities, which may adversely affect our
leverage and financial condition.
During
2008, we sold $2,000,000 in a private placement of debt securities and may
engage in similar private placements in the future. The incurrence of this
debt:
|
•
|
may
lead to default and foreclosure on our assets if our operating
revenues are insufficient to pay our debt
obligations;
|
|
|
•
|
may
cause an acceleration of our obligations to repay the debt even if we make
all principal and interest payments when due if we breach the covenants
contained in the terms of the debt documents;
|
|
|
•
|
may
create an obligation to immediately repay all principal and accrued
interest, if any, upon demand to the extent any debt securities are
payable on demand; and
|
|
|
•
|
may
hinder our ability to obtain additional financing, if necessary, to the
extent any debt securities contain covenants restricting our ability to
obtain additional financing while such security is outstanding, or to the
extent our existing leverage discourages other potential
investors.
|
Additional
capital maybe costly or difficult to obtain.
Additional
capital, whether through the offering of equity or debt securities, may not be
available on reasonable terms or at all, especially in light of the recent
downturn in the economy and dislocations in the credit and capital markets. If
we are unable to obtain required additional capital, we may have to curtail our
growth plans or cut back on existing business and, further, we may not be able
to continue operating if we do not generate sufficient revenues from operations
needed to stay in business. We may incur substantial costs in
pursuing future capital financing, including investment banking fees, legal
fees, accounting fees, securities law compliance fees, printing and distribution
expenses and other costs. We may also be required to recognize non-cash expenses
in connection with certain securities we issue, such as convertible notes and
warrants, which may adversely impact our financial condition.
If
we are unable to repay the loan from Sricon, they may have difficulty competing
for future large contracts.
We
believe that Sricon will ultimately require the amounts they loaned us in order
to expand their operations and the scope of contracts on which they can
bid. If we are unable to repay the loans made to us by Sricon on
time, they may be required to find alternative sources of funding for such
expansion, and the costs and timing of obtaining such funding may make it more
difficult for these companies to expand the scope of contracts for which
they can compete. To the extent Sricon obtains additional funding, or
we are unable to repay the loans, it may result in the issuance of
additional shares of capital stock or our tender to Sricon of a portion of
the shares we acquired from them, resulting in the dilution of our interest in
Sricon.
Leveled
penalties for time overruns may adversely affect our economic
performance.
Sricon
and TBL execute construction contracts primarily in the roads and infrastructure
development sectors. Sricon and TBL typically enter into high value contracts
for these activities, which impose penalties if contracts are not executed in a
timely manner. If Sricon and TBL are unable to meet the performance
criteria as prescribed by respective contracts, then levied penalties may
adversely affect our financial performance.
Our
business is dependent on continuing relationships with clients and strategic
partners.
Our
business is dependent on developing and maintaining strategic alliances with
contractors that undertake turnkey contracts for infrastructure development
projects as well as government organizations. The business and our
results could be adversely affected if we are unable to maintain continuing
relationships and pre-qualified status with key clients and strategic
partners.
Our
business model relies heavily on our management team and any
unexpected loss of key officers may adversely affect our
operations
The
continued success of our business is largely dependent on the continued services
of key employees. The loss of the services of certain key personnel,
without adequate replacement, could have an adverse effect on our performance.
Our senior management as well as the senior management of our subsidiaries have
played a significant role in developing and executing the overall business plan,
maintaining client relationships, proprietary processes and
technology. While no one is irreplaceable, the loss of the
services of any would be disruptive to our business. In order to
mitigate this risk factor we are recruiting professional managers and expanding
the executive ranks as well as pursuing succession-planning initiatives, but there can be no
guarantees that these mitigation efforts will be successful.
Quarterly financial
results will vary.
Factors
that may contribute to the variability of quarterly revenue, operating results
or profitability include:
|
·
|
Fluctuations
in revenue due to seasonality: For example, during the monsoon
season, the heavy rains slow down road building and construction
work. This results in uneven revenue and operating results
through the quarters. In general the months between June
and September are the rainy seasons and these tend to be slower quarters
than the others.
|
|
·
|
Our
revenue recognition policy records contract revenue for those stages of a
project that we complete, after we receive certification from the client
that such stage has been successfully completed. Since revenue
is not recognized until we receive a certification from our clients,
revenue recognition can be uneven.
|
Our
subsidiaries may become involved in litigation in the future.
Our
subsidiaries are fairly large companies and may have to initiate actions in the
Indian Courts to enforce their rights and may also be drawn into legal
litigation. The expenses of litigation and any judgments against us
could have a material adverse effect on us.
We
face competition in the Indian infrastructure industry.
The
Indian real estate and infrastructure industries are increasingly attracting
foreign capital. We currently have competition from international as
well as domestic companies that operate at the national
level. Smaller localized contractors and companies are also competing
in their respective regions. If we are unable to offer competitive
prices and obtain contracts, there could be a significant reduction in our
revenue.
Our
operations are sensitive to weather conditions.
Our
business activities in India could be materially and adversely affected by
severe weather conditions. Severe weather conditions may require us to evacuate
personnel or curtail services and may result in damage to a portion of our fleet
of equipment or to our facilities, resulting in the suspension of operations,
and may further prevent us from delivering materials to project sites in
accordance with contract schedules or generally reduce our
productivity. Difficult working conditions and extremely high
temperatures also adversely affect our operations during summer months and
during monsoon season, which restrict our ability to carry on construction
activities and fully utilize our resources.
The
revenue recorded in the first half of our fiscal year between June through
September is traditionally lower than revenue recorded during the second half of
our fiscal year due to the weather conditions. During periods of
curtailed activity due to adverse weather conditions, we may continue to incur
operating expenses, reducing profitability.
We incur costs as a result of
operating as a public company. Our management is required to devote
substantial time to new compliance initiatives. Because we report in
India in IGAAP and in the US in USGAAP, we may experience untimely close of our
books and records and delays in the preparation of financial statements and
related disclosures.
As part
of a public company with substantial operations, we are experiencing an
increase in legal, accounting and other expenses. In addition the
Sarbanes-Oxley Act of 2002 (the “SOX” act), as well as new rules subsequently
implemented by the SEC and the NYSE Alternext, have imposed various requirements
on public companies, including requiring changes in corporate governance
practices. Our management and other personnel need to devote a
substantial amount of time to these compliance initiatives. We have
not evaluated or tested internal controls over financial reporting at Sricon and
TBL. We expect to carry out the evaluations and take install systems
and processes as required. However, we cannot be certain as to the timing of
completion of the evaluation testing and remediation actions or the impact of
the same on our operations.
The
audit report provided by Yoganandh and Ram (Y&R) will require a review by a
US firm.
The SEC
requires that the 2009 audit, conducted by Y&R, be reviewed by another PCAOB
registered firm. If the review identifies changes to the audit, we
will be required to amend our annual report as filed on Form
10-K. The requirement of the review is expected to increase our
legal, accounting and other expenses.
The
Company has warrants outstanding, which could dilute the number of shares
outstanding.
At the
time the warrants are exercised, the company will get the exercise price, unless
the exercise is cashless. In either case, such an exercise will
also increase the number of shares outstanding. This may adversely
affect the share price as the supply of shares eligible for sale in the public
market will increase. The increased number of shares offered for sale
in the public market may exceed the public demand to buy shares at a given
market price resulting in the market price adjusting downward to equalize supply
and demand.
If
the benefits of our acquisition of TBL and Sricon do not meet the expectations
of financial or industry analysts, the market price of our common stock may
decline.
The
market price of our common stock may decline if:
|
·
|
we
do not achieve the perceived benefits of our acquisition of TBL and Sricon
as rapidly as, or to the extent anticipated by, financial or industry
analysts; or
|
|
·
|
the
effect of our acquisition of TBL and Sricon on our financial statements is
not consistent with the expectations of financial or industry
analysts.
|
Accordingly,
investors may experience a loss as a result of a decreasing stock
price.
Although
we are required to use our best efforts to have an effective registration
statement covering the issuance of the shares underlying the public warrants at
the time that our warrant holders exercise their public warrants, we cannot
guarantee that a registration statement will be effective, in which case our
warrant holders may not be able to exercise our public warrants and such
warrants may expire worthless.
Holders
of our public warrants will be able to exercise the warrants only if a current
registration statement under the Securities Act of 1933 relating to the shares
of our common stock underlying the warrants is then effective. Although we have
undertaken in the warrant agreement, and therefore have a contractual
obligation, to use our best efforts to maintain a current registration statement
covering the shares underlying the public warrants to the extent required by
federal securities laws, and we intend to comply with such undertaking, with
such a registration statement currently effective, we cannot assure you that we
will be able to do so. In no event shall we be liable for, or any registered
holder of any warrant be entitled to receive, (a) physical settlement in
securities unless the conditions and requirements set forth in the warrant
agreement have been satisfied or (b) any net-cash settlement or other
consideration in lieu of physical settlement in securities. The value of the
public warrants may be greatly reduced if a registration statement covering the
shares issuable upon the exercise of the warrants is not kept current. Such
warrants may expire worthless.
Because
the warrants sold in the private placements were originally issued pursuant to
an exemption from registration requirements under the federal securities laws,
the holders of the warrants sold in the private placement will be able to
exercise their warrants even if, at the time of exercise, a prospectus relating
to the common stock issuable upon exercise of such warrants is not current. As a
result, the holders of the warrants purchased in the private placements will not
have any restrictions with respect to the exercise of their warrants. As
described above, the holders of the public warrants will not be able to exercise
them unless we have a current registration statement covering the shares
issuable upon their exercise.
