What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-07-13 compared with 2019-06-14 · 467 added, 356 removed, 369 unchanged (69% of the section changed)

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To the Shareholders and the Board of Directors of India Globalization Capital, Inc.

Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of India Globalization Capital, Inc and its subsidiaries (the “Company”) as of March 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows, for each of the years in the two-year period ended March 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of March 31, 2019, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2019, based on the criteria established in Internal Control-Integrated Framework:

(2013) issued by COSO.

Opinions on the Consolidated Financial Statements

We have audited the accompanying Consolidated balance sheets of India Globalization Capital, Inc.

and its subsidiaries (the "Company") as of March 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows, for each of the two years in the period ended March 31, 2020, and the related notes (collectively referred to as the "Consolidated financial statements").

In our opinion, the Consolidated financial statements present fairly, in all material respects, the Consolidated financial position of the Company as at March 31, 2020 and 2019, and the Consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

These Consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's Consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the Consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the Consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We believe that our audits provide a reasonable basis for our opinion.

Manohar Chowdhry & Associates

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Chennai, India

June 12, 2019

India Globalization Capital, Inc.

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Cash and cash equivalents

Accounts receivable, net of allowances of 6 and 11

Investment held for sale

Marketable Securities

Accounts receivable, net

Deposits and advances

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Property, plant and equipment, net

Investments in unlisted securities

Non-Marketable Securities

Claims and advances

Operating lease asset

Total long-term assets

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Short-term loan

Notes payable

Total current liabilities

Other liabilities

Operating lease liability

Total non-current liabilities

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Stockholders' equity:

Preferred stock, $0.0001 per value:

authorized 1,000,000 shares, no share issued or outstanding as on March 31, 2020 and March 31, 2019

Common stock and additional paid-in capital, $0.0001 par value:

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Operating loss

Impairment of investment

Other income – net

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CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousand s)

(in thousands)

Common Shares

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Accumulated Other Comprehensive Loss

Non-Controlling Interest

Total Stockholders' Equity

Balances as of March 31, 201 8

Common stock issued through public offering

Bricoleur Note penalty shares

Share based compensation & options to advisors and employees

Cancellation of shares of Brilliant Hallmark

Payment for acquisition of patent

Loss on foreign currency translation

Non-controlling interest adjustment

Net income loss

Balances as of March 31, 2018

Bricoleur Note penalty shares

Common stock issued through public offering, net

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Adoption of ASU 2018-07

Cancellation of IGC shares as consideration of Cabaran Ultima

Cancellation of IGC shares

Net income loss

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Balances as of March 31, 201 9

Share based compensation & other expenses

Cancellation of IGC shares

Net income loss

Loss on foreign currency translation

Balances as of March 31, 20 20

The accompanying notes should be read in connection with these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousand s )

(in thousands)

Years Ended March 31,

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Adjustment to reconcile net loss to net cash:

Other operating expenses, net

Depreciation and amortization

Non-cash Interest

Gain on settlement of note payable, net

Impairment of investment

Share based compensation and other expenses

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Claims and advances

Trade payables and accrued liabilities

Accounts payable

Accrued liabilities and others

Net cash used in operating activities

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Purchase of property, plant and equipment

Deconsolidation adjustment

Investment in marketable securities

Loan repayment

Acquisition and filing cost of patents and rights

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Proceed from option exercised

Non-cash interest/penalty expenses

Repayment of loan

Net cash provided by financing activities

Net cash (used in)/ provided by financing activities

Effects of exchange rate changes on cash and cash equivalents

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Non-cash items:

Common stock issued including ESOP, consultancy and patent acquisition

Common stock issued/granted including ESOP, consultancy, and patent acquisition

Common stock issued as penalty on notes payable

Amortization of operating lease

The accompanying notes should be read in connection with these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For F iscal Year s Ended March 31, 2019 and 201 8

For Fiscal Years Ended March 31, 2020 and 201 9

Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to India Globalization Capital, Inc., together with our subsidiaries.

NOTE 1 – NATURE OF OPERATIONS AND MANAGEMENT’S PLANS

IGC has two lines of business:

1) infrastructure and 2) plant and cannabinoid-based products and therapies.

IGC has two segments:

Infrastructure and Life Sciences.

The Company’s Infrastructure Business, managed from India, involves:

(a) the rental of heavy construction equipment;

(b) execution of construction contracts;

and (c) the purchase and resale of physical commodities used in infrastructure, (collectively, the “Infrastructure Business”).

Our second line of business (collectively, the “Plant and Cannabinoid Business”), stems from plant material and cannabinoids produced by the cannabis plant.

It involves several brands that the Company develops and expects to commercialize as alternative plant and cannabinoid-based therapies.

The Company’s flagship branded, patent pending, product is Hyalolex™.

In addition, the Company, under the brand name Holi Hemp™, sells hemp crude extract, hemp isolate, and hemp distillate.

(a) the execution of construction contracts, (b) the rental of heavy construction equipment, and (c) the purchase and resale of physical commodities used in infrastructure.

Our revenue in Fiscal 2020 was primarily derived from this business.

Information about our infrastructure products and service offerings is available at www.igcinc.us.

The Company’s Life Sciences segment, managed from the United States, involves:

a) the development of potential new drugs, subject to applicable regulatory approvals , b) several CBD-based products and brands, in various stages of development, for sale online and through stores, c) wholesale of hemp extracts including hemp crude extract and hemp isolate, among others, d) hemp growing and processing facilities, e) white labeling of hemp-based products and f) the offering of tolling services like extraction and distillation to hemp farmers.

In Fiscal 2020 we completed the development of several products building out our “house of brands” that we intend to market online and through retail stores.

We are enthusiastic about what we believe to be the immense potential of these unique concepts to address various segments of the exponentially growing cannabinoid wellness and lifestyle product market.

In Fiscal 2020, the Company generated $411 thousand revenue from its Life Sciences segment, however COVID-19 has forced the Company to delay the launch of some of the brands and products.

In Fiscal 2020 the Company in response to the COVID-19 pandemic adapted its manufacturing facilities and operations to include alcohol-based hand sanitizers which go on sale in Fiscal 2021.

The Company’s principal office in the U.S.

is in Potomac, Maryland, and the Company has a facility in Washington State and offices in Delhi and Kerala, India.

The Company’s fiscal is the 52 or 53-week period that ends on the last day of March.

The Company’s Fiscal 2019 consists of the 52 weeks ended on March 31, 2019.

Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in March and the associated quarters, months and periods of those fiscal years.

is in Potomac, Maryland, and the Company has a facility in Washington State and offices in Colombia, Hong Kong, and India.

As of March 31, 2020, the Company had the following direct operating subsidiaries:

Techni Bharathi Private Limited (TBL), IGCare LLC, Holi Hemp LLC, IGC Pharma LLC, SAN Holdings LLC, Sunday Seltzer, LLC and Colombia-based beneficially-owned subsidiary Hamsa Biochem SAS (Hamsa).

The Company’s fiscal year is the 52- or 53-week period that ends on March 31.

The Company is a Maryland corporation established in 2005.

The Company’s filings are available on www.sec.gov.

Business updates

In Fiscal 2019, we incorporated three wholly owned U.S.

based subsidiaries:

IGC Pharma LLC, that will own our intellectual property, conduct R&D, and conduct medical trials;

IGCare LLC, that will sell certain cannabinoid products;

and Holi Hemp LLC, that will wholesale and retail certain products such as hemp crude extract, hemp distillate, and hemp isolate, among others.

In Fiscal 2018, the Company incorporated one indirectly wholly-owned subsidiary in Hongkong – IGC Enterprises Limited.

On March 23, 2019, we sold our Malaysian subsidiary Cabaran Ultima and received back 80,000 shares of IGC common stock from the buyer of Cabaran.

