Item 8. Financial Statements and Supplementary Data
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firms (PCAOB ID 5341 )
50
Consolidated Balance Sheets
51
Consolidated Statements of Operations and Comprehensive Loss
52
Consolidated Statements of Stockholders’ Equity
53
Consolidated Statements of Cash Flows
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Notes to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of IGC Pharma, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of IGC Pharma, Inc. (formerly known as ‘India Globalization Capital, Inc.’) and its subsidiaries (the “Company”) as of March 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
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 audit. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.
Manohar Chowdhry & Associates
Chartered Accountants
We have served as the Company's auditor since 2018.
Chennai, India
July 7, 2023
UDIN: 23237830BGZGZQ9446
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IGC Pharma, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
2023
($)
March 31,
2022
($)
ASSETS
Current assets:
Cash and cash equivalents
3,196
10,460
Accounts receivable, net
107
125
Short term investments
154
-
Inventory
2,651
3,548
Deposits and advances
358
978
Total current assets
6,466
15,111
Non-current assets:
Intangible assets, net
1,170
917
Property, plant and equipment, net
8,213
9,419
Claims and advances
1,003
937
Operating lease asset
326
450
Total non-current assets
10,712
11,723
Total assets
17,178
26,834
LIABILITIES AND STOCKHOLDERS ’ EQUITY
Current liabilities:
Accounts payable
530
981
Accrued liabilities and others
1,368
1,460
Total current liabilities
1,898
2,441
Non-current liabilities:
Long-term loans
141
144
Other liabilities
21
16
Operating lease liability
207
341
Total non-current liabilities
369
501
Total liabilities
2,267
2,942
Commitments and Contingencies – See Note 12
Stockholders ’ equity:
Preferred stock, $ 0.0001 par value: authorized 1,000,000 shares, no shares issued or outstanding as of March 31, 2023, or March 31, 2022.
Common stock and additional paid-in capital, $ 0.0001 par value: 150,000,000 shares authorized; 53,077,436 and 51,054,017 shares issued and outstanding as of March 31, 2023, and March 31, 2022, respectively.
118,965
116,019
Accumulated other comprehensive loss
( 3,389
)
( 2,968
)
Accumulated deficit
( 100,665
)
( 89,159
)
Total stockholders ’ equity
14,911
23,892
Total liabilities and stockholders ’ equity
17,178
26,834
The accompanying notes should be read in connection with these consolidated financial statements.
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IGC Pharma, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except loss per share and share data)
Years Ended March 31,
2023
($)
2022
($)
Revenue
911
397
Cost of revenue
( 469
)
( 203
)
Gross profit
442
194
Selling, general and administrative expenses
( 8,552
)
( 13,292
)
Research and development expenses
( 3,461
)
( 2,330
)
Operating loss
( 11,571
)
( 15,428
)
Impairment of investment
-
( 49
)
Other income, net
65
461
Loss before income taxes
( 11,506
)
( 15,016
)
Income tax expense/benefit
-
-
Net loss attributable to common stockholders
( 11,506
)
( 15,016
)
Foreign currency translation adjustments
( 421
)
( 194
)
Comprehensive loss
( 11,927
)
( 15,210
)
Net loss per share attributable to common stockholders:
Basic and diluted
$
( 0.22
)
$
( 0.30
)
Weighted-average number of shares used in computing loss per share amounts:
52,576,258
49,991,631
The accompanying notes should be read in connection with these consolidated financial statements.
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IGC Pharma, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS ’ EQUITY
(in thousands)
Number of
Common Shares
Common Stock
and Additional
Paid in Capital
($)
Accumulated
Deficit
($)
Accumulated Other
Comprehensive Loss
($)
Total Stockholders’
Equity
($)
Balances as of April 1, 2021
47,827
109,720
( 74,143
)
( 2,774
)
32,803
Common stock-based compensation & expenses, net
1,520
2,197
-
-
2,197
Net proceeds from issuance of common stock
1,750
4,145
-
-
4,145
Other adjustments
( 43
)
( 43
)
-
-
( 43
)
Net loss
-
-
( 15,016
)
-
( 15,016
)
Foreign currency translation adjustments
-
-
-
( 194
)
( 194
)
Balances as of March 31, 2022
51,054
116,019
( 89,159
)
( 2,968
)
23,892
Balances as of April 1, 2022
51,054
116,019
( 89,159
)
( 2,968
)
23,892
Common stock-based compensation & expenses, net
1,815
2,843
-
-
2,843
Net proceeds from issuance of common stock
208
103
-
-
103
Net loss
-
-
( 11,506
)
-
( 11,506
)
Foreign currency translation adjustments
-
-
-
( 421
)
( 421
)
Balances as of March 31, 2023
53,077
118,965
( 100,665
)
( 3,389
)
14,911
The accompanying notes should be read in connection with these consolidated financial statements.
