What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-19 compared with 2020-02-10 · 425 added, 351 removed, 293 unchanged (73% of the section changed)

3 unchanged sentences

(in thousands, except share data)

December 3 1 ,

June 30, 2020

March 31, 2020

Current assets:

Cash and cash equivalents

Short-term investment

Marketable securities

Accounts receivable, net

Deposits & advances

Deposits and advances

Total current assets

1 unchanged sentence

Property, plant and equipment, net

Investments in unlisted securities

Non-Marketable securities

Claims and advances

Total non-current assets

Operating lease asset

Total long-term assets

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable

Accrued and other liabilities

Short-term loan

Accrued liabilities and others

Short-term loans

Total current liabilities

Long-term loans

Other liabilities

Operating lease liability

Total non-current liabilities

2 unchanged sentences

Stockholders' equity:

Preferred stock, $0.0001 per value:

authorized 1,000,000 shares, no share issued or outstanding as on June 30, 2020 and March 31, 2020

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

150,000,000 shares authorized;

39,571,407 and 39,501,407 shares issued and outstanding as of December 31, 2019 and March 31, 2019, respectively.

41,196,130 and 39,320,116 shares issued and outstanding as on June 30, 2020 and March 31, 2020, respectively.

Accumulated other comprehensive loss

3 unchanged sentences

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2019 Form 10-Q

| June 30, 2020 Form 10-Q

India Globalization Capital, Inc.

1 unchanged sentence

(in thousands, except loss per share)

Three months ended December 31

Nine months ended December 31

Cost of revenue

General and administrative expenses

Three months ended June 30,

Cost of revenues

Selling, general and administrative expenses

Research and development expenses

Inventory write off

Operating loss

1 unchanged sentence

Loss before income taxes

Income tax expense

Income taxes expense

Net loss attributable to common stockholders

5 unchanged sentences

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2019 Form 10-Q

| June 30, 2020 Form 10-Q

India Globalization Capital, Inc.

CONDENSED CONSOLIDATED STATEMENT S OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Three Months Ended December 31, 2018

Common Shares

Common Stock and Additional Paid in Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Balances as of September 30, 2018

Bricoleur Note penalty shares

Common stock issued through public offering, net

Share based compensation & expenses, net

Cancellation of shares allotted

Investment from Bradbury Global

Loss on foreign currency translation

Balances as of December 31, 2018

Three Months Ended December 31, 2019

Balances as of September 30, 2019

Bricoleur Note penalty shares

Common stock issued through public offering, net

Share based compensation & expenses, net

Cancellation of shares allotted

Investment from Bradbury Global

Loss on foreign currency translation

Balances as of December 31, 2019

Nine Months Ended December 31, 2018

Three Months Ended June 30, 2019

Common Shares

Common Stock and Additional Paid in Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Common Stock and

Additional Paid in

Accumulated Other

Comprehensive Loss

Total Stockholders'

Balances as of March 31, 2019

Bricoleur Note penalty shares

Common stock issued through public offering, net

Share based compensation & expenses, net

Cancellation of shares allotted

Investment from Bradbury Global

Common stock-based compensation & expenses, net

Loss on foreign currency translation

Balances as of December 31, 2018

Nine Months Ended December 31, 2019

Balances as of June 30, 2019

Three Months Ended June 30, 2020

Balances as of March 31, 2020

Bricoleur Note penalty shares

Common stock issued through public offering, net

Share based compensation & expenses, net

Cancellation of shares allotted

Investment from Bradbury Global

Common stock-based compensation & expenses, net

Common stock issued for investment

Loss on foreign currency translation

Balances as of December 31, 2019

Balances as of June 30, 2020

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2019 Form 10-Q

| June 30, 2020 Form 10-Q

India Globalization Capital, Inc.