There was no operating activity or gain and loss in the subsidiary in Fiscal 2019.

• The Company is executing a road building contract in Kerala, India valued initially at approximately $0.6 million.

Throughout Fiscal 2020, the Company worked on execution of the contract as well as sought approval for an expansion of the contract.

The total value of the contract was increased to approximately $1.1 million.

The Company estimates that it will take between 12 and 15 months to complete the work.

Work on this project has been temporarily suspended due to COVID-19.

We expect to re-start the project in second quarter of Fiscal 2021.

• The Company filed an INDA with the FDA for a double-blind, placebo-controlled, 100-person trial, for its proprietary patent pending formulation based on IGC-AD1 that uses ultra-low doses of tetrahydrocannabinol (“THC”) with other natural compounds intended to assist in the management of the care of patients suffering from Alzheimer’s disease.

• IGC filed a provisional patent, IGC 510, Compositions and Methods using CBD for treating stammering and symptoms of Tourette syndrome with the USPTO.

• The Company established an approximately $0.5 million facility in San Juan, Puerto Rico to house and conduct trials.

• As part of an out-reach and marketing campaign, we distributed samples of Hyalolex™ Drops of Clarity™, to dispensaries in Puerto Rico.

The formulation is currently available in about 51 dispensaries in Puerto Rico.

While this is a small market penetration, it allows us to collect data.

Based on feedback received from customers and dispensaries in Puerto Rico, the Company has expanded the scope of the Hyalolex™ formulation to potentially target other ailments, such as anxiety and sleep disorders, and has introduced a line of products including tinctures, among others.

These will all be branded under Hyalolex™, with the original formulation branded as Hyalolex™ Drops of Clarity™.

Post COVID-19 based stay-in-place restrictions we expect to manufacture and distribute these products initially in Puerto Rico and subsequently online and in other states.

• In Fiscal 2020 the Company in response to the COVID-19 pandemic adapted its manufacturing facility to include FDA-registered alcohol-based hand sanitizers, which go on sale in Fiscal 2021.

• The Company advanced its branding and product strategy with the development of several brands aimed at various sectors of the market.

The progress includes filing trademark applications and intent to use applications;

securing URLs;

creating product formulations, labelling, and packaging;

obtaining product insurance;

securing product development teams;

conducting focus groups;

performing quality and taste testing;

and organizing and registering limited liability companies to mitigate risk, among others.

• The Company grows hemp in Arizona.

The crop has passed inspection by the Arizona Department of Agriculture (“AZDA”) and has been certified as legal by AZDA.

However, the harvest is delayed due to of the difficulty in finding workers because of the social distancing rules brought on by COVID-19.

• We prepared our facilities in Washington for the dual purpose of manufacturing finished products as well as for extraction and distillation.

Most of our hemp processing and distillation equipment is sourced from China.

Currently, due to COVID-19 the commissioning and certification of the equipment is delayed as the technicians are unable to travel from China to the U.S.

• On February 15, 2020, the Company signed a Share Subscription Agreement (“SSA”) with Evolve I, to acquire 20% of Evolve I.

As of March 31, 2020, the Company has not completed its due diligence.

• In January 2020, the Company and the named defendant directors and officers executed a formal settlement agreement on specific final terms of settlement with the plaintiffs in all pending derivative lawsuits.

On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved.

On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits.

Please See Item 3 Legal Proceedings.

• IGC recently received notification that on March 24, 2020, the USPTO issued a method and composition patent (#10,596,159 B2) for the Company’s cannabinoid formulation for the treatment of cachexia and eating disorders in humans and veterinary animals.

IGC filed this application for its IGC-504 formulation (#15/751,901) on August 11, 2016.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

a) Principles of consolidation

The consolidated financial statements include the accounts of the Company and all of its subsidiaries.

The consolidated financial statements include the accounts of the Company and all its subsidiaries.

Intercompany accounts and transactions have been eliminated.

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Transactions between the Company and its subsidiaries are eliminated in the consolidated financial statements.

b ) Reclassifications

Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

Certain aged receivables and certain deposits and advances in the amount of approximately $644 thousand have been reclassified to non-current assets from current assets.

In Fiscal 2019, a Note Payable in the amount of $1.8 Million has been paid off.

Please see “Note 10 – Loans and Other Liabilities”, in our Notes to Consolidated Financial Statements contained herein for more information.

c ) Use of estimates

b ) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

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Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

d ) Revenue recognition

c ) Revenue recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”).

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Recognize revenue when or as the performing party satisfies performance obligations.

The consideration/price for the transaction (performance obligation(s)) is determined as per the agreement or invoice (contract) for the services and products in the Infrastructure Business and Plant and Cannabinoid Business.

Revenue in the Infrastructure Business is recognized for the renting and contracting business once the obligation as per the agreement has been completed by the company.

The revenue from the purchase and resale of physical infrastructure commodities is recognized once the bill of lading along with the invoice have been transferred to the customer.

In the Plant and Cannabinoid Business, the revenue from the cannabinoid-based products is recognized in Holi Hemp once goods have been sold to the customer and the performance obligation has been completed.

While in IGCare, we license our products to processors.

The revenue from the cannabinoid-based products and therapies is recognized once goods have been sold to the customer by the outlets and the performance obligation is completed as per the agreement.

Net sales disaggregated by significant products and services for Fiscal 2019 and Fiscal 2018 were as follows (in thousands):

Year Ended March 31,

Infrastructure Business

Rental income (1)

Construction contracts (2)

Purchase and resale of physical commodities (3)

Plant and Cannabinoid Business

Cannabinoid products and therapies (4)

Rental income consists of income from rental of heavy construction equipment like bulldozers, excavators, rollers and pavers, among others.

Relates to the income from execution of construction contracts.

Relates to the income from purchase and resale of physical commodities used in infrastructure, like steel, marble and tiles.

Relates to the revenue from plant and cannabinoid-based products and therapies such as hemp crude extract, hemp isolate, and hemp distillate.

There was no revenue from Hyalolex™ in Fiscal 2019.

During Fiscal 2019 and 2018, the Company had approximately $5,091 thousand and $2,193 thousand of revenue respectively in Infrastructure Business.

During Fiscal 2019, the Company reported $25 thousand in revenue from the Plant and Cannabinoid Business.

e ) Basic and diluted loss per share

Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding.

Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.

The weighted average number of shares outstanding for Fiscal 2019 and Fiscal 2018 used for the computation of basic EPS is 35,393,407 and 27,937,287 shares, respectively.

Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method).

The computation of basic loss per share for the year ended March 31, 2019 excludes potentially dilutive securities of 3.3 million shares underlying common stock, warrants and options, because their inclusion would be antidilutive.

As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.

Refer to Note 19 - “Revenue Recognition”.

d ) Cost of Sales

Our cost of sales includes costs associated with in-house and outsourced distribution, labor expense, components, manufacturing overhead, and outbound freight for our products division.

In our products division, cost of sales also includes the cost of refurbishing, if required, on products returned by customers that will be offered for resale and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value.

These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value.

( e ) Earnings/(Loss) per Share

The computation of basic loss per share for Fiscal 2020, excludes potentially dilutive securities of about 5 million shares which includes share options, unvested shares such as restricted shares and restricted share units, granted to employees and advisors, warrants, and shares from the conversion of outstanding units, shares to be issued to Evolve I pursuant to the Share Subscription Agreement, if any, because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for Fiscal 2020 and 2019, used for the computation of basic earnings per share (“EPS”) is 39,490,014 and 35,393,407, respectively.

Due to the loss incurred during Fiscal 2020 and 2019, all the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.

f ) Income taxes

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g) Accounts receivable

Accounts receivable represents amounts owed from customers in the Infrastructure Business.

The Company estimates reserves for bad debts based on general aging, experience and past-due status of the accounts.