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IGC Pharma, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended March 31,
2023
($)
2022
($)
Cash flows from operating activities:
Net loss
( 11,506
)
( 15,016
)
Adjustment to reconcile net loss to net cash:
Depreciation and amortization
657
651
Provision for bad debt
126
1,718
Permanent impairment of PPE
-
833
Impairment of non-marketable securities
-
49
Common stock-based compensation and expenses, net
2,843
2,197
Net loss on sale of property, plant, and equipment
39
-
Forgiveness of PPP Loan
-
( 430
)
Changes in:
Accounts receivables, net
5
50
Inventory
897
1,930
Deposits and advances
591
541
Claims and advances
( 150
)
( 334
)
Accounts payable
( 451
)
504
Accrued and other liabilities
( 88
)
( 129
)
Operating lease asset
124
38
Operating lease liability
( 134
)
( 64
)
Net cash used in operating activities
( 7,047
)
( 7,462
)
Cash flow from investing activities:
Purchase of property, plant, and equipment
( 310
)
( 236
)
Sale of property, plant, and equipment
538
29
Investment in short-term investments
( 154
)
-
Acquisition and filing cost of patents and rights
( 309
)
( 535
)
Net cash used in investing activities
( 235
)
( 742
)
Cash flows from financing activities:
Net proceeds from the issuance of common stock
103
4,145
Repayment of long-term loan
( 3
)
( 3
)
Net cash provided by financing activities
100
4,142
Effects of exchange rate changes on cash and cash equivalents
( 82
)
( 26
)
Net decrease in cash and cash equivalents
( 7,264
)
( 4,088
)
Cash and cash equivalents at the beginning of the period
10,460
14,548
Cash and cash equivalents at the end of the period
3,196
10,460
Supplementary information:
Non-cash items:
Common stock issued/granted for stock-based compensation, including patent acquisition
2,842
2,197
Forgiveness of PPP Loan
-
( 430
)
The accompanying notes should be read in connection with these consolidated financial statements.
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IGC Pharma, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Fiscal Years Ended March 31, 2023, and 2022
Unless the context requires otherwise, all references in this report to “IGC,” “we,” “our” and “us” refer to IGC Pharma, Inc., together with our subsidiaries.
NOTE 1 – NATURE OF OPERATIONS AND MANAGEMENT ’ S PLANS
Since 2014, our team has been committed to researching the application of cannabinoids such as THC and CBD in combination with other compounds to address various ailments, including Alzheimer’s disease. With our research, we have developed intellectual property, formulations, and wellness and lifestyle brands. IGC submitted IGC-AD1, our investigational drug candidate for Alzheimer’s, to the FDA under Section 505(i) of the Federal Food, Drug, and Cosmetic Act and received approval on July 30, 2020, to proceed with the Phase 1 trial on Alzheimer’s patients. The Company completed all dose escalation studies, and as announced by the Company on December 2, 2021, the results of the clinical trial have been submitted in the Clinical/Statistical Report (CSR) filed with the FDA. The Company is motivated by the potential that, with future successful results from appropriate further trials, IGC-AD1 could contribute to relief for some of the 55 million people around the world expected to be impacted by Alzheimer’s disease by 2030 (WHO, 2020). To the best of our knowledge, this is the first human clinical trial using ultra-low doses of THC, in combination with another molecule, to treat symptoms of dementia in Alzheimer’s patients. THC is a naturally occurring cannabinoid produced by the cannabis plant. It is known for being a psychoactive substance that can impact mental processes in a positive or negative way depending on the dosage. THC is biphasic, meaning that low and high doses of the substance may affect mental and physiological processes in substantially different ways. For example, in some patients, low doses may relieve a symptom, whereas high doses may amplify a symptom. Ultimately, the goal of IGC’s research is to discover and analyze whether, and at what level of dosing, IGC-AD1 provides relief of a given symptom. IGC’s trial is based on micro dosing on patients suffering from Alzheimer’s disease.
The Company has filed forty-one (41) patent applications to address various diseases such as Alzheimer’s, Central Nervous System (“CNS”) disorders, pain, stammering, seizures in cats and dogs, eating disorders, stress-relief, and calm-restoring beverage, and fatigue. As of March 31, 2023, our portfolio includes nine granted patents.
In addition, we license a patent filing from the University of South Florida titled “Ultra-Low dose THC as a potential therapeutic and prophylactic agent for Alzheimer’s Disease.” The USPTO issued a patent (#11,065,225) for this filing on July 20, 2021.
As of March 31, 2023, the Company had the following operating subsidiaries: Techni Bharathi Private Limited (TBL), IGCare LLC, Holi Hemp LLC, IGC Pharma LLC, SAN Holdings LLC, Sunday Seltzer, LLC, Hamsa Biopharma India Pvt. Ltd. And Colombia-based beneficially-owned subsidiary IGC Pharma SAS (formerly Hamsa Biopharma Colombia SAS) (Hamsa). The Company’s fiscal year is the 52- or 53-week period that ends on March 31. The Company’ principal office is in Maryland established in 2005. Additionally, the Company have offices in Washington state, Colombia, South America, and India. The Company’s filings are available on www.sec.gov.