If
equity research analysts do not publish research or reports about our business
or if they issue unfavorable commentary or downgrade our common stock, the price
of our common stock could decline.
The
trading market for our common stock will rely in part on the research and
reports that equity research analysts publish about our business and us. We do
not control these analysts. The price of our stock could decline if one or more
equity analysts downgrade our stock or if those analysts issue other unfavorable
commentary or cease publishing reports about our business or us.
We
do not currently intend to pay dividends, which may limit the return on your
investment in us.
We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
Item 1B. Unresolved Staff
Comments
None
|
Item 2.
|
Properties
|
We do not
own any real estate or other physical properties materially important to our
operation. Our headquarters are located at 4336 Montgomery Avenue, Bethesda,
Maryland, 20814. Sricon’s headquarters are located at Pragati Layout,
Rajeev Nagar, Nagpur 440025, India. TBL’s headquarters are located at
34/136 A Edappally Bypass Road, Cochin 682024, Kerala, India. In
addition, we have offices in Mauritius, Delhi, Bombay and Bangalore,
India. We have temporary facilities at each of our work centers in
the states of Maharashtra, Gujarat, Andhra Pradesh and Assam.
The Company
is not involved in investments in (i) real estate or interests in real estate,
(ii) real estate mortgages, and (iii) securities of or interests
in persons primarily engaged in real estate
activities, as all of its land rights
are used for production purposes.
|
Item 3.
|
Legal
Proceedings
|
TBL has a
loan for USD 713,710 due to Dhanlaxmi Bank, India. This loan is overdue.
However, TBL has filed a suit against the bank in the DRT (Debt Restructuring
Tribunal, India) as there is a dispute. The bank has offered to
settle the dispute for approximately USD 540,594, to be paid
in installments. The loan
is collateralized by properties pledged by the original
Promoters of TBL. As the collateral belongs to the Promoters of TBL, both
TBL and the TBL Promoters are undergoing discussions to determine the
circumstances under which the bank will be repaid.
|
Item 4.
|
Submission
of Matters to a Vote of Security
Holders
|
None
PART
II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
The
Company commenced its initial public offering on March 8, 2006. In the
initial public offering, the Company offered units for purchase. A unit in
the Company is comprised of one share of common stock of the Company and two
warrants to purchase one share of common stock. On April 13, 2006, there
was a voluntary separation of the Company’s units into shares of common stock
and warrants to purchase common stock which permitted separate trading of the
common stock and warrants. The common stock, units and warrants trade on the
NYSE Alternext under the symbols “IGC,” “IGC.U,” and “IGC.WS,” respectively. The
following table sets forth the high and low sales prices of the units for the
fiscal year, as reported on the NYSE Alternext.
The
following table shows, for the last eight fiscal quarters, the high and low
closing prices per share of the Common Stock, Warrants and Units as quoted on
the NYSE Alternext:
|
Common
Stock
|
Warrants
|
Units
|
|||||||||||||||||||||
|
Quarter
Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
|||||||||||||||||
|
June
30, 2007
|
$
|
5.77
|
$
|
5.57
|
$
|
0.79
|
$
|
0.59
|
$
|
7.32
|
$
|
6.85
|
|||||||||||
|
September
30, 2007
|
$
|
5.85
|
$
|
5.64
|
$
|
0.63
|
$
|
0.36
|
$
|
7.10
|
$
|
6.40
|
|||||||||||
|
December
31, 2007
|
$
|
5.94
|
$
|
5.69
|
$
|
0.59
|
$
|
0.34
|
$
|
6.90
|
$
|
6.35
|
|||||||||||
|
March
31, 2008
|
$
|
5.90
|
$
|
3.60
|
$
|
0.73
|
$
|
0.25
|
$
|
7.45
|
$
|
4.15
|
|||||||||||
|
June
30, 2008
|
$
|
5.90
|
$
|
3.81
|
$
|
1.30
|
$
|
0.58
|
$
|
8.80
|
$
|
5.28
|
|||||||||||
|
September
30, 2008
|
$
|
4.99
|
$
|
4.50
|
$
|
1.00
|
$
|
0.55
|
$
|
6.86
|
$
|
5.65
|
|||||||||||
|
December
31, 2008
|
$
|
4.78
|
$
|
.70
|
$
|
.53
|
$
|
.01
|
$
|
5.75
|
$
|
.01
|
|||||||||||
|
March
31, 2009
|
$
|
1.10
|
$
|
.33
|
$
|
.13
|
$
|
.02
|
$
|
1.07
|
$
|
.40
|
|||||||||||
|
June
30, 2009
|
$
|
1.25
|
$
|
1.12
|
$
|
.06
|
$
|
.06
|
$
|
1.80
|
$
|
1.02
|
|||||||||||
Holders
Continental
Stock Transfer & Trust Company is the transfer agent and registrar for our
common stock. As of March 31, 2009, we had 1,019 holders of record
of our common stock, 187 holders of record of our units and 1,076 holders
of record of our warrants. The last sale price as reported by the
NYSE Alternext on March 31, 2009, was $0.60 for units, $ 0.40 for shares and $
0.03 for warrants. The Company has never paid a cash dividend on its common
stock and does not anticipate the payment of cash dividends in the foreseeable
future.
Unregistered
Sales of Equity Securities
On March
7, 2008 Messrs. Mukunda and Krishna entered into an agreement with third parties
to transfer on September 8, 2008 pursuant to the terms of certain Share
Redistribution Agreements an aggregate of 1,368,031 shares of the Company’s
common stock. Specifically, Mr. Mukunda agreed to transfer 1,131,581
shares and Dr. Krishna agreed to transfer 236,450 shares. The
purpose of the agreements were to induce such third parties to acquire shares of
the Company's common stock and to cause such shares to be voted in favor of the
Company’s acquisition.
On
September 30, 2008, IGC consummated a private placement of unsecured notes in
the total principal amount of $2,000,000 and issued 200,000 shares of common
stock to the investor as additional consideration for the purchase of the
notes. These transactions were exempt from registration under the
Securities Act in reliance upon the exemption from the registration requirements
provided in Section 4(2) of the Securities Act, which exempts private issuances
of securities in which the securities are not offered or advertised to the
general public. No underwriting discounts or commissions were paid
with respect to such sales.
Warrant
Tender Offer
In an
effort to raise additional capital and reduce the number of warrants
outstanding, on November 24, 2008, we announced to the holders of all 22,609,000
outstanding, publicly traded warrants and of 1,190,000 warrants issued by the
Company in private placements the opportunity to acquire shares of common
stock. We modified the terms of the Warrants to (1) permit, instead of paying
the purchase price of $5.00 in cash, the exchange of 5 Warrants and $0.55 for
one share of Common Stock and (2) permit the exercise of a Warrant such that the
Holder will receive one share of Common Stock in exchange for every 12 Warrants
surrendered. The Warrant holders could use one or both methods in exercising the
warrants for Common Stock. The offer was initially planned to commence on
Monday, November 24, 2008 and expire on December 23, 2008 as further described
in our initial Tender Offer Statement dated November 24, 2008 and filed with the
SEC on that date.
On
January 6, 2009, we extended the expiration date of the tender offer to January
9, 2009. Under the tender offer, 11,943,878 warrants (50% of the warrants
outstanding) were exercised, of which 2,706,350 warrants were exercised by
exchanging 5 warrants and $0.55 for one share of common stock and 9,237,528
warrants were exercised by surrendering 12 warrants for one share of common
stock. The offer resulted in the Company raising a total of $297,698.50 in cash
proceeds and issuing a total of 1,311,064 new shares of common
stock.
Following
the issuance of the shares relating to the warrant exercise, we have 10,091,971
shares of common stock outstanding. The remaining 11,855,122 warrants
outstanding after the tender offer will expire in accordance with their terms on
March 3, 2011.
Issuer Purchases of Equity Securities
During
the fourth quarter of our fiscal year ended March 31, 2009, the Company made no
purchases of its equity securities other than pursuant to the tender offer
described above:
|
ISSUER
PURCHASES OF EQUITY SECURITIES
|
||||||||||||||||
|
Period
|
(a)
Total Number of Shares Purchased
|
(b)
Average Price Paid per Share (or Unit)
|
(c)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans or Programs**
|
(d)
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May
Yet Be Purchased Under the Plans or Programs
|
||||||||||||
|
Month
#1 (January 1, 2009-January 31, 2009)
|
0
|
N/A
|
N/A
|
N/A
|
||||||||||||
|
Month
#2 (February 1, 2009-February 29, 2009)
|
0
|
N/A
|
N/A
|
N/A
|
||||||||||||
|
Month
#3 (March 1, 2009-March 31, 2009)
|
0
|
N/A
|
N/A
|
N/A
|
||||||||||||
|
Total
|
0
|
N/A
|
N/A
|
N/A
|
||||||||||||
Dividends
IGC has
not paid any cash dividends on its common stock to date. It is the
present intention of the board of directors to retain all earnings, if any, for
use in the business operations, and consequently, the board does not anticipate
declaring any dividends in the foreseeable future. The payment of any
dividends will be with the discretion of the board of directors and will be
contingent upon our financial condition, results of operations, capital
requirements and other factors our board deems relevant.
Item 6.