The allowance for doubtful accounts is determined by evaluating the relative credit worthiness of each client, historical collections experience and other information, including the aging of the receivables.

We make estimates of the collectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness, and current economic trends.

If the financial condition of a customer deteriorates, additional allowances may be required.

We had $133 thousand of accounts receivable, net of provision, for doubtful debt of $9 thousand as of March 31, 2020 as compared to $84 thousand, net of provision, for doubtful debt of $6 thousand as of March 31, 2019.

h) Cash and cash equivalents

For financial statement purposes, the Company considers all highly liquid debt instruments with maturity of three months or less, to be cash equivalents.

The Company maintains its cash in bank accounts in the U.S., India, and Hong Kong, which at times may exceed applicable insurance limits.

The cash in foreign subsidiaries as on March 31, 2019 and 2018, was approximately $284 thousand and $30 thousand, respectively.

The Company maintains its cash in bank accounts in the U.S., India, Colombia, and Hong Kong, which at times may exceed applicable insurance limits.

The cash and cash equivalents in the Company on March 31, 2020 and 2019, was approximately $7,258 thousand and $25,610 thousand, respectively.

i) Short-term and long-term investments

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Certificates of deposit and commercial paper are carried at cost which approximates fair value.

We classify our marketable securities as available-for-sale in accordance with FASB ASC Topic 320, “Investments — Debt and Equity Securities”.

Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders’ equity, net of related tax effects.

Other Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs.

The Company’s equity in the earnings/(losses) of affiliates is included in the statement of income and the Company’s share of net assets of affiliates is included in the balance sheet.

Where the Company’s ownership interest is in excess of 25% and the Company enjoys significant interest, the Company has accounted for the investment based on the equity method.

In Fiscal 2019 and 2018, the Company concluded that it does not have significant influence over Midtown Partner LLC (MTP).

Therefore, the Company did not recognize any changes in MTP’s earnings/(losses).

The investment is valued at the same value as in Fiscal 2017.

Available-for-sale securities:

Investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position.

Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except as indicated in the following sentence.

All or a portion of the unrealized holding gain and loss of an available-for sale security that is designated as being hedged in a fair value hedge shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 35-4.

Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs.

Where the Company’s ownership interest is in excess of 20% and the Company enjoys significant interest, the Company has accounted for the investment based on the equity method in accordance with ASC 323, “Investments – Equity method and Joint Ventures”.

Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and its share of post-acquisition movements in accumulated other comprehensive income (loss) is recognized in other comprehensive income (loss).

Where the Company does not have significant influence, the Company has accounted for the investment in accordance with ASC Topic 321 “Investments-Equity Securities”.

j) Property, plant and equipment (PP&E)

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The carrying amounts of the Company’s financial instrument includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values due to the nature of the items.

As of March 31, 2019, the Company’s investments are Level 3 instruments.

Financial instruments are classified as current if they are expected to be liquidated within the next twelve months.

For further information refer Note 7 – Investments in Unlisted Securities.

Please refer to Note -16 “Fair value of financial instruments”, for further information.

l) Concentration of credit risk and significant customers

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Equity awards issued to non-employees are recorded at their fair value on the grant date as they are immediately exercisable and not forfeitable on the date of grant.

The adoption of this guidance had approximately a $30 thousand impact on our Consolidated Financial Statements.

n) Commitments and contingencies

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Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.

p) Inventor y

Inventory, consisting of products available for sale, are primarily accounted for using the first-in first-out method, and are valued at the lower of cost or market, the term market means current replacement cost, provided that it meets both the following conditions:

a) market shall not exceed the net realizable value, and b) market shall not be less than net realizable value reduced by an allowance for an approximately normal profit margin.

This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.

These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future.

q ) Cyber s ecurity

p) Change in inventory valuation method

On April 1, 2019, the Company changed its methodology for the valuation of inventory from first-in-first-out to weighted average cost method.

The newly adopted accounting principle is preferable because the weighted average cost method of accounting for all inventories will improve financial reporting by better matching revenues and expenses and better reflecting the current value of inventory.

The change did not impact the financial statements for the prior years.

Inventory is valued at the lower of cost or net realizable value, net realizable value defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Inventory consists of raw materials, finished goods and work-in-progress such as extracted crude oil, CBD isolate, growing crops, crude oil, herbal oils, among others.

Work-in-progress also includes product manufacturing in process, costs of growing hemp, in accordance with applicable laws and regulations including but not limited to labor, utilities, fertilizers and irrigation.

Inventory is primarily accounted for using the weighted average cost method.

Primary costs include raw materials, packaging, direct labor, overhead, shipping and the depreciation of manufacturing equipment.

Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Harvested crops are measured at net realizable value, with changes recognized in profit or loss only when the harvested crop:

- has a reliable, readily determinable, and realizable market value;

- has relatively insignificant and predictable costs of disposal;

- is available for immediate delivery.

The Company believes its harvested crops does not have a readily available market.

Hence, the Company values its harvested crops at cost.

r ) Cybersecurity

We have a cybersecurity policy in place and tighter cybersecurity measures to safeguard against hackers.

In Fiscal 2020, there were no impactful breaches in cybersecurity.

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

The Company evaluates its financial instruments, including equity-linked financial instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

s) Research and Development Expenses

During Fiscal 2019 and Fiscal 2018, the Company recorded research and development expense of approximately $1,256 thousand and $137 thousand respectively.

During Fiscal 2020 and 2019, the Company recorded research and development expenses of approximately $1 million and $1.3 million, respectively.

All research and development costs are expensed in the period in which they are incurred.

t ) Recently issued and adopted accounting pronouncements

Goodwill represents the excess cost of an acquisition over the fair value of our share of net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill on acquisition of subsidiaries would be disclosed separately.

Goodwill is stated at cost less impairment losses incurred, if any.

As of March 31, 2020, there was no Goodwill.

Lessor Accounting

For lessors, however, the accounting remains largely unchanged from the current model, changes have been made to align certain lessor and lessee accounting guidance and the key aspects of the lessor accounting model with new revenue recognition standard.

Under the new guidance, contract consideration will be allocated to its lease components and non-lease components (such as maintenance).

For the Company as a lessor, any non-lease components will be accounted for under ASC Topic 606, Revenue from Contracts with Customers, unless the Company elects a lessor practical expedient to not separate the non-lease components from the associated lease component.

The amendments in ASU 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (“Topic 606”).

To elect the practical expedient, the timing and pattern of transfer of the lease and non-lease components must be the same and the lease component must meet the criteria to be classified as an operating lease if accounted for separately.

If these criteria are met, the single component will be accounted for under either Topic 842 or Topic 606 depending on which component(s) are predominant.

The lessor practical expedient to not separate non-lease components from the associated component must be elected for all existing and new leases.

As lessor, the Company expects that post-adoption substantially all existing leases will have no change in the timing of revenue recognition until their expiration or termination.

The Company expects to elect the lessor practical expedient to not separate non-lease components such as maintenance from the associated lease for all existing and new leases and to account for the combined component as a single lease component.

The timing of revenue recognition is expected to be the same for the majority of the Company’s new leases as compared to similar existing leases;

however, certain categories of new leases could have different revenue recognition patterns as compared to similar existing leases.

For leases that are accounted for as operating leases, income is recognized on a straight-line basis over the term of the lease contract.

Generally, when a lease is more than 180 days delinquent (where more than three monthly payments are owed), the lease is classified as being on nonaccrual and the Company stops recognizing leasing income on that date.

Payments received on leases in nonaccrual status generally reduce the lease receivable.

Leases on nonaccrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full.

Lessee Accounting

The Company adopted ASU 2016-02 effective April 1, 2019 using the modified retrospective approach.

The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

In connection with the adoption, the Company will elect to utilize the modified retrospective presentation whereby the Company will continue to present prior period financial statements and disclosures under ASC 840.