IGC has two segments: Life Sciences and Infrastructure.
Life Sciences Segment
Pharmaceutical : Since 2014, this part of our business has focused on the potential uses of phytocannabinoids, including THC and Cannabidiol (CBD), in combination with other compounds to treat multiple diseases, including Alzheimer’s. In addition, the Company has acquired and initiated work on TGR-63, a non-cannabinoid pre-clinical molecule, that exhibits an impressive affinity for reducing neurotoxicity in Alzheimer’s cell lines. Neurotoxicity causes cell dysfunction and death in Alzheimer’s disease. If shown to be efficacious, in AD cell lines, in halting this process, this inhibitor has the potential to treat Alzheimer’s disease by ameliorating Aβ plaques.
Over the Counter Products : We have created a women’s wellness brand, Holief™ available through online channels that are compliant with relevant federal, state, and local laws, and regulations. Holief™ is an all-natural, non-GMO, vegan, line of over the counter (OTC) products aimed at treating menstrual cramps (dysmenorrhea) and premenstrual symptoms (PMS). The products are available online and through Amazon and other online channels. Holief™ is compliant with relevant federal, state, and local laws, and regulations.
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Infrastructure Segment
The Company’s infrastructure business has been operating since 2008, it includes: (i) Execution of Construction Contracts and (ii) Rental of Heavy Construction Equipment.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and all its subsidiaries. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Transactions between the Company and its subsidiaries are eliminated in the consolidated financial statements.
b) Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Management believes that the estimates and assumptions used in the preparation of the consolidated financial statements are prudent and reasonable. Significant estimates and assumptions are 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; intangible assets; valuations; impairment of goodwill and investments; recoverability of advances; the valuation of options granted, and warrants issued; and income tax and deferred tax valuation allowances, if any. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Critical accounting estimates could change from period to period and could have a material impact on IGC’s results, operations, financial position, and cash flows. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
c) Revenue recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
ASC 606 prescribes a 5-step process to achieve its core principle. The Company recognizes revenue from trading, rental, or product sales as follows:
I. Identify the contract with the customer.
II. Identify the contractual performance obligations.
III. Determine the amount of consideration/price for the transaction.
IV. Allocate the determined amount of consideration/price to the contractual obligations.
V. 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 segment and Life Sciences segment. Refer to Note 17 – “Revenue Recognition.”
d) Cost of Revenue
Our cost of revenue 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 revenue also includes the cost of refurbishing or repackaging, if required, on products returned by customers that will be offered for resale.
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e) Earnings/(Loss) per Share
The computation of basic loss per share for Fiscal 2023, excludes potentially dilutive securities of approximately shares which includes share options, unvested shares such as restricted shares and restricted share units, granted to employees, non-employees and advisors, 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 Fiscal 2023 and 2022, used for the computation of basic earnings per share (EPS) is 52,576,258 and 49,991,631 , respectively. Due to the loss incurred during Fiscal 2023 and 2022, all the potential equity shares are anti-dilutive, and accordingly, the fully diluted EPS is equal to the basic EPS.
f) Going Concern:
The Company assesses and determines its ability to continue as a going concern in accordance with the provisions of ASC Subtopic 205-40, " Presentation of Financial Statements — Going Concern ", which requires the Company to evaluate whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern.
The Company is currently in a clinical trial stage and, thus, has not yet achieved profitability. The Company expects to continue to incur significant operating and net losses and negative cash flows from operations in the near future.
For the years ended March 31, 2023, and March 31, 2022, the Company incurred net losses of $ 11.5 million and $ 15 million, respectively. As of March 31, 2023, the Company’s cash and cash equivalents totaled $3.2 million. On June 30, 2023, the Company successfully obtained a working capital credit facility totaling $ 12 million and, in addition, sold 10,000,000 shares for $ 3,000,000 . The equity and the credit facility serve to minimize ongoing liquidity requirements and ensure the Company’s ability to sustain its operations. Furthermore, the Company intends to raise additional funds through private placement and ATM offerings, subject to market conditions. Please refer to Note 19, “Subsequent Event,” for further information.
The Company estimates that its current cash and cash equivalents balance with working capital and equity investment is sufficient to support operations beyond the twelve months following the date these consolidated financial statements and footnotes were issued. These estimates are based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects.
g) Income taxes
The Company accounts for income taxes under the asset and liability method, in accordance with ASC 740, Income Taxes, which requires an entity to recognize deferred tax liabilities and assets. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. A valuation allowance is established and recorded when management determines that some or all of the deferred tax assets are not likely to be realized and therefore, it is necessary to reduce deferred tax assets to the amount expected to be realized.
In evaluating a tax position for recognition, management evaluates whether it is more-likely-than-not that a position will be sustained upon examination, including resolution of related appeals or litigation processes, based on technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold, the tax position is measured and recognized in the Company’s financial statements as the largest amount of tax benefit that, in management’s judgment, is greater than 50% likely of being realized upon settlement. As of March 31, 2023, and 2022, there was no significant liability for income tax associated with unrecognized tax benefits.
h) Accounts receivable
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 $ 107 thousand of accounts receivable, net of provision for doubtful debt of $ 17 thousand as of March 31, 2023, as compared to $ 125 thousand of accounts receivable, net of provision for doubtful debt of $ 93 thousand as of March 31, 2022.