1 unchanged sentence

(in thousands)

Nine months ended

Dec ember 3 1 ,

Three months ended

Operating activities:

1 unchanged sentence

Depreciation and amortization

Share based compensation and expenses, net

Inventory write off

Bad debts & creditors write back, net

Gain on settlement of Note Payable

Other adjustments

Common stock-based compensation and expenses, net

Accounts receivables

Deposits and advances

Account payables accrued and other liabilities

Claims and advances

Accounts payable

Accrued and other liabilities

Net cash used in operating activities

1 unchanged sentence

Purchase of property, plant and equipment

Purchase of short-term investment

Investment in marketable securities

Investment in non-marketable securities

Acquisition and filing cost of patents and rights

1 unchanged sentence

Financing activities:

Issuance of equity stock, net

Repayment of loan

Proceeds from long- term loan

Net cash provided by financing activities

7 unchanged sentences

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

Common stock issued as a penalty on notes payable

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2019 Form 10-Q

| June 30, 2020 Form 10-Q

India Globalization Capital, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED DECEMBER 31, 2019

THREE MONTHS ENDED JUNE 30, 2020

(in thousands, except for share data and loss per share, unaudited)

1 unchanged sentence

Our filings are available on www.sec.gov.

The information contained on our websites, including www.igcinc.us, are not incorporated by reference in this report, and you should not consider such information to be a part of this report.

The information contained on our websites, including www.igcinc.us, is not incorporated by reference in this report, and you should not consider such information to be a part of this report.

We exclude our investments and minority non-controlling interests, and any information provided by them is not incorporated by reference in this report, and you should not consider such information to be a part of this report.

NOTE 1 – BUSINESS DESCRIPTION

IGC has two lines of business:

1) Infrastructure Business;

and 2) Plant and Cannabinoid Business.

IGC has two segments:

Infrastructure and Life Sciences.

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

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

The Company’s Plant and Cannabinoid Business, managed from the United States, involves:

a) the development of potential new drugs, subject to applicable regulatory approvals, that use ultra-low doses of phytocannabinoids including cannabidiol (CBD), cannabigerol (CBG), and tetrahydrocannabinol (THC), among others, in combination with other compounds believed to assist in the treatment of diseases like Alzheimer’s, 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, f) the offering of tolling services like extraction and distillation to hemp farmers and retailers, and g) acquisitions across these business areas.

The Company operates both lines of business in compliance with applicable state, national, and local laws and regulations.

Corporate Update

Through the three months ended December 31, 2019, the Company directed its resources broadly in the following areas:

The Company is currently executing a road building contract in Kerala, India valued at approximately $650 thousand.

Through the three months ended December 31, 2019, the Company worked on execution of the contract as well as sought approval for an expansion of the contract.

Effective January 24, 2020, the total value of the contract was increased to approximately $1.2 million.

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

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

Our revenue for the three months ended June 30, 2019 was primarily derived from this segment.

The Company’s Life Sciences segment, formerly known as the Plant and Cannabinoid business, managed from the United States (“U.S.”), involves:

(a) the development of potential new drugs, subject to applicable regulatory approvals, (b) several CBD-based and non-CBD-based products and brands in various stages of development, for sale online and through stores, including non-CBD-based hand sanitizers, among others, (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.

Our revenue for the three months ended June 30, 2020, was primarily derived from this segment.

The current COVID-19 pandemic and the associated social distancing and reduced foot traffic to stores continues to adversely impact our ability to distribute products and provide services.

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

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

Business updates

On July 30, 2020, IGC received notice from the FDA to proceed with a 12-subject Phase 1 human clinical trial (“removal of full clinical hold”) on its Investigational New Drug Application (“INDA”), submitted under Section 505(i) of the Federal Food, Drug, and Cosmetic Act, for IGC-AD1.

The Phase 1 trial will involve a randomized placebo controlled Multiple Ascending Dose (“MAD”) study to evaluate safety and tolerability of IGC-AD1 in subjects with mild to severe dementia due to Alzheimer’s disease.

In addition, the study will evaluate pharmacokinetics (“PK”) and collect data on other factors.