Selected Financial Data
IGC and
all its subsidiaries have fiscal years that end at March 31.
IGC’s
historical information is derived from its audited financial statements for
the period from its inception (April 29, 2005) to March 31, 2006, for the fiscal
years ended March 31, 2007, 2008 and 2009. The information is only a summary and
should be read in conjunction with IGC’s historical financial statements and
related notes and IGC’s respective Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained elsewhere herein. The
historical results included below and elsewhere herein are not indicative of the
future financial performance of IGC.
India
Globalization Capital, Inc.
Selected
Summary Statement of Income Data
|
Selected
Statement of Operations Data:
|
Year
Ended
|
Year
Ended
|
Year
Ended
|
29-Apr-05
|
||||||||||||
|
31-Mar-09
|
31-Mar-08
|
31-Mar-07
|
To
March 31, 2006
|
|||||||||||||
|
Revenue
|
$
|
35,338,725
|
$
|
2,188,018
|
$
|
$
|
||||||||||
|
Other
Income-Interest, net
|
-
|
471,698
|
3,171,818
|
210,584
|
||||||||||||
|
Net
Income (loss)
|
(521,576
|
)
|
(5,215,270
|
)
|
1,517,997
|
(443,840
|
)
|
|||||||||
|
Per
Share Data
|
||||||||||||||||
|
Earnings
per share – basic
|
$
|
(0.05
|
)
|
$
|
(0.61
|
)
|
$
|
0.11
|
$
|
(0.14
|
)
|
|||||
|
Earnings
per share - diluted
|
$
|
(0.05
|
)
|
$
|
(0.61
|
)
|
||||||||||
|
Weighted
Average Shares
|
||||||||||||||||
|
Basic
|
10,091,171
|
8,570,107
|
13,974,500
|
3,191,000
|
||||||||||||
|
Diluted
|
10,091,171
|
8,570,107
|
||||||||||||||
India
Globalization Capital, Inc.
Selected
Summary Balance Sheet Data
|
31-Mar-09
|
31-Mar-08
|
31-Mar-07
|
||||||||
|
ASSETS
|
||||||||||
|
Investments
held in trust fund
|
$
|
-
|
$
|
-
|
$
|
66,104,275
|
||||
|
Total
Current Assets
|
19,498,584
|
32,896,447
|
70,385,373
|
|||||||
|
Total
Assets
|
51,832,513
|
67,626,973
|
70,686,764
|
|||||||
|
LIABILITIES
|
||||||||||
|
Current
Liabilities
|
9,446,345
|
17,384,059
|
5,000,280
|
|||||||
|
Total
Liabilities
|
13,974,638
|
26,755,261
|
5,000,280
|
|||||||
|
Common
stock subject to possible conversion
|
12,762,785
|
|||||||||
|
Total
stockholders’ equity
|
$
|
23,595,269
|
$
|
27,326,056
|
$
|
52,923,699
|
||||
The
following table sets forth certain selected financial data of
Sricon. The selected financial data presented below was derived from
Sricon’s audited consolidated financial statements for the period April 1, 2007
through March 7, 2008 and for the three year period ended March 31, 2007, and
from Sricon’s unaudited consolidated financial statements for the year ended
March 31, 2004. The information is only a summary and should be read in
conjunction IGC’s historical financial statements and related notes and our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. Additional information regarding Scrion’s
historical performance can be found in the Company’s Annual Report on Form
10-KSB for the year ended March 31, 2008. The historical results included below
and elsewhere herein are not indicative of the future financial performance of
IGC, Sricon and TBL.
Sricon
Infrastructure (Predecessor)
Selected
Summary Statement of Income Data
|
Amounts
in Thousands Except Per Share Data
|
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
|
7-Mar-08
|
31-Mar-07
|
31-Mar-06
|
|||||||||
|
Revenue
|
$
|
22,614
|
$
|
10,604
|
$
|
11,011
|
|||||
|
Income
Before Tax
|
3,144
|
778
|
668
|
||||||||
|
Income
Taxes
|
(768
|
)
|
(368
|
)
|
(186
|
)
|
|||||
|
Net
Income (loss)
|
2,376
|
410
|
482
|
||||||||
|
Per
Share Data
|
|||||||||||
|
Earnings
per share – basic
|
$
|
0.81
|
$
|
0.14
|
$
|
0.16
|
|||||
|
Earnings
per share - diluted
|
$
|
0.78
|
|||||||||
|
Weighted
Average Shares
|
|||||||||||
|
Basic
|
2,932,159
|
2,932,159
|
2,932,159
|
||||||||
|
Diluted
|
3,058,881
|
||||||||||
|
Unaudited
|
||||||||
|
Year
Ended
|
Year
Ended
|
|||||||
|
Amounts
in Thousands Except Per Share Data
|
31-Mar-05
|
31-Mar-04
|
||||||
|
Revenue
|
$
|
11,477
|
$
|
15,298
|
||||
|
Income
Before Tax
|
907
|
646
|
||||||
|
Income
Taxes
|
(363
|
)
|
(199
|
)
|
||||
|
Net
Income (loss)
|
544
|
446
|
||||||
|
Per
Share Data
|
||||||||
|
Earnings
per share – basic
|
$
|
0.19
|
$
|
0.11
|
||||
|
Earnings
per share - diluted
|
||||||||
|
Weighted
Average Shares
|
||||||||
|
Basic
|
2,932,159
|
183,259
|
||||||
|
Diluted
|
Sricon
Infrastructure Private Limited (Predecessor)
Selected
Summary Balance Sheet Data
|
|
March
7,
|
March
31,
|
March
31,
|
|||||||||
|
(Amounts
in Thousand US Dollars)
|
2008
|
2007
|
2006
|
|||||||||
|
ASSETS
|
||||||||||||
|
Accounts
receivables
|
$ | 7,764 | $ | 2,751 | $ | 2,083 | ||||||
|
Unbilled
receivables
|
4,527 | 2,866 | 2,980 | |||||||||
|
Inventories
|
447 | 71 | 248 | |||||||||
|
Property
and equipment, net
|
5,327 | 4,903 | 4,347 | |||||||||
|
BOT
Project under progress *
|
3,485 | 3,080 | 1,584 | |||||||||
|
LIABILITIES
|
||||||||||||
|
Short-term
borrowings and current portion of long-term debt
|
5,732 | 3,646 | 3,868 | |||||||||
|
Due
to related parties
|
1,322 | 2,264 | 1,604 | |||||||||
|
Long-term
debt, net of current portion
|
1,264 | 2,182 | 1,855 | |||||||||
|
Other
liabilities
|
1,519 | 1,913 | 697 | |||||||||
|
Total
stockholders’ equity
|
$ | 9,673 | $ | 4,289 | $ | 3,740 | ||||||
|
|
||||||||
|
(Amounts
in Thousand US Dollars)
|
March
31,
|
Unaudited 31-Mar-04 |
||||||
|
2005
|
||||||||
|
ASSETS
|
||||||||
|
Accounts
receivables
|
|
$
|
2,128
|
$
|
2,223
|
|||
|
Unbilled
receivables
|
974
|
984
|
||||||
|
Inventories
|
154
|
71
|
||||||
|
Property
and equipment, net
|
3,424
|
3,098
|
||||||
|
BOT
Project under progress *
|
0
|
0
|
||||||
|
LIABILITIES
|
||||||||
|
Short-term
borrowings and current portion of long-term debt
|
5,103
|
359
|
||||||
|
Due
to related parties
|
1,724
|
1,553
|
||||||
|
Long-term
debt, net of current portion
|
1,278
|
1,089
|
||||||
|
Other
liabilities
|
1,307
|
1,267
|
||||||
|
Total
stockholders’ equity
|
$
|
2,760
|
$
|
2,822
|
||||
*BOT
Project under progress means Build, Operate, and Transfer. BOT is listed as
Accounts Receivable – Long term in the Consolidated Financial Statements for
IGC. See the Summary of Significant Accounting Policies for a
detailed explanation of BOT projects.
The
following table sets forth certain selected financial data of Techni Bharathi
Limited. The selected financial data presented below was
derived from Techni Bharathi
Limited audited consolidated financial statements for the period April 1,
2007 through March 7, 2008 and for the three year period ended March 31, 2007,
and from TBL’s unaudited consolidated financial statements for the year ended
March 31, 2004. The information is only a summary and should be read
in conjunction IGC’s historical financial statements and related notes and our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. Additional information regarding TBL’s
historical performance can be found in the Company’s Annual Report on Form
10-KSB for the year ended March 31, 2008. The historical results included below
and elsewhere herein are not indicative of the future financial performance of
IGC, Sricon and TBL.