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i) Cash and cash equivalents
For financial statement purposes, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. 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, 2023, and 2022, were approximately $ 3,196 thousand and $ 10,460 thousand, respectively.
j) 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 relation to our investment guidelines and market conditions. Short-term and long-term investments consist of corporate, various government agencies 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 a 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 March 31, 2023, 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. ”
k) Property, plant, and equipment (PP&E)
Property, plant, and equipment are recorded at cost net of accumulated depreciation and depreciated over their estimated useful lives using the straight-line method.
Upon retirement or disposition, cost and related accumulated depreciation of the Property, plant and equipment are de-recognized, and any gain or loss is reflected in the results of operation. Cost of additions and substantial improvements to property and equipment are capitalized. The cost of maintenance and repairs of the property and equipment are charged to operating expenses as incurred.
l) Fair value of financial instruments
ASC 820, “Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying amounts of the Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximately their fair values due to the nature of the items. Please refer to Note 15, “Fair value of financial instruments,” for further information.
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m) Concentration of credit risk and significant customers
Financial instruments, which potentially expose the Company to concentrations of credit risk, are primarily comprised of cash and cash equivalents, investments, accounts receivable and unbilled accounts receivable, if any. The Company places its cash investments in highly rated financial institutions. The Company adheres to a formal investment policy with the primary objective of preservation of principal, which contains credit rating minimums and diversification requirements. Management believes its credit policies reflect normal industry terms and business risk. The Company does not anticipate non-performance by the counterparties and, accordingly, does not require collateral. During Fiscal 2023, sales were spread across customers in Asia and U.S. and the credit concentration risk is low.
n) 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 the 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.
For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable. For performance-based awards with a vesting schedule based entirely on the attainment of performance conditions, stock-based compensation expense associated with each tranche is recognized over the expected achievement period for the operational milestone, beginning at the point in time when the relevant operational milestone is considered probable to be achieved.
For market-based awards, stock-based compensation expense is recognized over the expected achievement period. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.
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. Generally, 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. For further information refer to Note 14, “Stock-Based Compensation” of Notes to Consolidated Financial Statements.
o) Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. We record associated legal fees as incurred. Information regarding our commitments and contingencies is incorporated by reference in Note 12, “Commitments and contingencies” of this Annual Report on Form 10-K.
p) Impairment of long – lived assets
The Company reviews its long-lived assets, with finite lives, for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable. Such circumstances include, though are not limited to, significant or sustained declines in revenues or earnings, future anticipated cash flows, business plans, and material adverse changes in the economic climate, such as changes in the operating environment, competitive information, and impact of changes in government policies. For assets that the Company intends to hold for use, if the total of the expected future undiscounted cash flows produced by the assets or subsidiary company is less than the carrying amount of the assets, a loss is recognized for the difference between the fair value and carrying value of the assets. For assets, the Company intends to dispose of by sale, a loss is recognized for the amount by which the estimated fair value less cost to sell is less than the carrying value of the assets. Fair value is determined based on quoted market prices, if available, or other valuation techniques including discounted future net cash flows. Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.
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q) Intangible assets
The Company’s intangible assets are accounted for in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Intangible assets having indefinite lives are not amortized, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value. We perform an impairment analysis on March 1 annually on the indefinite-lived intangible assets following the steps laid out in ASC 350-30-35-18. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets. If quantitative analysis is necessary, we would analyze various aspects including revenues from the business, associated with the intangible assets. In addition, intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company has analyzed a variety of factors in light of the known impact to date of the COVID-19 pandemic on its business to determine if a circumstance could trigger an impairment loss, and, at this time and based on the information presently known, does not believe it is more likely than not that an impairment loss has been incurred.
Intangible assets with finite useful lives are amortized using the straight-line method over their estimated period of benefit. In accordance with ASC 360-10-35-21, definite lived intangibles are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.
The Company intends to capitalize trademarks and related expenses exceeding $2,500 per trademark. Management may also capitalize trademarks and related expenses up to $2,500 per trademark based on its potential and benefit in coming years.
r) Inventory
Inventory is valued at the lower of cost or net realizable value, which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Inventory consists of finished goods related to wellness products, hand sanitizers, finished hemp-based products, beverages. Work-and in-progress consist of products in the manufacturing process as on reporting date, including but not limited to primary cost. 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.
We capitalize inventory costs related to our investigational drug, provided that management determines there is a potential alternative use for the inventory in future research and development projects or other purposes. As of March 31, 2023, and 2022, our consolidated balance sheet reported approximately $ 407 thousand and no clinical trial-related inventory, respectively.
Abnormal amounts of idle facility expense, freight, handling costs, scrap, discontinued products and wasted material (spoilage) are expensed in the period they are incurred.