The Company’s IGC-AD1 formulation is based on a patent filed by the University of South Florida (“USF”) that uses a cannabinoid as one of the active ingredients.

The Company has exclusive rights to the patent filing.

The Company has suffered losses and setbacks due to the COVID-19 pandemic, including being delayed in executing an ongoing construction contract, being unable to commission equipment, and having to slow down operations because of COVID-19.

In response to the COVID-19 pandemic, the Company manufactured and distributed alcohol-based hand sanitizers.

The majority of our revenue for the three months ended June 30, 2020, is from the sale of hand sanitizers.

In an effort to help some of the hardest hit communities, we donated hand sanitizers to the Federal Emergency Management Agency (“FEMA”), the Navajo Indians in Arizona, the Crow Indian reservation in Montana, and the Sioux reservation in South Dakota.

The Company is executing a road building contract in Kerala, India valued at approximately $1.1 million.

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

The Company filed an Investigative New Drug Application (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 THC with other natural compounds intended to assist in the management of the care of patients suffering from Alzheimer’s disease.

The Company filed and continued to pursue a research and development license from the Department of Health, Medicinal Cannabis in Puerto Rico to carry out the IGC-AD1 medical trial.

The Company established an approximately $500 thousand facility in San Juan, Puerto Rico to house and conduct the expected trial on IGC-AD1.

The Company, as part of an out-reach and marketing campaign, distributed samples of Hyalolex™, the Company’s flagship product, to dispensaries in Puerto Rico.

Hyalolex™ is currently available in about 40 dispensaries in Puerto Rico.

During the quarter ending December 31, 2019, another batch of Hyalolex™ was also made in Puerto Rico to continue its distribution to dispensaries.

We plan to collect data on messaging, use, and tolerance, among others.

The Company intends to use the data received to position Hyalolex™ for a much wider state-side market, with a view towards increased sales.

Among the key insights the Company received from a data collection is that, while Hyalolex™ is currently targeted at a smaller segment of Alzheimer’s patients, feedback indicates that the product also appeals to a much larger segment of the market that is interested in using the ultra-low dose formulation in the product in a manner believed to assist in managing anxiety and sleep problems.

The Company is investigating the expansion of the scope of the Hyalolex™ market in response to this data.

| December 31, 2019 Form 10-Q

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, labeling, 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 categories of products the Company is working on, include CBD-infused seltzer called Sunday Seltzer TM ;

CBD-infused creams and topicals called Holief TM ;

and, CBD-infused lifestyle products called Herbo TM , among others, that IGC intends to bring to market in the future in compliance with applicable laws and regulations.

We expect to deploy QR codes on the containers, supported by our Hyperledger-based blockchain system, that will allow customers to view, on a website, product origination;

product process, including key ingredient procurement and certifications;

origination of hemp and hemp extracts and their certifications, among others, intended to help assure customers of product compliance, safety, efficacy, origination, and process.

The Company grows, dries, and processes hemp.

During the quarter ending December 31, 2019, a first test harvest, initiated in December, passed inspection by the Arizona Department of Agriculture (AZDA), with the harvest certified as legal under the United States Department of Agriculture (USDA) rules.

Post drying, the harvest will be transported for further processing to our facility in the State of Washington in accordance with applicable law and regulation.

Barring any unforeseen circumstances, the Company expects to continue to harvest through spring.

Please refer to Item 1A.

Risk Factors.

The Company previously announced that it contemplated a processing facility in Arizona.

However, for various business reasons, the Company withdrew from building the facility in Arizona and instead has leased a Good Manufacturing Practice (GMP) compliant building, in the State of Washington, that was previously occupied by a supplement manufacturer and has commenced buildout for extraction, distillation, and production of end user products.

Some of our equipment is sourced from China and the travel restrictions in China could cause delays in completing some of the installation.

We expect that the facility will have three profit centers:

a) production of products such as lotions, creams, oils, among others, to support our products and white labeling activity;

b) extraction of hemp into crude oil, intended to support farmers in the State of Washington and Oregon;

and c) distillation of crude oil into hemp extracts.