Techni
Bharathi Limited (Predecessor)
Selected
Summary Statement of Income Data
|
(Amounts
in Thousand US Dollars, except share data and as stated
otherwise)
|
April
1 2007 to March 7, 2008
|
31-Mar-07
|
31-Mar-06
|
|||||||||
|
Revenue
|
$ | 5,321 | $ | 4,318 | $ | 2,285 | ||||||
|
Income
(loss) before income taxes
|
2,245 | 401 | (2,369 | ) | ||||||||
|
Income
taxes
|
(86 | ) | 135 | 62 | ||||||||
|
Net
(loss)/income
|
1,988 | 536 | (2,307 | ) | ||||||||
|
Per
Share Data
|
||||||||||||
|
Basic
|
$ | 0.46 | $ | 0.13 | $ | (0.54 | ) | |||||
|
Diluted
|
$ | 0.22 | $ | 0.13 | $ | (0.54 | ) | |||||
|
Weighted
Average Shares
|
|
|||||||||||
|
Basic
|
4,287,500 | 4,287,500 | 4,287,500 | |||||||||
|
Diluted
|
9,089,928 | 4,287,500 | 4,287,500 | |||||||||
|
(Amounts
in Thousand US Dollars, except share data and as stated
otherwise)
|
31-Mar-05
|
Unaudited
|
||||||
|
31-Mar-04
|
||||||||
|
Revenue
|
$
|
8,954
|
$
|
8,773
|
||||
|
Income
(loss) before income taxes
|
(3,823
|
)
|
(2,609
|
)
|
||||
|
Income
taxes
|
515
|
(63
|
)
|
|||||
|
Net
(loss)/income
|
(3,308
|
)
|
(2,672
|
)
|
||||
|
Per
Share Data
|
||||||||
|
Basic
|
$
|
(0.77
|
)
|
$
|
(0.62
|
)
|
||
|
Diluted
|
$
|
(0.77
|
)
|
$
|
(0.62
|
)
|
||
|
Weighted
Average Shares
|
||||||||
|
Basic
|
4,287,500
|
4,287,500
|
||||||
|
Diluted
|
4,287,500
|
4,287,500
|
||||||
Techni
Bharathi Limited (Predecessor)
Selected
Summary Balance Sheet Data
|
(Amounts
in Thousand US Dollars)
|
7-Mar-08
|
31-Mar-07
|
31-Mar-06
|
|||||||||
|
ASSETS
|
||||||||||||
|
Cash
and cash equivalents
|
$
|
736
|
$
|
1,208
|
$
|
69
|
||||||
|
Inventories
|
1,428
|
1,284
|
4,182
|
|||||||||
|
Prepaid
and other assets
|
271
|
1,231
|
1,275
|
|||||||||
|
Property,
plant and equipment (net)
|
1,979
|
2,265
|
2,417
|
|||||||||
|
LIABILITIES
|
||||||||||||
|
Short
term borrowings and current portion of long-term loan
|
2,437
|
6,079
|
8,125
|
|||||||||
|
Trade
payable
|
2,222
|
1,502
|
987
|
|||||||||
|
Long
term debts, net of current portion
|
-
|
2,333
|
3,656
|
|||||||||
|
Advance
from customers
|
824
|
1,877
|
2,997
|
|||||||||
|
Total
Stockholders' equity
|
$
|
(397
|
)
|
$
|
(4,895
|
)
|
$
|
(5,438
|
)
|
|||
|
Unaudited
|
||||||
|
(Amounts
in Thousand US Dollars)
|
31-Mar-05
|
31-Mar-04
|
||||
|
ASSETS
|
||||||
|
Cash
and cash equivalents
|
$
|
83
|
$
|
107
|
||
|
Inventories
|
4,459
|
4,922
|
||||
|
Prepaid
and other assets
|
1,765
|
2,070
|
||||
|
Property,
plant and equipment (net)
|
3,463
|
3,985
|
||||
|
LIABILITIES
|
||||||
|
Short
term borrowings and current portion of long-term loan
|
6,291
|
6,614
|
||||
|
Trade
payable
|
3,341
|
2,738
|
||||
|
Long
term debts, net of current portion
|
3,897
|
2,892
|
||||
|
Advance
from customers
|
3,057
|
2,755
|
||||
|
Total
Stockholders' equity
|
$
|
(3,032
|
)
|
$
|
320
|
|
IGC
India Mining & Trading PVT LTD
(Selected
Summary Statement of Income Data)
|
(Amounts
in Thousand US Dollars, except share data and as stated
otherwise)
|
December
16, 2008 (inception) to March 31, 2009
|
|||
|
Revenue
|
$ | 0 | ||
|
Income
(loss) before income taxes
|
(8,644 | ) | ||
|
Income
taxes
|
(78 | ) | ||
|
Net
(loss)/income
|
(8,722 | ) | ||
|
Per
Share Data
|
||||
|
Basic
|
$ | - | ||
|
Diluted
|
$ | - | ||
|
Weighted
Average Shares
|
||||
|
Basic
|
- | |||
|
Diluted
|
- | |||
IGC
India Mining & Trading PVT LTD
(Selected
Summary Balance Sheet Data)
|
(Amounts
in Thousand US Dollars)
|
31-Mar-09
|
|||
|
ASSETS
|
||||
|
Cash
and cash equivalents
|
$
|
229,099
|
||
|
Inventories
|
||||
|
Prepaid
and other assets
|
59,066
|
|||
|
Property,
plant and equipment (net)
|
||||
|
LIABILITIES
|
||||
|
Short
term borrowings and current portion of long-term loan
|
||||
|
Trade
payable
|
1,154
|
|||
|
Long
term debts, net of current portion
|
||||
|
Advance
from customers
|
||||
|
Total
Stockholders' equity
|
$
|
287,011
|
||
Item 7. Management's Discussion and Analysis
Forward-Looking
Statements
This
report contains forward-looking statements, including, among others,
(a) our expectations about possible business combinations, (b) our
growth strategies, (c) our future financing plans, and (d) our
anticipated needs for working capital. Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and expectations, are
generally identifiable by use of the words “may,” “should,” “expect,”
“anticipate,” “approximate,” “estimate,” “believe,” “intend,” “plan,” or
“project,” or the negative of these words or other variations on these words or
comparable terminology. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found in this report. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under our
“Description of Business” and matters described in this report generally. In
light of these risks and uncertainties, the events anticipated in the
forward-looking statements may or may not occur. These statements are based on
current expectations and speak only as of the date of such statements. We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of future events, new information or
otherwise.
The
information contained in this report identifies important factors that could
adversely affect actual results and performance. All forward-looking statements
attributable to us are expressly qualified in their entirety by the foregoing
cautionary statements.
Background
IGC,
a Maryland corporation was organized on April 29, 2005 as a blank check
company for the purpose of acquiring one or more businesses with operations
primarily in India through a merger, capital stock exchange, asset acquisition
or other similar business combination or acquisition. On March 8, 2006, we
completed an initial public offering. On February 19. 2007, we
incorporated India Globalization Capital, Mauritius, Limited (IGC-M), a wholly
owned subsidiary, under the laws of Mauritius. On March 7, 2008, we
consummated an agreement to acquire 63% of Sricon Infrastructure Private Limited
(Sricon) and 77% of Techni Bharathi Limited (TBL). The shares of the two Indian
companies, Sricon and TBL, are held by IGC-M. On December 16, 2009
IGC-M beneficially formed IGC Mining and Trading, Limited and obtained ownership
of it on March 29, 2009. IGC-IMT is based in Chennai,
India. There was no activity in IGC-IMT between December 16, 2008 and
March 29, 2009.
Most of
the shares of Sricon and TBL acquired by IGC were purchased directly from the
companies. IGC purchased a portion of the shares from the existing owners of the
companies. The founders and management of Sricon own 37% of Sricon
and the founders and management of TBL own 23% of TBL.
The
acquisitions were accounted for under the purchase method of
accounting. Under this method of accounting, for accounting and
financial purposes, IGC-M, Limited, was treated as the acquiring entity and
Sricon and TBL as the acquired entities. The financial statements
provided here and going forward are the consolidated statements of IGC, which
include IGC-M, Sricon, TBL and their subsidiaries. However,
historical descriptions of our business for periods and dates prior to March 7,
2008 include information on Sricon and TBL.
Sricon
was incorporated in 1997 with the Registrar of Companies, Maharashtra in the
name of “Srivastava Construction Private Limited.” Sricon is located
in Nagpur, India. TBL was incorporated in 1982.
Until the
formation of Sricon, the infrastructure construction work was carried out in
Vijay Engineering Enterprises (partnership concern)
(“VEE”). Sricon was incorporated with an objective to execute large
scale infrastructure projects in sectors such as Highways, Water Management
System, Power and Cement Plants, etc. In an effort to consolidate all
infrastructure activities under one company to garner better synergy, business
profile, as well as improve cost management, VEE was merged with Sricon
effective March 31, 2004.
Company
Overview
We are a
construction and materials company engaged in the following core business areas:
1) civil construction of roads and highways, 2) the construction and maintenance
of high temperature cement and steel plants, 3) operations and supply of rock
aggregate and 4) the export of iron ore to China. Our present
and past clients include various Indian government
organizations. Including our subsidiaries, we have
approximately 800 employees and contractors. Our larger construction
subsidiary, Sricon, has the capacity and prior experience to bid on contracts
priced at a maximum of about $116 million. We are focused on winning
construction contracts, building out rock aggregate quarries and setting up
relations and export hubs for the export of iron ore to
China.
The
Indian government has articulated plans to modernize the Indian
Infrastructure. It expects to spend around $21 billion in the next 12
months on infrastructure. We believe that these initiatives will continue to be
favorable to our business. Our model is three fold: 1) we bid on
construction and engineering contracts which provide us with a backlog which
translates into greater revenues and earnings, 2) we are in the process of
building rock quarries and selling rock aggregate to the infrastructure industry
and 3) we export iron ore to China. There is seasonality in our
business as outdoor construction activity slows down during the Indian
monsoons. The rains typically last intermittently from June through
September.