Please refer to Note 3, “Inventory,” for further information.
s) Cybersecurity
We have a cybersecurity policy in place and tighter cybersecurity measures to safeguard against hackers. In Fiscal 2023, there were no impactful breaches in cybersecurity.
t) Research and Development Expenses
During Fiscal 2023 and 2022, the Company recorded research and development expenses of approximately $ 3.5 million and $ 2.3 million, respectively. All research and development costs are expensed in the period in which they are incurred.
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u) Leases
Lessor Accounting
Under the current ASU 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 a 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 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 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 Topic 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, 2023.
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 to Note 9, “Leases,” for further information.
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v) Recently issued and adopted accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (ASUs) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Newly issued ASUs not listed 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.
NOTE 3 – INVENTORY
(in thousands)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Raw materials
2,100
2,247
Work-in-progress
18
584
Finished goods
533
717
Total
2,651
3,548
Work-and in-progress consist of products in the manufacturing process as on reporting date, including but not limited to gummies, tincture, and hemp derivatives. Finished goods comprise, but is not limited to, hand sanitizers, gummies, lotions, and beverages, among others.
During Fiscal 2023, the Company charged $ 376 thousand of inventory in selling, general and administration due to product expiration, handling costs, scrap, and wasted material (spoilage) as compared to approximately $ 252 thousand for Fiscal 2022. This charge was recorded in Selling, general, and administrative expenses.
NOTE 4 – DEPOSITS AND ADVANCES
(in thousands)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Advances to suppliers and consultants
72
170
Other receivables and deposits
24
472
Prepaid expense and other current assets
262
336
Total
358
978
The Advances to suppliers and consultants primarily relate to advances to suppliers in our Life Sciences and Infrastructure segment. Prepaid and other current assets include approximately $ 25 thousand in statutory advances for Fiscal 2023, as compared to $ 170 thousand in Fiscal 2022. The Company decided to move advances paid to suppliers worth approximately $ 164 thousand to claims and advances, considering recovering might take more than 12 months.
NOTE 5 – INTANGIBLE ASSETS
Amortized intangible assets
(in thousands)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Patents
709
290
Other intangibles
34
32
Accumulated amortization
( 107
)
( 51
)
Total amortized intangible assets
636
271
Unamortized intangible assets
Patents
534
646
Other intangibles
-
-
Total unamortized intangible assets
534
646
Total intangible assets
1,170
917
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The value of intangible assets includes the cost of acquiring patent rights, supporting data, and the expense associated with filing of forty-one (41) patent applications in different countries along with nine (9) granted patents. It also includes acquisition costs related to domains, and licenses.
The amortization of patent and patent rights with finite life is up to 20 years, commencing from the date of grant or acquisition. The amortization expense in Fiscal 2023 and 2022 amounted to approximately $ 57 thousand and $ 24 thousand, respectively.
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, 2023, there was no impairment.
Estimated amortization expense
(in thousands)
($)
For the year ended 2024
62
For the year ended 2025
69
For the year ended 2026
75
For the year ended 2027
83
For the year ended 2028
91
NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT
(in thousands, except useful life)
Useful Life (years)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Land
N/A
4,100
4,438
Buildings and facilities
25
2,298
2,810
Plant and machinery
5 - 20
3,335
4,593
Computer equipment’s
3
138
241
Office equipment’s
3 - 5
84
145
Furniture and fixtures
5
92
141
Vehicles
5
102
163
Construction in progress
N/A
-
108
Total gross value
10,149
12,639
Less: Accumulated depreciation
( 1,936
)
( 3,220
)
Total property, plant and equipment, net
8,213
9,419
The depreciation expense in Fiscal 2023 and 2022 amounted to approximately $ 600 thousand and $ 627 thousand, respectively. The net decrease in total property, plant, and equipment (net) is primarily due to depreciation and foreign exchange translations because of a decrease in value of foreign currencies. In addition, Fiscal 2023, the Company disposed of fully depreciated assets in the amount of approximately $ 1.6 million from its subsidiaries. This resulted in a reduction in the value of total gross assets but did not affect the net value of assets as the disposed assets had previously been fully depreciated. The Company sold a property in Puerto Rico for net proceeds of approximately $ 485 thousand (acquired for approximately $ 480 thousand) and accounted for a profit of approximately $ 5 thousand in other income. For more information, please refer to Note 18, “Segment Information” for the non-current assets other than financial instruments held in the country of domicile and foreign countries.
NOTE 7 – LEFT BLANK INTENTIONALLY
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NOTE 8 – CLAIMS AND ADVANCES
(in thousands)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Claims receivable (1)
951
368
Non-current deposits
27
-
Non-current advances
25
569
Total
1,003
937
(1)
The claims receivable is due from different vendors. While the Company has initiated collection proceedings internally or with the appropriate authorities, it believes receiving the amount in the next 12 months will be challenging because of the time required for collection proceedings. The Company decided to move advances paid to some suppliers worth approximately $ 164 thousand to claims and advances, considering recovering might take more than 12 months. Includes $ 140 thousand owed to one of our manufacturers for the equipment purchase.