In addition, the Company will elect the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs.

Further, the Company will adopt a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e.

leases with terms of 12 months or less).

and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets.

Under ASU 2016-02 (Topic 842), lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date:

(i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;

and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease.

The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received.

All right-of-use assets are reviewed for impairment.

There was no impairment for right-of-use lease assets as of March 31, 2020.

The Company categorizes leases at their inception as either operating or finance leases.

On certain lease agreements, the Company may receive rent holidays and other incentives.

The Company recognizes lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments.

v) Recently issued and adopted accounting pronouncements

Changes to U.S.

2 unchanged sentences

Newly issued ASUs not listed below are expected to have no impact on the Company’s consolidated financial position and results of operations, because either the ASU is not applicable, or the impact is expected to be immaterial.

Business Combination:

In January 2017, the FASB issued ASU No.

2017-01, Business Combination (Topic 805).

ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

The new amendments in this Update is effective from annual periods beginning after December 15, 2017, including interim periods within those periods.

The adoption of this guidance did not have a material impact on our Consolidated Financial Statements.

Reporting Comprehensive Income:

In February 2018, the FASB issued ASU No.

2018-02, Income Statement-Reporting Comprehensive Income (Topic 220).

ASU 2018-02 addresses the effect of the change in the U.S.

federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017.

The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted.

The adoption of this guidance did not have a material impact on our Consolidated Financial Statements.

Stock-Based Compensation :

In June 2018, the FASB issued ASU No.

2018-07, an authoritative guidance regarding Compensation - Stock Compensation, which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees.

The standard will be effective for the Company for its fiscal beginning April 1, 2019, including interim periods within that fiscal, with early adoption permitted.

This guidance was adopted early in first quarter of fiscal beginning April 2018.

The adoption of this guidance had approximately $30 thousand impact on our Consolidated Financial Statements.

Not yet adopted

Credit Losses:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial instruments.

The amendments in this update change how companies measure and recognize credit impairment for many financial assets.

The amendment is effective from December 15, 2019.

The Company is evaluating the impact of this update.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements.

The amendment is effective from December 15, 2019.

The Company is evaluating the impact of this update.

D isclosures:

In August 2018, the FASB issued ASU 2018-13.

3 unchanged sentences

The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements

Collaborative Arrangement :

Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606.

The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

Intangibles-Goodwill and Other-Internal-Use Software :

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

ASU 2018-15 (Subtopic 350-40) aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

Credit Losses:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial instruments.

The amendments in this update change how companies measure and recognize credit impairment for many financial assets.

The amendment is effective for fiscal years beginning after January 2023.

The Company is evaluating the impact of this update.

NOTE 3 – INVENTOR Y

On April 1, 2019, the Company changed its methodology for the valuation of inventory from first-in-first-out to weighted average cost method.

The change did not impact the financial statements for the prior years.

(in thousands)

As of March 31,

Fiscal 2019 inventory consists of hemp crude oil and hemp distillate, whereas Fiscal 2018 inventory consisted of Hyalolex™ and its components.

The 2018 Farm Bill that legalized hemp created an opportunity to reformulate some of our formulations to comply with the 2018 Farm Bill by keeping THC below 0.3% by dry weight.

Management decided to repurpose the formulation of Hyalolex™ and its components for other products as well as for reformulating Hyalolex™ and therefore expensed the inventory as R&D in Fiscal 2019.

March 31, 2020

March 31, 2019

Raw Materials

Work-in-Progress

Finished Goods

Inventory in the form of work-in-progress as of March 31, 2020, is comprised of, but not limited to, various hemp-based extracts such as, crude oil, hemp distillate, and hemp isolate.

The Company accounts all hemp extracts as work-in-progress until they are in the processing facility.

Inventory also includes cost related to growing crops like seeds, fertilizer, other raw materials, labor, farm related overhead and the depreciation of farming equipment, among others.

NOTE 4 – DEPOSITS AND ADVANCES

(in thousands)

As of March 31,

Advance to suppliers and consultants

March 31, 2020

March 31, 2019

Advances to suppliers and consultants

Other advances

Advances for Property, Plant and Equipment

Statutory advances

Other current assets

Prepaid expense and other current assets

The Advances to suppliers and consultants primarily relate to retainers given to attorneys and advance to suppliers in our infrastructure business.

Advances for Property, Plant and Equipment include advance paid for equipment for processing facility in the State of Washington.

NOTE 5 – INTANGIBLE ASSETS

Amortized intangible assets

(in thousands)

As of March 31,

Patent & other intangible assets at the beginning of the period

Patent acquisition and filing expenses for 12 months (Net)

The value of intangibles include the acquisition of patent rights, data, and the filing of patents.

The amortization of acquired patent rights is 13 years from Fiscal 2020.

There was no amortization of intangible assets during Fiscal 2019 and Fiscal 2018.

On November 6, 2018, the Company received notification from the USPTO of the patent issuance (#10,117,891) for its cannabinoid method and composition for the treatment of neuropathic pain in patients with Psoriatic Arthritis, Fibromyalgia, Scleroderma and other conditions.

The formulation consists of micro-doses of the cannabinoids THC and CBD as well as other ingredients.

The formulation for relieving pain is expected to be marketed under the brand Natrinol™.

On October 12, 2018 the Company filed a provisional patent with the USPTO for a CBD-infused energy drink titled “Method and Composition for Relieving Fatigue and Restoring Energy”.

On September 25, 2018, IGC executed a Strategic Distributor and Partnership Agreement for products, including a sugar-free energy drink called “Nitro G,” in exchange for 797,000 restricted, unregistered shares of common stock valued approximately $1.34 million accounted as Intangible assets in second quarter of Fiscal 2019.

Due to the U.S.

Food & Drug Administration’s current general prohibition on the distribution of CBD-infused drinks, among others, the Company, in the fourth quarter of Fiscal 2019, elected to terminate the Strategic Distributor & Partnership Agreement.

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following:

March 31, 2020

March 31, 2019

Other intangibles

Total amortized intangible assets

Unamortized intangible assets

Total unamortized intangible assets

Total Intangible assets

The value of intangible assets includes the cost of acquiring patent rights, supporting data, and the expense associated with filing 10 patents and 26 trademarks.

It also includes acquisition costs related to brands and domains.

The amortization of patent and patent rights is up to 20 years, commencing from the date of grant.

The amortization of website/domains is up to 10 years.

Trademarks and other patents that have not been granted have not been amortized.

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets.

The Company regularly reviews its Intangible assets to determine if any intangible asset is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period and concluded that, as of March 31, 2020, there was no impairment.

Estimated amortization expense

(in thousands)

As of March 31,

For the year ended 2021

For the year ended 2022

For the year ended 2023

For the year ended 2024

For the year ended 2025

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

(in thousands, except useful life)

Useful Life (years)

March 31, 2020

March 31, 2019

Buildings & facilities

3 unchanged sentences

Furniture and fixtures

Facility under construction

Construction in progress

Total Gross Value

Accumulated depreciation

Total Net PP&E

Depreciation expense for Fiscal 2019 and Fiscal 2018 were approximately $59 thousand and $19 thousand, respectively.

Capital work-in-progress represents advances paid towards the acquisition of property and equipment and the cost of property and equipment not used before the balance sheet date.

NOTE 7 – INVESTMENTS IN UNLISTED SECURITIES

Investments – others for each of the years ended March 31, 2019 and 2018 consist of the following:

Total Property, plant and equipment, net

Depreciation expense in Fiscal 2020 and 2019, amounted to approximately $134 thousand and $59 thousand, respectively.

The net increase in total Property, Plant & Equipment is primarily due to the purchase of an office building, a facility for clinical trials in Puerto Rico, and set-up of hemp cultivation, product manufacturing, processing and packaging facilities, in the U.S.

subsidiaries during Fiscal 2020.