Industry
Overview
The
Indian GDP surpassed $1 Trillion in fiscal 2007. According to the
World Bank, only nine economies at the close of 2005 generated more than $1
Trillion in GDP. India’s growth rates have been ranging from 6.2% to
8.5% since 2003 and peaked at 9.2% in fiscal year ending March 31,
2007. The GDP growth rate for 2008 was 7.9%. The Indian
stock markets experienced significant growth with the SENSEX peaking at 21,000
(January 8, 2008). The current global financial crisis created
a liquidity crunch starting in October 2008.
India’s
GDP growth for fiscal year end March 31, 2008 was 8.6% and for fiscal year end
March 31, 2009 is estimated around 5.8%. The slowing of the GDP was
caused by the global financial crisis. However, it does indicate that India has
withstood the global downturn better than many nations. The factors contributing
to maintaining the relatively high growth included growth in the agriculture and
service industries, favorable demographic dynamics (India has a large youth
population that exceeds 550 Million), the savings rate and spending habits of
the Indian middle class. Other factors are attributed to changing
investment patterns, increasing consumerism, healthy business confidence,
inflows of foreign investment (India ranks #2 behind China in the A.T. Kearney
“FDI Confidence Index” for 2007) and improvements in the Indian banking
system. Meanwhile, several economists are forecasting India’s GDP
growth rate during the current fiscal year ending March 31, 2010 to be around
6%.
To
sustain India’s fast growing economy, the share of infrastructure investment in
India is expected to increase to 9 per cent of GDP by 2014, which is an
increase from 5 per cent in 2006-07. This forecast is based on The
Indian Planning Commission’s annual publication that for the Eleventh Plan
period (2007-12), a large investment of approximately $494 Billion is
required for Infrastructure build out and modernization. This
industry is one of the largest employers in the country – the construction
industry alone employs more than 30 million people. According to the
Business Monitor International (BMI), by 2012, the construction industry’s
contribution to India’s GDP is forecasted to be 16.98%.
This
ambitious infrastructure development mandate by the Indian Government will
require funding. The Government of India has already raised funds
from multi-lateral agencies such as the World Bank and the Asian Development
Bank. The India Infrastructure Company was set up to support
projects by guaranteeing up to $2 Billion annually. In
addition, the Indian Government has identified public-private partnerships (PPP)
as the cornerstone of its infrastructure development policy. The
government is also proactively seeking additional FDI and approval is not
required for up to 100% of FDI in most infrastructure
areas. According to Indian Prime Minister Dr. Manmohan Singh,
addressing the Finance Ministers of ASEAN countries, at the Indo ASEAN Summit at
New Delhi, in August 2007, India needs $150 billion at the rate of
$15 billion per annum for the next 10 years. Speaking to the media in
November of 2007, Indian commerce minister Kamal Nath added: "Our FDI
policy is perhaps one of the most liberal in the world, India remains a favorite
FDI destination despite what is going on in the stock market."
Previously,
Minister Nath said the government had fixed an ambitious $30 billion Foreign
Direct Investment (FDI) target for the country's 2007-08 financial year (April
to March) following total inflows in 2006-07 of $19.5 billion (or $16B
excluding reinvested earnings) compared with $7.7 billion in
2005-06. Actual FDI for 2007-08 surged past $25
Billion. With the exception of Japan, the focus and expected growth
of infrastructure in India has made it a leading FDI destination within
Asia in terms of private equity. Eight of the Lipper's world's
top ten infrastructure funds in 2007 were Indian equity
funds. However, in comparison, China received $67 billion in FDI,
while India received only $16B. More than 50% of India’s
FDI will be utilized for infrastructure, telecom, and power.
The
Government of India is also permitting External Commercial Borrowings (ECB’s) as
a source of financing Indian Companies looking to expand existing
capacity as well as incubation for new startups. ECB’s
include commercial bank loans, buyers' credit, suppliers' credit, securitized
instruments such as Floating Rate Notes and Fixed Rate Bonds, credit from
official export credit agencies, and commercial borrowings from private sector
Multilateral Financial Institutions such as International Finance Corporation
(Washington), ADB, AFIC, CDC, etc. National credit policies seek to
keep an annual cap or ceiling on access to ECB, consistent with prudent debt
management. Also, these policies seek to encourage greater
emphasis on infrastructure projects and core sectors such as power,
oil exploration, telecom, railways, roads & bridges, , ports, industrial
parks, urban infrastructure, and fosters exporting. Applicants will
be free to raise ECB from any internationally recognized source such as banks,
export credit agencies, suppliers of equipment, foreign collaborators, foreign
equity-holders, and international capital markets.
ECB can
be accessed in two methods, namely, the Automatic Route and the Approval
Route. The Automatic Route is primarily for investment in Indian
infrastructure, and will not require Reserve Bank of India (RBI)/Government
approval. The maximum amount of ECB’s under the Automatic Route raised by an
eligible borrower is limited to $500 million during any financial year. The
following are additional requirements under the Automatic route:
a) ECB up
to $20 million or equivalent with minimum average maturity of 3
years.
b) ECB
above $20 million and up to $500 million or equivalent with minimum average
maturity of 5 years.
Some of
the areas where ECB’s are utilized is the National Highway Development Project
and the National Maritime Development Program. In addition, the
following represent some of the major infrastructure projects planned for the
next five years:
|
1.
|
Constructing
dedicated freight corridors between Mumbai-Delhi and
Ludhiana-Kolkata.
|
|
2.
|
Capacity
addition of 485 million MT in Major Ports, 345 million MT in Minor
Ports.
|
|
3.
|
Modernization
and redevelopment of 21 railway
stations.
|
|
4.
|
Developing
16 million hectares through major, medium and minor irrigation
works.
|
|
5.
|
Modernization
and redevelopment of 4 metro and 35 non-metro
airports.
|
|
6.
|
Expansion
to six-lanes 6,500 km (4,038 Miles) of Golden Quadrilateral and selected
National Highways.
|
|
7.
|
Constructing
228,000 miles of new rural roads, while renewing and upgrading the
existing 230,000 miles covering 78,304 rural
habitations.
|
Pro
Forma and Adjusted Pro Forma Financial Information
In
prior annual filings, we compared annual consolidated results of operations and
cash flows to the preceding year. Since we acquired both TBL
and Sricon at the close of year ending March 31, 2008, we believe a comparison
of the December 31, 2009 consolidated results of operations and cash flows to
March 31, 2008 is not an adequate comparison. Only the operating
results for March 8, 2008 to March 31, 2008 are included in our 2008
consolidated results of operations and cash flows. To reflect a
better comparison of operating results, we are presenting in this Management’s
Discussion and Analysis section, the Pro Forma results of operations for the
Company as if the acquisitions occurred on Apri11, 2007 and April 1,
2008, respectively. We are basing our Pro Forma results of operations
from (1) the audited financial statements of Sricon for the period ended March
7, 2008, (2) the unaudited financial statements of Sricon for the period March
8, 2008 to March 31, 2008, (3) the audited financial statements of TBL for the
period ended March 7, 2008, (4) the unaudited financial statements of TBL for
the period March 8, 2008 to March 31, 2008, and (5) the audited consolidated
financial statements of the Company for the year ended March 31, 2009 and
2008.
We
believe that the presented Pro Forma financial statements and analysis is a more
meaningful comparison of our operating results.
The
following tables represent our Pro Forma Consolidated Financial
Statements.
India
Globalization Capital, Inc.
Adjusted
Pro Forma Consolidated Statements of Operations
(unaudited)
|
Year
Ended
March 31,
2009
|
Year
Ended
March
31, 2008
|
Percentage
Increase (Decrease)
|
||||||||||
|
Revenue
|
$ | 35,338,725 | $ | 30,123,348 | $ | 17.3 | % | |||||
|
Cost
of revenue
|
(27,179,494 | ) | (22,462,592 | ) | 21.0 | % | ||||||
|
Gross
profit
|
8,159,231 | 7,660,756 | 6.5 | % | ||||||||
|
Selling,
general and administrative expenses
|
(4,977,815 | ) | (2,997,983 | ) | 66.0 | % | ||||||
|
Depreciation
|
(873,022 | ) | (921,382 | ) | (5.2 | %) | ||||||
|
Operating
income
|
2,308,394 | 3,741,392 | (38.3 | %) | ||||||||
|
Legal
and formation, travel and other start up costs
|
(5,765,620 | ) | (100.0 | %) | ||||||||
|
Interest
expense
|
(1,753,952 | ) | (3,411,357 | ) | 48.6 | % | ||||||
|
Interest
income
|
1,176,018 | 319,984 | 267.5 | % | ||||||||
|
Other
Income
|
2,997,495 | (100.0 | %) | |||||||||
|
Income
/ (loss) before income taxes
|
1,730,461 | (2,118,106 | ) | (181.7 | %) | |||||||
|
Provision
for income taxes, net
|
(1,535,087 | ) | (946,939 | ) | (62.1 | %) | ||||||
|
Income
after Income Taxes
|
195,373 | (3,065,046 | ) | 106.4 | % | |||||||
|
Provision
for Dividend on Preference Stock and its Tax
|
||||||||||||
|
Minority
interest
|
(716,950 | ) | (1,343,845 | ) | 46.6 | % | ||||||
|
Net
income / (loss)
|
$ | (521,576 | ) | $ | (4,408,891 | ) | $ | 88.2 | % | |||
|
Net
income / (loss) per share: basic and diluted
|
$ | (0.05 | ) | |||||||||
|
Weighted
average number of shares outstanding-basic and diluted
|
10,091,171 | |||||||||||
Pro
Forma Adjustments
The
Consolidated Pro Forma Statement of Operations contains US GAAP to Pro Forma
adjustments consisting of the elimination of interest income held in trust and
provision for income taxes. Had the merger occurred during April 1,
2007, interest income in the amount of $2,192,402 would not have been earned
because funds as reported in US GAAP results would have not been held in
trust. Therefore, we eliminate the applicable interest earned from
the Pro Forma statement of operations for the year ended March 31,
2008. Accordingly, the provision for income taxes is reduced by
$16,955.