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 2023 and 2022 are approximately $ 178 thousand. The Company also has four operating leases as of March 31, 2023.
America : In November 2019, the Company entered into a lease agreement with a lease 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 remaining lease term for the operating lease is 2.7 years with a discount rate of 7 %. The lease does not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.
Asia : The Company renewed three lease agreements for terms between three to four years, expiring between 2023 and 2024. The total annual lease expense is approximately $ 25 thousand. The lease contracts do not contain any material residual value guarantees or material restrictive covenants. The remaining lease term for the operating leases is between 1 - 1.7 years with a discount rate of 7 %. The lease does not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.
(in thousands)
Year Ended
March 31, 2023
($)
(in thousands)
Year Ended
March 31, 2022
($)
Operating lease costs
148
149
Short term lease costs
178
178
Total lease costs
326
327
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Right of use assets and lease liabilities for our operating leases were recorded in the consolidated balance sheet as follows:
(in thousands)
(in thousands)
Year Ended
March 31, 2023
($)
Year Ended
March 31, 2022
($)
Assets
Operating lease asset
326
450
Total lease assets
326
450
Liabilities
Current liabilities:
Accrued liabilities and others (current portion – operating lease liability)
133
123
Noncurrent liabilities:
Operating lease liability (non-current portion – operating lease liability)
207
341
Total lease liability
340
464
Supplemental cash flow and non-cash information related to leases is as follows:
(in thousands)
Year Ended
March 31, 2023
($)
(in thousands)
Year Ended
March 31, 2022
($)
Cash paid for amounts included in the measurement of lease liabilities
–Operating cash flows from operating leases
118
109
Right-of-use assets obtained in exchange for operating lease obligations
326
450
As of March 31, 2023, the following table summarizes the maturity of our lease liabilities:
Mar-24
151
Mar-25
133
Mar-26
87
Mar-27
-
Less: Present value discount
( 31
)
Total Lease liabilities
340
NOTE 10 – ACCRUED LIABILITIES AND OTHERS
(in thousands)
As of
March 31, 2023
($)
As of
March 31, 2022
($)
Compensation and other contributions
619
1,054
Provision for expenses
258
103
Short-term lease liability
133
123
Other current liability
358
180
Total
1,368
1,460
Compensation and other contribution-related liabilities consist of accrued salaries to employees. In addition, provision for expenses includes provision for legal, professional, and marketing expenses. Other current liability also includes statutory payables of approximately $ 31 thousand and 55 thousand as of March 31, 2023, and March 31, 2022, respectively, and approximately $ 3 thousand of short-term loans as of March 31, 2023, and March 31, 2022, respectively.
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NOTE 11 – LOANS AND OTHER LIABILITIES
Loan as of March 31, 2023:
On June 11, 2020, the Company received an Economic Injury Disaster Loan (EIDL) for approximately $ 150 thousand at an annual interest rate of 3.75 %. The Company must pay principal and interest payments of $ 731 every month beginning June 5, 2021. The SBA will apply each installment payment first to pay interest accrued to the day SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining principal and accrued interest are due and payable 30 years from the date of the loan. For Fiscal 2023, the interest expense and principal payment for the EIDL were approximately $ 5 thousand and $ 3 thousand, respectively. As of March 31, 2023, approximately $ 141 thousand of the loan is classified as Long-term loans and approximately $ 3 thousand as Short-term loans.
Other Liability:
(in thousands)
As of March 31,
2023
($)
2022
($)
Statutory reserve
21
16
Total
21
16
The statutory reserve is a gratuity reserve for employees in our subsidiaries in India.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
The Company may be involved in legal proceedings, claims, and assessments arising in the ordinary course of business. 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, 2023, except as disclosed in Item 3 – Legal Proceedings, and Note 19 - 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 addition, under applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company. In addition, employees receive benefits from a provident fund, a defined contribution plan. The employee and employer each make monthly contributions to the plan equal to 12 % of the covered employee’s salary. The contribution is made to the Indian Government’s provident fund.
NOTE 13 – SECURITIES
As of March 31, 2023, the Company was authorized to issue up to 150,000,000 shares of common stock, par value $ 0.0001 per share, and 53,077,436 shares of common stock were issued and outstanding. The Company is also authorized to issue up to 1,000,000 shares of preferred stock, par value $ 0.0001 per share, and no preferred shares were issued and outstanding as of March 31, 2023. We have one security listed on the NYSE American: common stock, $0.0001 par value (ticker symbol: IGC). This security also trades on the Frankfurt, Stuttgart, and Berlin stock exchanges (ticker symbol: IGS1).
The Company also has 91,472 units outstanding that can be separated into common stock. Ten units may be separated into one share of common stock. The unit holders are requested to contact the Company or our transfer agent, Continental Stock Transfer & Trust, to separate their units into common stock.