The net decrease in land and accumulated depreciation is primarily due to foreign exchange translations as a result of a decline in value of Indian Rupee.

The construction is progress relates to the Washington facility under construction.

For more information, please refer to Note 20 – Segment Information for the non-current assets other than financial instruments held in the country of domicile and foreign countries.

NOTE 7 – INVESTMENTS IN NON-MARKETABLE SECURITIES

(in thousands)

As of March 31,

Investment in equity shares of unlisted company (i)

Investment in affiliate (ii)

The movement between the two reporting periods is based on the sale at cost of 1.34% of the investment in the amount of $5 thousand to a director of our subsidiary and fluctuations in the exchange rate.

The investment is recorded at cost.

Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued Apogee 1,200 thousand shares of IGC’s common stock valued at $888 thousand for the purchase of a 24.9% ownership interest in Midtown Partners & Co., LLC (MTP).

March 31, 2020

March 31, 2019

Investment in equity shares of unlisted company

Investment in MTP (i)

Pursuant to the December 18, 2014 Purchase Agreement with Apogee, we issued Apogee 1.2 million shares of IGC’s common stock valued at $888 thousand for the purchase of a 24.9% ownership interest in Midtown Partners & Co., LLC (“MTP”).

During Fiscal 2018, after considering several factors, the Company concluded that it no longer had significant influence over MTP.

Hence, we did not record any impact of MTP’s earnings/(losses) and instead we maintained the same value as of March 31, 2017 or (approximately $773 thousand).

Hence, we do not record any impact from MTP’s earnings/(losses) and instead we maintain the same value of approximately $773 thousand since Fiscal 2017.

In the last quarter of Fiscal 2020 Midtown Partners LLC became noncompliant with FINRA.

Based on this and the Company impaired its investment in MTP.

The Company regularly reviews its investment portfolio to determine if any security is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period.

We concluded that, as at March 31, 2019, no impairment provision was required against the carrying value of the investments.

NOTE 8 – CLAIMS AND ADVANCES

(in thousands)

As of March 31,

March 31, 2020

March 31, 2019

Claims receivable (1)

Non-current deposits

Other advances (2)

The claims receivables are due from the Cochin International Airport.

Cochin International Airport is partially owned by the State Government of Kerala.

The receivables have been due for periods in excess of one year as of March 31, 2019.

The Company continues to carry the full value of the receivables without interest and without any impairment, because it believes that there is minimal risk that this organization will become insolvent and unable to make payment.

From the Company’s past experience, Company believes it will be difficult to receive the amount in next 12 months due to time taken by legal proceedings and the option to appeal in higher jurisdiction.

Non-current advances (2)

The claims receivable is due from the Cochin International Airport (“CIA”) that is partially owned by the State Government of Kerala.

As of March 31, 2020, the receivable is due for over one year.

The Company continues to carry the full value of the receivables without interest and without any impairment, because it believes that there is minimal risk that CIA will become insolvent and unable to make the payment.

While the Company has initiated collection proceedings, it believes it will be difficult to receive the amount in the next 12 months because of the time required for legal collection proceedings.

The decrease in claims receivable was mainly due to foreign exchange translation as a result of a decline in value of Indian Rupee.

Includes a loan of $200 thousand, to one of our manufacturers, for the purchase of equipment, at an annual interest rate of three percent (3%), due on April 1, 2021.

On May 21, 2012, TBL entered into an agreement with Weave & Weave for the purchase of land valued at approximately $578 thousand.

TBL gave Weave and Weave an advance of approximately $354 thousand.

We believe the amount is unrecoverable and hence a provision has been created in Fiscal 2019.

The decrease is due to a provision for advances of $240 thousand in Fiscal 2020.

NOTE 9 – LEASES

The Company has short-term leases primarily consisting of spaces with the remaining lease term being less than or equal to 12 months.

The total short- term lease expense and cash paid for Fiscal 2020 and 2019 are approximately $206 thousand and $135 thousand, respectively.

The Company also has an operating lease as on March 31, 2020.

In November 2019, the Company entered into an office lease agreement with lease a term of less than 12 months.

This lease was amended in March 2020, with a new lease term from March 1, 2020 to November 30, 2025.

The annual lease expense is approximately $123 thousand.

The lease contract does not contain any material residual value guarantees or material restrictive covenants.

The weighted average remaining lease term for the operating lease is 5.67 year and discount rate of 7%.

The lease does not provide a readily determinable implicit rate.

Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.

(in thousands)

March 31, 2020

Operating lease costs

Short term lease costs

Variable lease costs

Total lease costs

Right of use assets and lease liabilities for our operating leases were recorded in the consolidated balance sheet as follows:

(in thousands)

March 31, 2020

Operating lease asset

Total lease assets

Current liabilities:

Accrued liabilities and others (current portion – operating lease liability)

Noncurrent liabilities:

Operating lease liability (non-current portion – operating lease liability)

Total lease liability

Supplemental cash flow and non-cash information related to leases is as follows:

(in thousands)

March 31, 2020

Cash paid for amounts included in the measurement of lease liabilities

– Operating cash flows from operating leases

Right-of-use assets obtained in exchange for operating lease obligations

As of March 31, 2020, the following table summarizes the maturity of our lease liabilities:

Present value discount

Total Lease liabilities

NOTE 10 – ACCRUED LIABILITIES AND OTHERS

Accrued expenses consist of the following:

(in thousands)

As of March 31,

Statutory payables

March 31, 2020

March 31, 2019

Salaries and other contribution

1 unchanged sentence

Other current liability

Salaries and other contribution related liabilities consist of unpaid salary payable to employees.

Provision for Expenses include provisions for the March quarter for legal, professional, and marketing expenses.

NOTE 1 0 – LOANS AND OTHER LIABILIT IES

Secured l oans:

Since October 16, 2009, the Company had a note with Bricoleur Partners, L.P.

(Bricoleur) in the amount of $2 million.

On December 10, 2010, the Company repaid $200 thousand towards the principal amount, rendering the balance to $1.8 million.

In Fiscal 2019, the Company issued 30,000 shares to Bricoleur, valued at $18 thousand, which was expensed.

On December 27, 2018, the Company entered into a Settlement Agreement and Mutual Release with Bricoleur to settle the outstanding note for $1.5 million.

The gain from the settlement in the amount of $300 thousand is recognized as Other Income.

Salaries and other contribution related liabilities consist of accrued salaries to employees.

Provision for expenses include provision for legal, professional, and marketing expenses, including a provision of $200 thousand for the lawsuit as discussed in Note 12, Commitments and contingencies.

Other current liability also includes $89 thousand of current operating lease liability in Fiscal 2020 and statutory payables of approximately $27 thousand and $4 thousand as of March 31, 2020 and 2019, respectively.

NOTE 1 1 – LOANS AND OTHER LIABILITIES

Short-term loan:

Please refer to Note 13 for information about Related Party Transactions.

As of March 31, 2020, the Company had one secured loan of $50 thousand, at an annual interest rate of 15%.

Other Liability:

6 unchanged sentences

Such matters are subject to many uncertainties, and outcomes are not predictable with assurance.

There are no such matters that are deemed material to the consolidated financial statements as of March 31, 2019.

As of March 31, 2019, several law firms had filed shareholder lawsuits, including two derivative suits, citing the NYSE American delisting proceedings and subsequent fall in share price.

See Item 3, Legal Proceedings of this report for further information.

The Company intends to vigorously defend against these actions.

However, the exact amount of liability, if any, arising from such lawsuits cannot be determined at this stage.

No provision has been made in the consolidated financial statements as of March 31, 2019.

In the U.S., we provide health insurance, life insurance, and a 401(k) plan wherein the Company matches up to 6% of the employee’s pretax contribution up to a maximum annual amount determined by the IRS.