Results
of Operations (IGC)
The
following discussion relates to IGC for the years ended March 31, 2009 and March
31, 2008:
Revenues
Total pro
forma revenue increased 17.1% from $35.3 million for the year ended March
31, 2009, as compared to $30.1 million for the year ended March 31,
2008. Due to increased liquidity requirements in maintaining a high
level of growth, we have curtailed the number of contracts we are working on by
sub-contracting some and cancelling others.
Cost
of Revenues
Costs of
revenue consists primarily of compensation and related fringe benefits for
project-related personnel, department management and all other dedicated project
related costs and indirect costs. Cost of revenue increased by 4.7 million
or 21.0%, compared to the year ended March 31, 2008. The increase was
due to the increase of construction material.
Selling,
General and Administrative Expenses
Consist
primarily of employee-related expenses, professional fees, other corporate
expenses and allocated overhead. Selling, general and administrative expenses
increased by $2 million or 67.5% for the year ended March 31, 2009,
compared to the year ended March 31, 2008. The increase in SG&A
stem partly from overheads related to US compliance, USGAAP filings with the
SEC, and legal costs associated with the warrant tender offer and general fund
raising activity.
Net Interest Income (Expense)
– Net interest expense increased by $484 thousand for the year ended March
31, 2009 compared to the year ended March 31, 2008. The main reason
is that the interest income from money in trust is not included in the pro forma
statements.
Net
Income (loss)
Net loss
for the years ended March 31, 2009 and March 31, 2008 was $522 thousand and $4.4
million, respectively. The 2008 net loss included compensation
expense, legal, interest expense, formation, travel, other and start-up
costs net of interest income related to the cash held in our trust
account. The 2009 loss includes approximately $1.5 million of one
time expenses related to fund raising and non cash expenses related to warrants,
as well as approximately $300,000 of losses due to a strengthening US dollar
against the Indian Rupee.
Impairment
of Goodwill
As a
result of our annual impairment tests which occurred during the fourth quarter,
we have not recorded an impairment adjustment to goodwill. Factors
that influence the analysis include, contracts, potential contracts, ability to
grow the quarry and ore business, among others. While there is
an overall liquidity constraint and we require more cash to grow, the market
potential for the infrastructure business in India remains
unabated.
Liquidity
and Capital Resources
This liquidity and capital resources
discussion compares the consolidated company results for the years ended March
31, 2009 and 2008.
Cash used
for operating activities from continuing operations is net loss adjusted for
certain non-cash items and changes in operating assets and
liabilities. During the year ending March 31, 2009, cash used for
operating activities was $8.1 million compared to cash used for operating
activities of $8.6 million during the year ended March 31, 2008. The
uses of cash during the year ended March 31, 2009 relates primarily to the
payment of general operating expenses of our subsidiary companies, down payments
on equipment and one time expenses related to legal costs associated with the
warrant tender offer, increased fundraising activities, and increased expenses
in curtailing contracts.
During
the year ended March 31, 2009, investing activities from continuing operations
provided approximately $2.9 million of cash as compared to approximately $ 57.3
million used during the year of 2008. The large difference of cash
stems from our cash in escrow during the FYE 2008. During this
period we were a Special Purpose Acquisition Company for the majority of the
year with no operations. Therefore, cash was invested in treasury
bills and notes earning interest on cash held in trust.
During
the year ended March 31, 2009, there was cash financing used of approximately
$156 thousand, compared to cash used of approximately $ 41.4 million for the
year ended March 31, 2008. The significant use of cash in 2008 was for
acquisition costs related to the acquisition of TBL and Sricon. We paid off $5.5
million in bank lines and notes outstanding during the year ended March 31,
2009.
Our
future liquidity needs will depend on, among other factors, stability of
construction costs, interest rates, and a continued increase in infrastructure
contracts in India. We believe that our current cash balances,
anticipated operating cash flow, and potential cash from claims are adequate to
sustain the Company, but not to fuel rapid growth commensurate with the
opportunity before us. As such we have and continue to take measures
to constrain growth until we have visibility into increased
liquidity. As of now our bank lines in India have been dramatically
reduced to amounts borrowed and outstanding. We continue to explore
funding sources including negotiated settlement of accounts receivable,
settlement of claims, bank lines, equity, Mauritius listing of our stock,
convertible debentures, and debt. However, there can be no assurance that we
will be able to access additional credit facilities. Our strategy is
to use develop businesses that have a very short receivable cycle like the
export of ore to China and the sale of rock aggregate as well as aggressively
collect our outstanding receivables and claims.
Off
Balance Sheet Arrangements
Item 7A. Quantitative and
Qualitative Disclosure about Market Risks
The
primary objective of the following information is to provide forward-looking
quantitative and qualitative information about our potential exposure to market
risks. Market risk is the sensitivity of income to changes in
interest rates, foreign exchanges, commodity prices, equity prices, and other
market-driven rates or prices. The disclosures are not meant to be
precise indicators of expected future losses, but rather, indicators of
reasonably possible losses. This forward-looking information provides
indicators of how we view and manage our ongoing market risk
exposures.
Customer
Risk
The
Company’s customers are the Indian government, state government, private
companies and Indian government owned companies. Therefore, our
business requires that we continue to maintain a pre-qualified status with our
clients so we are not disqualified from bidding on future
work. The loss of a significant client, like the National Highway
Authority of India (NHAI), may have an adverse effect on
Company. Disqualification can occur if, for example, we run out of
capital to finish contracts that we have undertaken.
Commodity
Prices and Vendor Risk
The
Company is affected by the availability, cost and quality of raw materials
including cement, asphalt, steel, rock aggregate and
fuel. The prices and supply of raw materials and fuel
depend on factors beyond the control of the Company, including general economic
conditions, competition, production levels, transportation costs and import
duties. The Company typically builds contingencies into the
contracts, including indexing key commodity prices into escalation
clauses. However, drastic changes in the global markets for raw
material and fuel could affect our vendors, which may create disruptions in
delivery schedules that could affect our ability to execute contracts in a
timely manner. We are taking steps to mitigate some of this risk by
attempting to control the supply of raw materials. We do
not currently hedge commodity prices on capital markets.
Labor
Risk
The
building boom in India and the Middle East (India, Pakistan, and Bangladesh
export labor to the Middle East) had created pressure on the availability of
skilled labor like welders, equipment operators, etc. While this has
recently changed with the shortage of financial liquidity and falling oil
prices, we expect a construction boom and although manageable, some regional
shortage of skilled labor.
Compliance,
Legal and Operational Risks
We
operate under regulatory and legal obligations imposed by the Indian
governments and U.S. securities regulators. Those obligations
relate, among other things, to the company’s financial reporting, trading
activities, capital requirements and the supervision of its
employees. For example, we file our financial statements in
three countries under three different Generally Accepted Accounting Standards,
(GAAP). Failure to fulfill legal or regulatory obligations can lead
to fines, censure or disqualification of management and/or staff and other
measures that could have negative consequences for Sricon’s activities and
financial performance. We are mitigating this risk by hiring local consultants
and staff who can manage the compliance in the various jurisdictions in which we
operate. However, the cost of compliance in various jurisdictions
could have an impact on our future earnings.
Interest
Rate Risk
The
infrastructure development industry is one in which leverage plays a large
role. A typical contract requires that we furnish an earnest money
deposit and a performance guaranty. Furthermore, most contracts
demand that we reserve between 7 and 11 percent of contract value in the form of
bank guaranties and/or deposits. Finally, as interest rates rise, our
cost of capital increases thus impacting our margins.
Exchange
Rate Sensitivity
Our
Indian subsidiaries conduct all business in Indian Rupees with the exception of
foreign equipment that is purchased from the U.S. or Europe. Exchange
rates have an insignificant impact on our financial results. However,
as we convert from Indian Rupees to USD and subsequently report in U.S. dollars,
we may see an impact on translated revenue and
earnings. Essentially, a stronger USD decreases our reported earnings
and a weakening USD increases our reported earnings.
Accounting
Developments and their impact
In
September 2006, FASB issued FAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Benefit Plans” (FAS 158). This
Statement requires companies to recognize the over-funded or under-funded status
of a defined benefit postretirement plan as an asset or liability in its
statement of financial position. The Company has applied FAS 158, and there is
no impact on the financial statements.
In May
2005, FASB issued FAS No. 154, “Accounting Changes and Error Corrections-a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (FAS 154). This
Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement
No. 3, “Reporting Accounting Changes in Interim Financial Statements.” This
Statement requires retrospective application to prior periods’ financial
statements for changes in accounting principle, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. FAS 154 also requires that a change in depreciation, amortization, or
depletion method for long, non-financial assets be accounted for as a change in
accounting estimate effected by a change in accounting principal. The Company
adopted FAS 154 for accounting changes and corrections of errors made after the
adoption date. The adoption of the provisions of FAS 154 did not have an impact
on the Company’s financial statements.