On January 13, 2021, the Company entered into a Sales Agreement (the Agreement) with The Benchmark Company, LLC (Benchmark or the Sales Agent) pursuant to which the Sales Agent is acting as the Company’s sales agent with respect to the issuance and sale of up to $ 75,000,000 of the Company’s shares of common stock, par value $ 0.0001 per share (the Shares), from time to time in an “at the market” (ATM) offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the Offering). During Fiscal 2023, the Company raised approximately $ 103 thousand from the ATM, net of commission. The management may use these funds for working capital and capital expenditure requirements, along with clinical trials, share repurchases, debt repayments, investments, including but not limited to, mutual funds, treasury bonds, cryptocurrencies, and other asset classes.
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NOTE 14 – STOCK-BASED COMPENSATION
As of March 31, 2023, under both the Company’s previous 2008 and current 2018 Omnibus Incentive Plans, a total of 8,412,627 shares of common stock have been issued to employees, non-employees, and advisors. In addition, 5.5 million restricted share units (RSUs) fair valued at $ 5.5 million with a weighted average value of $ 1 per share, have been granted but not yet issued from different Incentive Plans and Grants. This includes 2.9 million RSUs granted to employees and directors, which consists of a vesting schedule based entirely on the attainment either operational milestones (performance conditions) or market conditions, assuming continued employment either as an employee, or director with the Company. The performance based RSUs are accounted upon certification by the management confirming the probability of achievement of milestones. As of March 31, 2023, the management confirmed two milestones had been achieved, and the rest were probable to be achieved by March 31, 2027.
Additionally, options held by advisors and directors to purchase 150 thousand shares of common stock fair valued at $ 69 thousand with a weighted average of $ 0.46 per share, which have been granted but are to be issued over a vesting period, between Fiscal 2022 and Fiscal 2026. Options granted and issued before the vesting period are expensed when issued.
The options are fair valued using a Black-Scholes Pricing Model and market based RSU are valued based on lattice model with the following assumptions:
Granted in
Fiscal 2023
Granted in
Fiscal 2022
Expected life of options
5 years
5 years
Vested options
100
%
100
%
Risk free interest rate
3.49
%
2.42
%
Expected volatility
280
%
282
%
Expected dividend yield
Nil
Nil
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 Selling, general and administrative expenses (including research and development). For Fiscal 2023, the Company’s common stock-based compensation and expenses shown in Selling, general and administrative expenses (including research and development) was $ 2.8 million.
For Fiscal 2022, the Company’s common stock-based compensation and expenses shown in Selling, general and administrative expenses (including research and development) was $ 2.2 million.
Non-vested shares
Shares
(in thousands)
(#)
Weighted average
grant date fair value
($)
Non-vested shares as of March 31, 2022
5,283
1.17
Granted
1,615
0.43
Vested
( 2,224
)
1.01
Cancelled/Forfeited
( 245
)
0.77
Non-vested shares as of March 31, 2023
4,429
1.01
Options
Shares
(in thousands)
(#)
Weighted average
grant date fair value
($)
Weighted average
exercise price
($)
Options outstanding as of March 31, 2022
300
0.93
0.34
Granted
-
-
-
Exercised
-
-
-
Cancelled/forfeited
( 150
)
1.39
0.30
Options outstanding as of March 31, 2023
150
1.39
0.30
There was a combined unrecognized expense of $ 2.7 million related to non-vested shares and share options that the Company expects to be recognized over a life of four years .
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NOTE 15 – FAIR VALUE OF FINANCIAL INSTRUMENTS
As of March 31, 2023, 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 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 the 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, 2023, and 2022, and indicates the fair value hierarchy of the valuation techniques the Company used to determine such fair value:
(in thousands)
Level 1
($)
Level 2
($)
Level 3
($)
Total
($)
March 31, 2023
Cash and cash equivalents:
3,196
-
-
3,196
Total cash and cash equivalents
3,196
-
-
3,196
Investments:
-Marketable securities
154
-
-
154
-Non-marketable securities
-
-
-
-
Total investments
154
-
-
154
Level 1
($)
Level 2
($)
Level 3
($)
Total
($)
March 31, 2022
Cash and cash equivalents:
10,460
-
-
10,460
Total cash and cash equivalents
10,460
-
-
10,460
Investments:
-Marketable securities
-
-
-
-
-Non-marketable securities
-
-
-
-
Total investment
-
-
-
-
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NOTE 16 – INCOME TAXES
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.
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. The valuation allowance will be maintained until sufficient positive evidence exists to support a conclusion that a valuation allowance is not necessary.
Income tax expense/(benefit) for each of the years ended March 31 consists of the following:
Year Ended March 31,
(in thousands)
Income Tax Expense
2023
($)
2022
($)
Net income loss before tax
( 11,506
)
( 15,016
)
Tax rate
21
%
21
%
Expected income tax recovery
( 2,416
)
( 3,153
)
Impact of tax rate differences in foreign jurisdictions
( 7
)
-
Tax rate changes and other adjustments
( 667
)
( 385
)
Permanent differences
88
50
Change in valuation allowance
3,002
3,488
-
-
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)
Deferred income taxes
2023
($)
2022
($)
Net operating loss carry-forwards foreign
137
149
Non-capital loss carry-forwards – U.S.