There are no such matters that are deemed material to the consolidated financial statements as of March 31, 2020, except as disclosed below.

As of March 31, 2020, several law firms have filed shareholder lawsuits, including three derivative suits (two of which have been consolidated), citing, among other things, the NYSE American delisting proceedings initiated in October 2018 (and overturned in February 2019) and subsequent fall in share price.

During the quarter ended September 30, 2019, the Company reached a preliminary agreement to resolve all derivative suits, subject to agreement on specific final terms of settlement and approval by the court.

In January 2020, the Company and the named defendant directors and officers reached agreement with the plaintiffs in all pending derivative lawsuits on specific final terms of settlement, and all parties executed a mutually acceptable settlement agreement.

Pursuant to the settlement agreement, which was filed with the Court as an exhibit to an Amended Consent Motion for Preliminary Approval of Derivative Settlement on April 30, 2020, the Company will adopt certain corporate governance modifications, and the derivative plaintiffs will receive $200,000.00 from the Company’s insurer to cover their attorneys’ fees and a nominal service award.

The Company has created a provision for $200,000 as of March 31, 2020.

On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved.

On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits.

For the current state of the consolidated Shareholder Class Action Litigation, please refer to Note 21 - Subsequent Events.

In the U.S., we provide health insurance, life insurance, and a 401(k) plan wherein the Company matches up to 6% of the employee’s pre-tax contribution up to a maximum annual amount determined by the IRS.

In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (“Gratuity Plan”) covering certain categories of employees.

2 unchanged sentences

The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary.

The contribution is made to the Government’s provident fund.

The Company has entered into indemnification agreements with its directors and executive officers.

Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers of the Company, and to advance expenses incurred by such individuals in connection with related legal proceedings.

It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim.

While the Company maintains directors and officer’s liability insurance coverage, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.

The contribution is made to the Indian Government’s provident fund.

NOTE 1 3 – SECURITIES

Company’s securities and listings

As of March 31, 2020, the Company was authorized to issue up to 150,000,000 shares of common stock, par value $0.0001, and 39,320,116 shares of common stock were issued and outstanding.

The Company is also authorized to issue of up to 1,000,000 shares of preferred stock, par value $0.0001 per share.

The Company has 11,672,178 outstanding public warrants (IGC:

IW) to purchase 1,167,217 shares of common stock by surrendering 10 warrants and a payment of $5.00 in exchange for each share of common stock.

We have 91,472 units outstanding that can be separated into common stock and warrants.

We have one security listed on the NYSE American:

common stock, $.0001 par value (ticker symbol:

This security is also available for trading on the Frankfurt, Stuttgart, and Berlin stock exchanges (ticker symbol:

This security also trades on the Frankfurt, Stuttgart, and Berlin stock exchanges (ticker symbol:

We have redeemable warrants quoted on the OTC markets (ticker symbol:

IGC.IW, CUSIP number 45408X118 expiring on March 8, 2021) to purchase common stock.

As of March 31, 2019, the Company was authorized to issue up to 150,000,000 shares of common stock, par value $0.0001, and has 91,472 units and 39,501,407 shares of common stock issued and outstanding.

The Company has 11,672,178 outstanding public warrants (IGC:

IW) to purchase 1,167,217 shares of common stock by surrendering 10 warrants and a payment of $5.00 in exchange for each share of common stock.

We have 91,472 units outstanding that can be separated into common stock and warrants.

The units are not listed on an exchange.

Ten units may be separated into one share of common stock and 20 warrants (IGC:

The unit holders are requested to contact the Company or our transfer agent Continental Stock Transfer & Trust to separate their units into common stock and warrants.

Securities update

Private placement and public offering

a) In Fiscal 2019, the Company completed a public offering of 5,898,656 shares listed on the NYSE American.

The net proceeds from this transaction after underwriting discounts and commissions were approximately $28.5 million.

b) In October 2018, the Company issued 869,565 shares amounting to approximately $1 million pursuant to a private placement.

Business Operations

a) During Fiscal 2019, the Company issued 107,133 shares of fully vested common stock pursuant to marketing agreements with service providers which were valued at approximately $52 thousand that were expensed and included in general & administrative expenses.

b) On March 23, 2019, we sold our Malaysian subsidiary Cabaran Ultima and received back 80,000 shares of IGC common stock from the buyer of Cabaran.

There was no operating activity or gain and loss in the subsidiary in Fiscal 2019.

c) During Fiscal 2019, the Company issued 80,000 shares to a former affiliated individual as part of a settlement agreement.

d) Options valued at $178 thousand to purchase 490,000 shares were exercised by our advisors.

IW) which effectively allows the holder to exercise the warrants into two shares of common stock.

NOTE 1 4 – RELATED PARTY TRANSACTIONS

We pay an affiliate of our CEO $4.5 thousand per month for office space and certain general and administrative services rendered in Maryland.

In addition, we pay another affiliate of our CEO $6.1 thousand per month for office and facilities in Washington State.

During Fiscal 2019, the total rent paid to the affiliates were approximately $54 thousand for the office space (and administrative services) in Maryland, and $73 thousand for the facilities in Washington State.

We expect that these expenses will remain at approximately this level during Fiscal 2020.

The Company’s total cash interest expense for Fiscal 2019 and Fiscal 2018 were approximately $14 thousand and $31 thousand respectively.

As of March 31, 2019, the Company had one secured loan of $50 thousand due from related party at an annual interest rate of 15%.

The assets of the Company secure the loan.

During the year, the Company repaid $377 thousand in loans from related parties.

We pay an affiliate of our CEO $4,500 per month for office space and certain general and administrative services, provided in Maryland, and $6,100 per month for facilities and services provided in the State of Washington.

The payment for the facilities and services provided in the State of Washington ended on December 31, 2019.

NOTE 1 5 – STOCK-BASED COMPENSATION

As of March 31, 2019, under the combined 2008 Omnibus Incentive Plan and the renewed 2018 Omnibus Incentive Plan, approximately 2.1 million shares of common stock have been awarded.

Under the combined 2008 Omnibus Incentive Plan and the renewed 2018 Omnibus Incentive Plan, as of April 1, 2019, a total of 6,372,127 shares of common stock have been awarded, and there are no shares of common stock available for future grants of options or stock awards.

In Fiscal 2019 and Fiscal 2018, we gave our advisors options to purchase 110,000 and 490,000 shares respectively.

During Fiscal 2020, no stock options were granted under 2018 Omnibus Incentive Plan (“2018 ESOP Plan”).

During Fiscal 2020, 252 thousand restricted share units, vesting over three years, were granted as inducement shares to employees.

These inducement shares are not part of 2018 ESOP Plan.

On February 25, 2020, the Company filed a Registration Statement on Form S-8 which registered 4 million shares of common stock $0.0001 par value of the Company issuable pursuant to the 2018 ESOP Plan, along with 2 million shares as a special grant of common stock to be issued, from time to time and at the Company’s Board of Directors’ discretion, to current and new directors, officers, employees, and advisors, as approved by the Company’s shareholders on January 7, 2020.

The Company has granted 1,610 thousand restricted stock and restricted stock units from the special grant fair valued at $521 thousand vesting between Fiscal 2021 and 2022.

As of March 31, 2020, under both the Company’s previous 2008 and current 2018 Omnibus Incentive Plans:

a total of 6,432,127 shares of common stock have been issued to employees and advisors;

1.7 million restricted share units fair valued at $621 thousand with a weighted average value of $0.37 per share, have been granted;

along with options held by Advisors to purchase 160 thousand shares of common stock fair valued at $65 thousand, that have been granted but are to be issued over a vesting period, between Fiscal 2020 and Fiscal 2024.