In
September 2006, the Securities and Exchange Commission (‘SEC’) staff issued
Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (‘SAB 108’). SAB 108 provides guidance on how prior year
misstatements should be taken into consideration when quantifying misstatements
in current year financial statements for purposes of determining whether the
current year’s financial statements are materially misstated. The provisions of
SAB 108 are required to be applied by registrants in their annual financial
statements covering fiscal years ending on or before November 15, 2007. The
adoption of the provisions of SAB 108 did not have an impact on the Company’s
financial statements.
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). FIN 48
clarifies the accounting and reporting for uncertainties in income tax law. This
Interpretation prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns. The provisions of FIN 48
will be applied beginning in the first quarter of 2008 (i.e. from April 1,
2008), with the cumulative effect of the change in accounting principle recorded
as an adjustment to retained earnings. The Company is currently assessing the
impact of the adoption of this Interpretation on its financial
statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS 141R also establishes disclosure requirements
to enable the evaluation of the nature and financial effects of the business
combination. This statement is effective beginning January 1,
2009. The Company does not expect the adoption of SFAS 141R to have a
material impact on its financial position and results of operations.
In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51.” This
statement improves the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that
require; the ownership interests in subsidiaries held by parties other than the
parent and the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, changes in a parent’s ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary be
initially measured at fair value, entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 affects those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries or that deconsolidate a subsidiary. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is
prohibited. The adoption of this statement did not have a material
effect on the Company's financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement
No. 133.” This statement is intended to improve transparency in
financial reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to
all derivative instruments within the scope of SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities” (SFAS 133) as well as related
hedged items, bifurcated derivatives, and nonderivative instruments that are
designated and qualify as hedging instruments. Entities with
instruments subject to SFAS 161 must provide more robust qualitative disclosures
and expanded quantitative disclosures. SFAS 161 is effective
prospectively for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application
permitted. The adoption of this statement did not have a material
effect on the Company's financial statements.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that presented in conformity
with generally accepted accounting principles in the United States of
America. SFA 162 will be effective 60 days following the SEC’s
approval of the PCAOB amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The
Company does not believe SFAS 162 will have a significant impact on the
Company’s financial statements.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.” The
scope of this Statement is limited to financial guarantee insurance and
reinsurance contracts, as described in the Statement, issued by enterprises
included within the scope of Statement 60. Accordingly, this
Statement does not apply to financial guarantee contracts issued by enterprises
excluded from the scope of Statement 60 or to some insurance contracts that seem
similar to financial guarantee insurance contracts issued by insurance
enterprises (such as mortgage guaranty insurance or credit insurance on trade
receivables). This Statement also does not apply to financial
guarantee contracts that are derivative instruments included within the scope of
SFAS No. 133, “Accounting for Derivative instruments and Hedging
Activities.” SFAS 163 is effective prospectively for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years; disclosure requirements in paragraphs
30(g) and 31 are effective for the first period (including interim periods)
beginning after May 23, 2008. The adoption of this statement did not have a
material effect on the Company's financial statements.
In
September 2006, the FASB issued FAS No.157, “Fair Value Measurements” (FAS No.
157). FAS No. 157 clarifies the principle
that fair value should be based on the assumptions market participants would use
when pricing an asset or liability and
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. The Company’s adoption
of this Standard on January 1, 2008 did not have a material effect on its
financial statements. Relative to FAS 157, the FASB issued FASB Staff Positions
(FSP) FAS 157-1, FAS 157-2, and FAS 157-3. FSP FAS 157-1 amends SFAS 157 to
exclude SFAS No. 13,“Accounting for Leases” (SFAS 13), and its related
interpretive accounting pronouncements that address leasing transactions, while
FSP FAS 157-2 delays the effective date of the application of SFAS 157 to fiscal
years beginning after November 15, 2008 for all nonfinancial assets and
nonfinancial liabilities that are recognized or disclosed at fair value in the
financial statements on a non-recurring basis. FSP FAS 157-3 clarifies the
application of FAS 157 as it relates to the valuation of financial assets in a
market that is not active for those financial assets. This FSP is effective
immediately and includes those periods for which financial statements have not
been issued. We currently do not have any financial assets that are valued using
inactive markets, and as such are not impacted by the issuance of this
FSP.
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities— Including
an amendment of FASB Statement No. 115” (FAS No. 159). FAS No. 159 provides
companies with a choice to measure
certain financial assets and liabilities at fair value that are not currently
required to be measured at fair value (the “Fair
Value Option”). Election of the Fair Value Option is made on an
instrument-by-instrument basis and is irrevocable. The Company’s adoption of
this Standard on January 1, 2008 did not have a material effect on its financial
statements.
Critical
Accounting Policies
The
preparation of financial statements in conformity with U.S. GAAP requires the
Company to make estimates and judgments that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Both our Indian subsidiaries
have based their estimates and judgments on experience and other
assumptions that they find reasonable. Actual results may differ from such
estimates as conditions and assumptions change, which could have a material
impact on the financial statements.
Accounting
standards whose application may have a significant effect on the reported
results of operations and financial position,
and that can require judgments by management that affect their application,
include FAS No. No. 5, “Accounting for Contingencies,” FAS No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets,” FAS No. 142, “Goodwill and
Other Intangible Assets,” FAS No. 157, “Fair Value Measurements,” FAS No. 159,
“The Fair Value Option for Financial Assets and Financial Liabilities,” and FAS
No. 109, “Accounting for Income Taxes,” including recent accounting requirements
under FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income
Taxes.”
Partial revenue is recognized on major
construction contracts when work is completed, an independent consultant
approves the work and a bill is retendered. The timing of
revenue recognition is dependent upon the agreement between the customer and the
Company. Specifically, revenue recognized from
construction, project related activities, contracts for supply, plant and
equipment commissioning is recognized as follows:
|
a)
|
Cost
plus contracts: Contract revenue is determined by adding the aggregate
cost plus proportionate margin as agreed with the customer and expected to
be realized.
|
||
|
|
|||
|
b)
|
|
Fixed
price contracts: Contract revenue is recognized using the percentage
completion method. Percentage of completion is determined as a proportion
of cost incurred-to-date to the total estimated contract cost. Changes in
estimates for revenue, costs to complete and profit margins are recognized
in the period in which they are reasonably
determinable
|
|
Revenue
from property development activity is recognized when all significant risks and
rewards of ownership in the land and/or building are transferred to the customer
and a reasonable expectation of collection of the sale consideration from the
customer exists.
Revenue
from service related activities and miscellaneous other contracts are recognized
when the service is rendered using the proportionate completion method or
completed service contract method.
Revenue
from mining and trading activity is typically recognized, based on contracts
that are “Freight on Board” (FOB), when a shipment is loaded on to a
ship.
Full
provision is made for any loss in the period in which it is
foreseen. If the financial conditions of the Company’s customers were
to deteriorate, resulting in an impairment of their ability to make payments,
additional provisions may be required.
Foreign
Currency Translation
IGC
mainly operates in India and a substantial portion of the Company’s sales are
denominated in the Indian Rupee. As a result, changes in the
relative values of the U.S. dollar and Indian Rupee 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 Indian rupee
is the functional currency 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 under:
|
Year
|
|
Month
end Average Rate (P&L rate)
|
|
Year
end rate (Balance sheet rate)
|
|
2005-06
|
INR
44.18 per USD
|
INR
44.48 per USD
|
||
|
2006-07
|
INR
45.11 per USD
|
INR
43.10 per USD
|
||
|
2007-08
|
INR
40.13 per USD
|
INR
40.42 per USD
|
||
|
2008-09
|
INR
46.49 per USD
|
INR
50.64 per
USD
|
Item 8.
Financial Statements and Supplementary Data
Our
Consolidated Financial Statements and supplementary financial data are included
in this annual report on Form 10-K beginning on page F-1
INDEX
TO FINANCIAL STATEMENTS
|
Page
|
|
|
India
Globalization Capital, Inc.
|
|
|
Report of Independent Registered
Public Accounting Firm
|
F-1
|
|
Consolidated
Balance Sheets – FYE 2009 and 2008
|
F-2
|
|
Consolidated
Statements of Income (Loss) -For FYE 2009 and 2007
|
F-3
|
|
Consolidated
Statements of Changes in Stockholder’s Equity - For FYE 2009 and
2008
|
F-4
|
|
Consolidated
Statements of Cash Flows - For FYE 2009 and 2008
|
F-5
|
|
Notes to Consolidated Financial
Statements
|
F-6
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders
India
Globalization Capital, Inc.
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and comprehensive
loss, and of cash flows present fairly, in all material respects, the financial
position of India Globalization Capital, Incorporated and its subsidiaries at
March 31, 2009 and 2008, and the results of their operations and their cash
flows for each of the two years in the period ended March 31, 2009 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/ Yoganandh &
Ram
Independent
Auditors registered with
Public
Company Accounting Oversight Board (USA)
India
Globalization Capital, Inc.