We intend that the facility, upon full completion and inspection, will qualify as a GMP certified facility.

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

We expect to re-start the project as soon as COVID-19 restrictions are lifted, and we are able to deploy our work force.

On July 17, 2020, the Company filed a provisional patent application with the USPTO for its IGC-511 formulation for Cannabidiol based composition and method for treating pain.

On July 6, 2020, the United States District Court for the District of Maryland entered an order formally and finally approving the January 2020 formal settlement agreement between the derivative plaintiffs, the Company, and the named defendant directors and officers, thereby resolving all pending derivative suits.

All derivative actions have now been formally terminated.

Please refer Part II, Item 1, Legal Proceedings.

On May 12, 2020, the Company completed an investment under the terms of a Share Subscription Agreement (“SSA”) with Evolve I, Inc., a Washington corporation (“Evolve”), by transferring part of the consideration to Evolve.

As of June 30, 2020, the Company owns an approximately 19.8% interest in Evolve.

| June 30, 2020 Form 10-Q

Business Organization

As of December 31, 2019, the Company had the following direct operating subsidiaries:

Holi Hemp LLC;

IGC Pharma LLC;

and SAN Holdings, LLC, as well as Colombia-based beneficially-owned subsidiary Hamsa Biochem SAS.

As of June 30, 2020, the Company had the following direct operating subsidiaries:

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

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

The Company is a Maryland corporation established in 2005.

We have employees, contract workers and advisors in the United States of America (“U.S.”), India, Colombia, and Hong Kong.

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

We have employees, contract workers and advisors in the U.S., India, Colombia, and Hong Kong.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5 unchanged sentences

The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year.

These interim statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2019 (“Fiscal 2019”) contained in the Company’s Form 10-K for Fiscal 2019, filed with the SEC on June 14, 2019, specifically in Note 2 to the consolidated financial statements.

These interim statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2020 (“Fiscal 2020”) contained in the Company’s Form 10-K for Fiscal 2020, filed with the SEC on July 13, 2020, specifically in Note 2 to the consolidated financial statements.

Principles of consolidation

2 unchanged sentences

In the opinion of the Management, the interim statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

| December 31, 2019 Form 10-Q

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The preparation of financial statements in conformity with U.S.

GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Management believes that the estimates and assumptions used in the preparation of the interim statements are prudent and reasonable.

Management believes that the estimates and assumptions used in the preparation of the consolidated financial statements are prudent and reasonable.

Significant estimates and assumptions are generally used for, but not limited to:

allowance for uncollectible accounts receivable;

sales returns;

normal loss during production;

future obligations under employee benefit plans;

the useful lives of property, plant and equipment;

the useful lives of property, plant, equipment;

intangible assets;

6 unchanged sentences

Critical accounting estimates could change from period to period and could have a material impact on IGC’s results, operations, financial position, and cash flows.

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

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

Presentation and functional currencies

IGC operates in India, U.S., Colombia, and Hong Kong, and a substantial portion of the Company’s transactions are denominated in the Indian Rupee (“INR”), Colombian Peso (“COP”), or the Hong Kong Dollar (“HKD”).

The local currency is the functional currency for the operations outside the U.S.

Changes in the exchange rates between this currency and the Company’s reporting currency are partially responsible for some of the periodic changes in the consolidated financial statements.

Assets and liabilities of the Company’s foreign operations are translated into U.S.

dollars (“USD”) at the spot rate in effect at the applicable reporting date.

Revenues and expenses of the Company’s foreign operations are translated at the average exchange rate during the applicable period.

The resulting unrealized cumulative translation adjustment is recorded as a component of accumulated other comprehensive income/(loss) in stockholders’ equity.

Transaction gains and losses related to foreign exchange are recognized in the consolidated statements of operations.