The options are fair valued using a Black-Scholes Pricing Model with the following assumptions:

6 unchanged sentences

Expected dividend yield

The amount recognized in the additional paid up capital with respect to our stock-based compensation plans and option-based compensation were as follows:

Stock-based compensation

The expense associated with share-based payments to employees, directors, advisors, and contractors is allocated over the vesting or service period and recognized in the general and administrative expenses (including research and development).

For Fiscal 2020, the Company’s share-based expense and option-based expense shown in general and administrative expenses and (including research and development) were $747 thousand and $23 thousand, respectively.

For Fiscal 2019, the share-based expense and option-based expense for employees and advisors were $515 thousand and $59 thousand, respectively, of which $515 thousand share-based expense and $48 thousand option-based expense related to general and administrative expenses (including research and development).

(in thousands)

Year ended March 31

Cost of sales

General and administrative (including research and development)

Total stock-based compensation to employees

Option-based compensation

Cost of sales

General and administrative (including research and development)

Intangible assets

Total option-based compensation to advisors & contractors

The cost associated with stock compensation to employees is allocated over the vesting period.

Over the next fiscal year we expect to recognize a total of $667 thousand and $101 thousand of stock-based compensation and option-based compensation, respectively.

Summary of Options

Number of options for Fiscal 2019

Non-vested shares

Weighted average grant date fair value

Non-vested shares as on March 31, 2019

Cancelled/Forfeited

Non-vested shares as on March 31, 2020

(in thousands)

Number of options for Fiscal 2018

Weighted average grant date fair value

Weighted average exercise price

Options outstanding as on March 31, 2019

Cancelled/Forfeited

Options outstanding as on March 31, 2020

There was combined unrecognized expense of $671 thousand related to non-vested shares and share options that the Company expects to be recognized over weighted average life of 1.32 years.

NOTE 1 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS

As of March 31, 2020, the Company’s marketable securities consist of liquid funds, which have been classified as Level 1 of the fair value hierarchy because they have been valued using quoted prices in active markets.

The increase in value of marketable securities is comprised of re-invested income of approximately $86 thousand and approximately $4 thousand unrealized gain during Fiscal 2020.

The Company’s cash and cash equivalents have also been classified as Level 1 on the same principle.

Financial instruments are classified as current if they are expected to be liquidated within the next twelve months.

The Company’s remaining investments have been classified as Level 3 instruments as there is little or no market data.

Level 3 investments are valued using cost-method.

For further information refer Note 7 – Investments in Non-Marketable Securities.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2020 and 2019, and indicates the fair value hierarchy of the valuation techniques the Company used to determine such fair value:

(in thousands)

Opening balance

Option granted during the period

Option exercised during the period

Closing balance

March 31, 2020

Cash and cash equivalents:

Total cash and cash equivalents

-Marketable securities

-Non-marketable securities

Total Investments

March 31, 2019

Cash and cash equivalents:

Total cash and cash equivalents

-Marketable securities

-Non-marketable securities

Total Investment

NOTE 1 7 – EMPLOYEE BENEFITS

4 unchanged sentences

Projected Benefit Obligation (PBO) at the beginning of the year

Foreign exchange adjustment

interest cost

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NOTE 1 8 – INCOME TAXES

The Company calculates its provision for foreign, U.S.

federal and state income taxes based on current tax law.

The Tax Cuts and Jobs Act (tax reform) was enacted on December 22, 2017 (“Enactment Date”), and has several key provisions impacting accounting for and reporting of income taxes.

The most significant provision reduces the U.S.

corporate statutory tax rate from 35% to 21% beginning on January 1, 2018.

The Company calculates its provision for foreign and U.S.

federal income taxes based on the current tax law.

As the Company maintains a full valuation allowance against its deferred tax assets, there is no income tax expense recorded related to this change other than the Federal AMT credit which are refundable due to the passage of tax reform.

In accordance with Staff Accounting Bulletin 118 (“SAB 118”), income tax effects of the Tax Act may be refined upon obtaining, preparing, or analyzing additional information during the measurement period and such changes could be material.

During the measurement period, provisional amounts may be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by U.S.

regulatory and standard-setting bodies.

While we are able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Act may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the I.R.S., and actions we may take.

We are continuing to gather additional information to determine the final impact.

Due to the Company’s history of losses and uncertainty of future taxable income, a valuation allowance sufficient to fully offset net operating losses and other deferred tax assets has been established.

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Income tax expense/(benefit) for each of the years ended March 31 consists of the following:

Year Ended March 31,

(in thousands)

As of March 31,

Total tax provision

Income Tax Expense

Net Income Loss before tax

Expected income tax recovery

Impact of tax rate differences in foreign jurisdictions

Tax rate changes and other adjustments

Permanent differences

Change in valuation allowance

The significant components of deferred income tax expense/(benefit) from operations before non-controlling interest for each of the years ended March 31 are approximated as following:

Year Ended March 31,

(in thousands)

As of March 31,

Deferred tax expense/(benefit)

Net operating loss carry forward

Foreign Tax Credits

Deferred income taxes

Net operating loss carry-forwards foreign

Non-capital loss carry-forwards – USA

Temporary differences

Net deferred tax asset

Valuation allowance

Net deferred tax expense

The table below sets forth the approximate income tax expense/(benefit) for 2019 and 2018 computed by applying the applicable U.S.

federal income tax rate and is reconciled to the tax expense/(benefit) computed at the effective income tax rate:

The table below sets forth the details of expiration of the non-financial carried forward losses of the Company as of March 31, 2020 as under:

(in thousands)

As of March 31,

Computed expected income tax expense/(benefit)

State tax benefit net of federal tax

Change in valuation allowance

Deferred expenses from foreign acquisition

Impairment loss on goodwill

Impairment loss on investments

Capitalized interest costs

Deferred tax assets from foreign subsidiaries

Effective income tax rate

Realization of deferred tax assets, including those related to net operating loss carryforwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain.

1 unchanged sentence

Based upon the Company’s current operating results management cannot conclude that it is more likely than not that such assets will be realized.

The Company files income tax returns in India, Hong Kong and the U.S.

The Company files income tax returns in India, Hong Kong, Colombia, and the U.S.

NOTE 1 9 – REVENUE RECOGNITION

Revenue in the Infrastructure Business is recognized for the renting business when the equipment is rented, and terms of the agreement has been fulfilled during the period.

The revenue from the purchase and resale of physical infrastructure commodities is recognized once the bill of lading along with the invoice have been transferred to the customer.

Revenue from the execution of infrastructure contracts is recognized on the basis of output method as and when part of the performance obligation has been completed and approval from the contracting agency has been obtained after survey of the performance completion as of that date.

In the Life Sciences segment, the revenue from the wellness and lifestyle business is recognized once goods have been sold to the customer and the performance obligation has been completed.

We license our products to processors.

The royalty income is recognized once goods have been sold to its customer by the processor.

Net sales disaggregated by significant products and services for Fiscal 2020 and Fiscal 2019 were as follows:

(in thousands)

Year Ended March 31,

Infrastructure segment

Rental income (1)

Construction contracts (2)

Purchase and resale of physical commodities (3)

Life Sciences segment

Wellness and Lifestyle (4)

Tolling/White labeling service (5)

(1) Rental income consists of income from rental of heavy construction equipment.

(2) Construction income consists of the execution contracts directly or through subcontractors.

There was revenue of $101 thousand from the $1.1 million NHAI construction contracts during Fiscal 2020.

The Company expects to complete the project 12 and 15 months.

(3) Relates to the income from purchase and resale of physical commodities used in infrastructure, like steel, wooden doors, marble, and tiles.

(4) Relates to revenue from Life Sciences segment such as sale of hemp crude extract, hemp isolate, and hemp distillate and royalty income from sale of Hyalolex™, now named Hyalolex™ Drops of Clarity™.

(5) Relates to income from tolling and white label services.