CONSOLIDATED
BALANCE SHEET
|
March 31,
2009
|
March 31,
2008
|
|||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
|
Cash
and cash equivalents
|
$ | 2,129,365 | $ | 8,397,441 | ||||
|
Accounts
Receivable
|
9,307,088 | 8,708,861 | ||||||
|
Unbilled
Receivables
|
2,759,632 | 5,208,722 | ||||||
|
Inventories
|
2,121,837 | 1,550,080 | ||||||
|
Interest
Receivable - Convertible Debenture
|
277,479 | |||||||
|
Convertible
debenture in MBL
|
3,000,000 | |||||||
|
Prepaid
taxes
|
88,683 | 49,289 | ||||||
|
Restricted
cash
|
6,257 | |||||||
|
Short
term investments
|
671 | |||||||
|
Prepaid
expenses and other current assets
|
2,801,148 | 4,324,201 | ||||||
|
Due
from related parties
|
290,831 | 1,373,446 | ||||||
|
Total
Current Assets
|
19,498,584 | 32,896,447 | ||||||
|
Property
and equipment, net
|
6,601,394 | 7,337,361 | ||||||
|
Accounts
Receivable – Long Term
|
2,769,196 | 3,519,965 | ||||||
|
Goodwill
|
17,483,501 | 17,483,501 | ||||||
|
Investment
|
70,743 | 1,688,303 | ||||||
|
Deposits
towards acquisitions
|
261,479 | 187,500 | ||||||
|
Restricted
cash, non-current
|
1,430,137 | 2,124,160 | ||||||
|
Deferred
tax assets - Federal and State, net of valuation allowance
|
898,792 | 1,013,611 | ||||||
|
Other
Assets
|
2,818,687 | 1,376,126 | ||||||
|
Total
Assets
|
$ | 51,832,513 | $ | 67,626,973 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Short-term
borrowings and current portion of long-term debt
|
$ | 3,422,239 | $ | 5,635,408 | ||||
|
Trade
payables
|
462,354 | 1,771,151 | ||||||
|
Advance
from Customers
|
206,058 | 931,092 | ||||||
|
Accrued
expenses
|
555,741 | 1,368,219 | ||||||
|
Taxes
payable
|
76,569 | 58,590 | ||||||
|
Notes
Payable to Oliveira Capital, LLC
|
1,517,328 | 3,000,000 | ||||||
|
Due
to related parties
|
1,214,685 | 1,330,291 | ||||||
|
Other
current liabilities
|
1,991,371 | 3,289,307 | ||||||
|
Total
current liabilities
|
$ | 9,446,345 | $ | 17,384,059 | ||||
|
Long-term
debt, net of current portion
|
1,497,458 | 1,212,841 | ||||||
|
Advance
from Customers
|
832,717 | |||||||
|
Deferred
taxes on income
|
590,159 | 608,535 | ||||||
|
Other
liabilities
|
2,440,676 | 6,717,109 | ||||||
|
Total
Liabilities
|
$ | 13,974,638 | $ | 26,755,261 | ||||
|
Minority
Interest
|
14,262,606 | 13,545,656 | ||||||
|
Common
stock subject to possible conversion, 11,855,122 shares at conversion
value
|
- | - | ||||||
|
COMMITMENTS
AND CONTINGENCY
|
||||||||
|
STOCKHOLDERS’
EQUITY
|
||||||||
|
Preferred
stock $.0001 par value; 1,000,000 shares authorized; none issued and
outstanding
|
- | |||||||
|
Common
stock — $.0001 par value; 75,000,000 shares authorized; 10,091,171 issued
and
outstanding at March 31, 2009 and 8,570,107 issued and outstanding at
March 31, 2008.
|
1,009 | 857 | ||||||
|
Additional
paid-in capital
|
33,186,530 | 31,470,134 | ||||||
|
Retained
Earnings (Deficit)
|
(4,662,689 | ) | (4,141,113 | ) | ||||
|
Accumulated
other comprehensive (loss) income
|
(4,929,581 | ) | (3,822 | ) | ||||
|
Total
stockholders’ equity
|
23,595,269 | 27,326,056 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 51,832,513 | $ | 67,626,973 | ||||
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Year
Ended
March 31,
2009
|
Year
Ended
March
31, 2008
|
|||||||
|
Revenue
|
$ | 35,338,725 | $ | 2,188,018 | ||||
|
Cost
of revenue
|
(27,179,494 | ) | (1,783,117 | ) | ||||
|
Gross
profit
|
8,159,231 | 404,901 | ||||||
|
Selling,
general and administrative expenses
|
(4,977,815 | ) | (367,647 | ) | ||||
|
Depreciation
|
(873,022 | ) | (58,376 | ) | ||||
|
Operating
income
|
2,308,394 | 5,153 | ||||||
|
Legal
and formation, travel and other start up costs
|
(5,765,620 | ) | ||||||
|
Interest
expense
|
(1,753,952 | ) | (1,944,660 | ) | ||||
|
Interest
income
|
1,176,018 | 2,213,499 | ||||||
|
Other
Income
|
202,858 | |||||||
|
Income
/ (loss) before income taxes
|
1,730,461 | (5,315,044 | ) | |||||
|
Provision
for income taxes, net
|
(1,535,087 | ) | (76,089 | ) | ||||
|
Income
after Income Taxes
|
195,373 | (5,391,134 | ) | |||||
|
Provision
for Dividend on Preference Stock and its Tax
|
171,084 | |||||||
|
Minority
interest
|
(716,950 | ) | 4,780 | |||||
|
Net
income / (loss)
|
$ | (521,576 | ) | $ | (5,215,270 | ) | ||
|
Net
income / (loss) per share: basic and diluted
|
$ | (0.05 | ) | $ | (0.61 | ) | ||
|
Weighted
average number of shares outstanding-basic and diluted
|
10,091,171 | 8,570,107 | ||||||
The
accompanying notes should be read in connection with the financial
statements.
India Globalization
Capital, Inc.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
Year
Ended
March 31,
2009
|
Year
Ended
March
31, 2008
|
|||||||
|
Net
income / (loss)
|
$ | (521,576 | ) | $ | (5,215,270 | ) | ||
|
Foreign
currency translation adjustments
|
(4,925,759 | ) | (3,822 | ) | ||||
|
Comprehensive
income (loss)
|
$ | (5,447,335 | ) | $ | (5,219,092 | ) | ||
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
Earnings
|
Accumulated
Other
Comprehensive
Income
|
Total
Stockholders'
|
||||||||||||||
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
/
Loss
|
Equity
|
|||||||||||||
|
Balance
at April 1, 2007
|
13,974,500
|
$ |
1,397
|
$ |
51,848,145
|
$ |
1,074,157
|
$ | $ |
52,923,699
|
||||||||
|
Redemption
of 1,910,469 shares on March 7, 2008 and balance in shares subject to
possible conversion transferred to paid in capital
|
(1,910,469)
|
(191)
|
1,689,164
|
|
1,688,973
|
|||||||||||||
|
Buyback
of 4,248,877 shares on March 7, 2008
|
(4,248,877)
|
(425)
|
(25,237,905
|
)
|
(25,238,330
|
)
|
||||||||||||
|
"Issuance
of common stock to Bridge Investors at $.01 per share
|
754,953
|
76
|
3,170,730
|
3,170,805
|
||||||||||||||
|
Net
Loss for the year
|
-
|
-
|
-
|
(5,215,270
|
)
|
(3,822
|
)
|
(5,219,091
|
)
|
|||||||||
|
Balance
at March 31, 2008
|
|
8,570,107
|
$
|
857
|
$
|
31,470,134
|
$
|
(4,141,113
|
)
|
$
|
(3,822
|
)
|
$
|
27,326,056
|
||||
|
Fair
value of 425,000 warrants issued to Oliveira Capital, LLC
|
403,750
|
403,750
|
||||||||||||||||
|
Issuance
of common stock to RedChip Companies at $4.71 per share
|
10,000
|
1
|
47,098
|
47,099
|
||||||||||||||
|
Fair
value of 200,000 common stock issued to Oliveira Trust
|
200,000
|
20
|
967,980
|
968,000
|
||||||||||||||
|
Conversion
of Warrants to Equity shares – 1,311,064 shares
|
1,311,064
|
131
|
297,568
|
297,699
|
||||||||||||||
|
Net
income / (Loss)
|
(521,576
|
)
|
(521,576
|
)
|
||||||||||||||
|
Foreign
currency translation adjustments
|
(4,925,759
|
)
|
(4,925,759
|
)
|
||||||||||||||
|
Balance
at March 31, 2009
|
10,091,171
|
$ |
1,009
|
$ |
33,186,530
|
$ |
(4,662,689
|
)
|
$ |
(4,929,581
|
)
|
$ |
23,595,269
|
|||||
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
Year
Ended
March
31, 2009
|
Year
Ended
March
31, 2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income (loss)
|
$
|
(521,576
|
)
|
$
|
(5,215,270
|
)
|
||
|
Adjustment
to reconcile net income (loss) to net cash used in operating
activities:
|
||||||||
|
Interest
earned on Treasury Bills
|
(2,119,104
|
)
|
||||||
|
Non-cash
compensation expense
|
450,850
|
|||||||
|
Deferred
taxes
|
221,037
|
(743,652
|
)
|
|||||
|
Depreciation
|
873,022
|
58,376
|
||||||
|
Loss
/ (Gain) on sale of property, plant and equipment
|
211,509
|
29
|
||||||
|
Amortization
of debt discount on Oliveira debt
|
2,652
|
4,052,988
|
||||||
|
Amortization
of loan acquisition cost
|
250,000
|
|||||||
|
Changes
in:
|
||||||||
|
Accounts
receivable
|
(2,725,195
|
)
|
808,978
|
|||||
|
Unbilled
Receivable
|
1,484,960
|
(635,207
|
||||||