IGC operates in India, U.S., Colombia and Hong Kong and a substantial portion of the Company’s financials are denominated in the Indian Rupee (INR), the Hong Kong Dollar (HKD) or the Colombian Peso (COP).

As a result, changes in the relative values of the U.S.

Dollar (USD), the INR, the HKD or the COP affect financial statements.

| June 30, 2020 Form 10-Q

The accompanying financial statements are reported in USD.

The INR, HKD and COP are the functional currencies for certain subsidiaries of the Company.

The translation of the functional currencies into U.S.

dollars is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues and expenses using average exchange rates prevailing during the reporting periods.

Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive income/(loss), a separate component of shareholders’ equity.

Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred.

Transaction gains and losses are recognized in the consolidated statements of operations.

Reclassifications

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

A short-term loan in the amount of approximately $50 thousand has been reclassified to non-current liability from current liability.

Impairment of long – lived assets

5 unchanged sentences

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

No impairment has been recorded for the three months and nine months ended December 31, 2019 and 2018.

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 December 31, 2019, there was no Goodwill.

No impairment has been recorded for the three months ended June 30, 2020, and 2019.

Short-term and long-term investments

Our policy for short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations, and delivers an appropriate yield in relationship to our investment guidelines and market conditions.

Short-term and long-term investments consist of corporate, various government agency and municipal debt securities, as well as certificates of deposit that have maturity dates that are greater than 90 days.

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

Available-for-sale securities:

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

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

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

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

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

As of June 30, 2020, investment in marketable securities is valued at fair value and investment in non-marketable securities with ownership less than 20% is valued at cost as per ASC Topic 321, “ Investments-Equity Securities ”.

| June 30, 2020 Form 10-Q

Stock – Based Compensation

The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC Topic 718, “ Stock-Based Compensation” .

The Company expenses stock-based compensation to employees over the requisite vesting period based on the estimated grant-date fair value of the awards.

The Company accounts for forfeitures as they occur.

Stock-based awards are recognized on a straight-line basis over the requisite vesting period.

For stock-based employee compensation cost recognized at any date will be at least equal to the amount attributable to the share-based compensation that is vested at that date.

The Company estimates the fair value of stock option grants using the Black-Scholes option-pricing model.

The assumptions used in calculating the fair value of stock-based awards represent Management’s best estimates.

The closing share price of the Company’s common stock on the date of grant is considered the fair-value of the share.

The volatility factor is determined based on the Company’s historical stock prices.

The expected term represents the period that our stock-based awards are expected to be outstanding.

The Company has never declared or paid any cash dividends.

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.

Accounts receivable

1 unchanged sentence

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

| December 31, 2019 Form 10-Q

Regarding our collection policy on commodity trading receivables, there are three types of trades:

(1) payment guaranteed through letters of credit, (2) deposit or spot payment on delivery, or (3) delivery on credit.

With the first type of trade:

our policy for collection was to ask the customer to open a letter of credit with a bank.

The typical terms of the letter of credit were that 100% of the payment was made when the material was shipped.

With the second type of trade, customers paid on delivery.

On the third type of trade, our policy was to allow the customer to have a payment credit term of 90-120 days.

We had $154,629 of accounts receivable, net of provision, for doubtful debt of $6 thousand as of December 31, 2019.

Inventory is valued at the lower of cost or market, or at sales price (fair value) less costs of disposal when certain conditions are met.

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 require us to recognize material write-downs in the future.

Inventory consists of raw materials, finished goods and work-in-progress such as extracted crude oil, growing crops and crude oil in process.

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

We had $264 thousand of accounts receivable, net of provision for doubtful debt of $9 thousand as of June 30, 2020, as compared to $133 thousand of accounts receivable, net of provision for doubtful debt of $9 thousand as of March 31, 2020.

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 related to wellness products, hand sanitizers, finished CBD products, among others as well as work-in-progress such as extracted crude oil, CBD isolate, growing crops, and herbal oils, among others.

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

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

1 unchanged sentence

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

Crops are segregated into “growing crops” and “harvested crops.” Growing crops are valued at the lower of cost or market value.