NOTE 20 – SEGMENT INFORMATION

3 unchanged sentences

Based on our integration and Management strategies, we operate in two reportable segments:

(i) Infrastructure Business and (ii) Plant and Cannabinoids Business.

The Company’s CODM is considered to be the Company’s chief executive officer (CEO).

(i) Infrastructure segment and (ii) Life Sciences segment.

The Company’s CODM is the Company’s chief executive officer (“CEO”).

The CEO reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

Therefore, and before our Plant and Cannabinoid Business started, the Company had determined that it operated in a single operating and reportable segment.

Therefore, and before our Life Sciences segment started, the Company had determined that it operated in a single operating and reportable segment.

As of the date of this report and in preparation for the new and different source of revenue, the Company has determined that it operates in two operating and reportable segments:

a) Infrastructure Business and b) and Plant and Cannabinoid Business.

a) Infrastructure Business and b) Life Sciences segment.

The Company does not include intercompany transfers between segments for management reporting purposes.

The following provides information required by ASC 280-10-50-38 “Entity-wide Information”:

1) The table below shows revenue reported by segments:

1) The table below shows revenue reported by segment:

Product & Service

(in thousands)

Percentage of Total Revenue

Infrastructure Business

Plant and Cannabinoid Business

Percentage of

Total Revenue

Infrastructure segment

Life Sciences segment

(in thousands)

Percentage of Total Revenue

Infrastructure Business

Plant and Cannabinoid Business

2(a) The table below shows the revenue attributed to the country of domicile (U.S.) and foreign countries.

Revenue is generally attributed to the location of customers located in those geographic locations.

Percentage of

Total Revenue

Infrastructure segment

Life Sciences segment

For information for revenue by product and service, refer Note 19, “Revenue Recognition”.

2) The table below shows the revenue attributed to the country of domicile (U.S.) and foreign countries.

Revenue is generally attributed to the geographic location of customers:

(in thousands)

1 unchanged sentence

Total Revenue

(2) Hong Kong

North America

2 unchanged sentences

Total Revenue

(2) Hong Kong

North America

2(b) The table below shows the non-current assets other than financial instruments held in the country of domicile and foreign countries (in thousands).

3) The table below shows the non-current assets other than financial instruments held in the country of domicile and foreign countries.

(in thousands)

Nature of Assets

USA (Country of Domicile)

Foreign Countries (India)

Total for the

(Country of Domicile)

Foreign Countries

(India, Hong Kong, and Colombia)

Total as of March 31, 2020

Intangible assets, net

2 unchanged sentences

Claims and advances

Total long-term assets

Operating lease asset

Total non-current assets

(in thousands)

Nature of Assets

USA (Country of Domicile)

Foreign Countries (India)

Total for Fiscal 2018

Foreign Countries

(India Hong Kong and Colombia)

Total as of March 31, 2019

Intangible assets, net

2 unchanged sentences

Claims and advances

Total long-term assets

Operating lease asset

Total non-current assets

NOTE 2 1 – SUBSEQUENT EVENTS

On May 13, 2019, the Company entered into an agreement with Alzheimer’s’ Prevention Clinic & Research Center Puerto Rico PBC for phase 2 trials related to IGC-AD1.

On May 17, 2019, the Company, through its wholly owned subsidiary Holi Hemp LLC, entered into a cultivation agreement for growing and farming of hemp on 100 Acre land in Arizona.

Additional Shareholder Derivative Action Litigation:

Mukunda, et al., 8:19-cv-01673 (U.S.

District Court for the District of Maryland)

On June 6, 2019, IGC shareholder Dimple Patel instituted a shareholder derivative complaint on behalf of IGC in the United States District Court for the District of Maryland.

Ram Mukunda, Claudia Grimaldi, Rohit Goel, Richard Prins, Shajy Mathilakathu, and Sudhakar Shenoy were named as defendants, and IGC was named as a nominal defendant.

The Patel litigation represents a claim made by a shareholder on behalf of the Company (as opposed to against the Company).

The complaint in the Patel litigation alleges that the Company should have filed suit against the individual defendants – Mukunda, Grimaldi, Goel, Prins, Mathilakathu, and Shenoy (collectively referred to as the “Individual Defendants”) – for breach of fiduciary duty.

Specifically, the complaint alleges that the Individual Defendants “violated their duty of good faith by knowingly causing and/or recklessly allowing the Company to make false and misleading statements and/or fail[ed] to disclose that:

(i) [IGC] substantially discontinued the business that it conducted at the time it began trading on the NYSE;

(ii) the Company had become engaged in ventures or promotions which have not developed to a commercial stage;

(iii) cannabis-related products, including CBD-based beverages, are illegal in Malaysia;

(iv) neither IGC nor Treasure Network was a licensed manufacturer of cannabis-based products in Malaysia;

(v) CBD-infused Nitro G was not an approved and registered product under Malaysian law;

(vi) Treasure Network, founded in 2017, was not “experienced”;

(vii) Treasure Network was a distributor, not a manufacturer;

(viii) at all relevant times, the Individual Defendants had the ability to exercise substantial control over Treasure Network;

(ix) consequently, the Company was not an operating company for the purposes of continued trading and listing on the NYSE American;

and (x) as a result, India Globalization’s public statements were materially false and misleading at all relevant times.” Because the claims made in the Patel litigation are asserted against the individual defendants, as opposed to the Company, the Company is merely a nominal defendant.

The Company will monitor the case and proceed as appropriate under the circumstances as and if the matter progresses.

The Company has retained counsel for that purpose.

The Company anticipates that it may seek to consolidate the Patel litigation with the Erny derivative litigation described herein.

In January 2020, the Company entered into a binding agreement for the settlement of three (3) previously disclosed derivative lawsuits:

Mukunda, et al.

, Civil Action No.

1:18-cv-03698-DKC, filed in the United States District Court for the District of Maryland on November 30, 2018;

Mukunda, et al.

, Civil Action No.

8:19-cv-00493-DKC, filed in the United States District Court for the District of Maryland on February 20, 2019;

Mukunda, et al.

, Civil Action No.

8:19-cv-01673-PWG, filed in the United States District Court for the District of Maryland on June 6, 2019.

Shareholders were given notice of the proposed settlement through the Company’s filing of an SEC Form 8-K report, the issuance of a press release, publication in Investor’s Business Daily, and posting in the “Investors” section of the Company’s website, all of which were deemed by the court to constitute sufficient notice to shareholders of the settlement.

Shareholders were given the opportunity to assert objections to the final settlement, and no objections were received by the parties to the derivative suit or filed with the court.

On June 30, 2020, the Court held a hearing to evaluate the fairness and reasonableness of the settlement and to determine whether the settlement will be approved.

On July 6, 2020, the Court entered an order formally and finally approving the settlement and resolving all pending derivative suits.

On May 3, 2020, the Company signed the Paycheck Protection Program Promissory Note and Agreement for a loan of approximately $430,000.

The Loan is established under the terms and conditions of the SBA program of the United States Small Business Administration (“SBA”) and the USA CARES Act (2020)(H.R.

748)(15 U.S.C 636 et seq.) (the “Act”) and matures after 2 years on May 3, 2022, with monthly repayments of approximately $18,000 commencing November, 2020.

On May 5, 2020, the Company also received Economic Injury Disaster Loan Emergency Advance for $10,000 and an Economic Injury Disaster Loan for approximately $150 thousand on June 11, 2020.

We continue to monitor the impact from restrictions imposed by the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Revenue from the infrastructure segment continues to be adversely affected as we are unable to fully deploy our workforce.

In response to the evolving circumstances, we adapted our facilities to manufacture, label, and distribute FDA-registered alcohol-based hand sanitizers and hand rubs.

While there is a general lack of visibility, we anticipate drastically reduced revenue from Infrastructure, compensated by increased revenue in the Life Sciences segment based on the strategic positioning.

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data