12,888
10,487
Temporary differences
548
( 66
)
Net deferred tax asset
13,573
10,570
Valuation allowance
( 13,573
)
( 10,570
)
-
-
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The table below sets forth the details of expiration of the non-financial carried forward losses of the Company as of March 31, 2023, as under:
Year
Amount
(in thousands)
($)
2023
47
2024
309
2025
3
2026
12
2027
30
2028
14
2029
25
2030
141
2031
3,081
2032
4,141
2033
627
2034
1,269
2035
1,735
2036
1,176
2037
819
2038
1,256
2039
4,132
2040
7,932
2041
8,841
2042
14,966
2043
11,359
Total
61,915
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. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. 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, Colombia, and the U.S.
NOTE 17 – REVENUE RECOGNITION
Revenue in the Infrastructure segment is recognized for the renting business when the equipment is rented, and the terms of the agreement have been fulfilled during the period. Revenue from the execution of infrastructure contracts is recognized on the basis of the 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. In retail sales, we offer consumer products through our online stores. Revenue is recognized when control of the goods is transferred to the customer. This generally occurs upon our delivery to a third-party carrier or to the customer directly. Revenue from white label services is recognized when the performance obligation has been completed and output material has been transferred to the customer.
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Net sales disaggregated by significant products and services for Fiscal 2023 and 2022 are as follows:
(in thousands)
Year ended March 31,
2023
($)
2022
($)
Infrastructure segment
Rental income (1)
37
23
Construction contracts (2)
76
15
Life Sciences segment
Wellness and lifestyle (3)
416
316
White labeling services (4)
382
43
Total
911
397
(1) Rental income consists of income from rental of heavy construction equipment.
(2) Construction income consists of the execution of contracts directly or through subcontractors.
(3) Revenue from wellness and lifestyle consists of sale of products such as gummies, hand sanitizers, bath bombs, lotions, beverages, hemp crude extract, hemp isolate, and hemp distillate.
(4) Revenue from white label services consists of rebranding our formulations or the customer’s products as per customer’s requirement.
NOTE 18 – SEGMENT INFORMATION
FASB ASC 280, “ Segment Reporting ” establishes standards for reporting information about reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group (CODM), in deciding how to allocate resources and in assessing performance. The CODM evaluates revenues and gross profits based on product lines and routes to market. Based on our integration and Management strategies, we operate in two reportable segments: (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 the purposes of making operating decisions and assessing financial performance. 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 segment 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 segment:
Product & Service
(in thousands)
Segments
Fiscal 2023
($)
Percentage of
Total Revenue
(%)
Infrastructure segment
113
12
%
Life Sciences segment
798
88
%
Total
911
100
%
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(in thousands)
Segments
Fiscal 2022
($)
Percentage of
Total Revenue
(%)
Infrastructure segment
38
9
%
Life Sciences segment
359
91
%
Total
397
100
%
For information for revenue by product and service, refer Note 17, “Revenue Recognition.”
2) The table below shows the attributed to the country of domicile (U.S.) and foreign countries. Revenue is generally attributed to the geographic location of customers:
(in thousands)
Segments
Country
Fiscal 2023
($)
Percentage of
Total Revenue
(%)
Asia
India
113
12
%
America
U.S.
777
86
%
Colombia
21
2
%
Total
911
100
%
(in thousands)
Segments
Country
Fiscal 2022
($)
Percentage of
Total Revenue
(%)
Asia
India
68
17
%
America
U.S.
329
83
%
Total
397
100
%
3) The table below shows the non-current assets other than financial instruments held in the country of domicile and foreign countries.
(in thousands)
Nature of Assets
U.S.
(Country of Domicile)
($)
Foreign Countries
(India, Hong Kong, and Colombia)
($)
Total as of March 31, 2023
($)
Intangible assets, net
1,170
-
1,170
Property, plant and equipment, net
4,074
4,139
8,213
Claims and advances
585
418
1,003
Operating lease asset
298
28
326
Total non-current assets
6,127
4,585
10,712
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(in thousands)
Nature of Assets
U.S.
(Country of Domicile)
($)
Foreign Countries
(India Hong Kong and Colombia)
($)
Total as of March 31, 2022
($)
Intangible assets, net
436
481
917
Property, plant and equipment, net
4,978
4,441
9,419
Claims and advances
550
387
937
Operating lease asset
396
54
450
Total non-current assets
6,360
5,363
11,723
NOTE 19 – SUBSEQUENT EVENTS
On June 30, 2023, the Company successfully obtained a working capital credit facility totaling $ 12 million and in addition sold 10,000,000 shares for $ 3,000,000 . The equity and the credit facility serve to minimize ongoing liquidity requirements and ensure the Company’s ability to sustain its operations. Furthermore, the Company intends to raise additional funds through private placement and ATM offerings, subject to market conditions.
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ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in and disagreements with accountants on accounting and financial disclosures.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.