Direct and indirect development costs of groves, orchards and vineyards are required to be capitalized during the development period and depreciated over the estimated useful life of the particular asset.

Harvested crops are measured at sales price less costs of disposal, with changes recognized in profit or loss only when the harvested crop:

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;

1 unchanged sentence

- is available for immediate delivery.

See Note 3, Inventory of this report for further information.

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

Hence, the Company values its harvested crops at cost.

Please refer note – “Note 3 - Inventory”, for further information.

Fair value of financial instruments

820, “Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC Topic 820, “ Fair Value Measurement ” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

2 unchanged sentences

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued and other liabilities, which is approximate to their fair values due to the nature of the items.

As of December 31, 2019, the Company’s short-term investment consists of mutual 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 mutual funds is comprised of re-invested income of approximately $63 thousand and immaterial unrealized gain during the nine months ended December 31, 2019.

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

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

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

Level 3 investments are valued using cost-method.

For further information refer to Note 7 – Investments in Unlisted Securities, which is classified as a non-current asset.

| December 31, 2019 Form 10-Q

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

(in thousands)

December 31, 2019

Cash and cash equivalents:

Total cash and cash equivalents

-Short-term investment in mutual fund

-Investment in unlisted securities

Total Investments

March 31, 2019

Cash and cash equivalents:

Total cash and cash equivalents

-Short-term investment in mutual fund

-Investment in unlisted securities

Total Investment

| June 30, 2020 Form 10-Q

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.

Please refer to Note 16 - “Fair Value of Financial Instruments”, for further information.

Earnings/(Loss) per Share

The computation of basic loss per share for the nine months ended December 31, 2019, excludes potentially dilutive securities of 3.41 million shares which includes share options, unvested shares granted to employees, warrants, and shares from the conversion of outstanding units, if any, because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for the three and nine months ended December 31, 2019 and 2018, used for the computation of basic earnings per share (“EPS”) is 39,571,407 and 39,543,480 and 39,356,515 and 34,034,657, respectively.

Due to the loss incurred during the nine-month periods ended December 31, 2019, and December 31, 2018, all the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.

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.

| December 31, 2019 Form 10-Q

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

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

The total short- term lease expense and cash paid for the nine months ended December 31, 2019 and December 31, 2018, are $154 thousand and $111 thousand, respectively.

Recent Accounting Pronouncements

Recently adopted

ASC 842, Leases

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No.

2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by ASU No.

2018-01, Land Easement Practical Expedient for Transition to Topic 842;

2018-10, Codification Improvements to Topic 842, Leases;

2018-11, Targeted Improvements;

2018-20, Narrow-Scope Improvements for Lessors.

The computation of basic loss per share for the three months ended June 30, 2020, excludes potentially dilutive securities of approximately 3.2 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, if any, because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for the three months ended June 30, 2020 and 2019, used for the computation of basic earnings per share (“EPS”) is 40,189,222 and 39,508,110, respectively.

Due to the loss incurred during the three months ended June 30, 2020 and 2019, all the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS.

Cybersecurity

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

In three months ended June 30, 2020, there were no impactful breaches in cybersecurity.

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).

Under the 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.

7 unchanged sentences

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.

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

| June 30, 2020 Form 10-Q

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.

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

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

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

| December 31, 2019 Form 10-Q

The Company has concluded that all lease arrangements would be classified as short-term in nature and as such, not recorded on the balance sheet.

The standard did not materially affect the Company's consolidated net earnings or have any impact on cash flows.

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 June 30, 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.

Please refer “Note 9 - Leases”, for further information.

Changes to U.S.

GAAP are established by the FASB in the form of accounting standards updates (ASUs) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs.

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

Not yet adopted

Investments , Derivatives and Hedging:

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topics 321, 323 and 815.

The new standard addresses accounting for the transition into and out of the equity method and measurement of certain purchased options and forward contracts to acquire investments.

The amendment is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.