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 )
46
Consolidated Balance Sheets
47
Consolidated Statements of Operations and Comprehensive Loss
48
Consolidated Statements of Stockholders’ Equity
49
Consolidated Statements of Cash Flows
50
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. and its subsidiaries (the “Company”) as of March 31, 2024 and 2023, 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, 2024, 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 of March 31, 2024, and 2023, and the consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, 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 judgments. 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
June 24, 2024
UDIN: 24237830BKGUQV1424
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IGC Pharma, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
2024
($)
March 31,
2023
($)
ASSETS
Current assets:
Cash and cash equivalents
1,198
3,196
Accounts receivable, net
39
107
Short term investments
-
154
Inventory
1,540
2,651
Asset held for sale
720
-
Deposits and advances
208
358
Total current assets
3,705
6,466
Non-current assets:
Intangible assets, net
1,616
1,170
Property, plant and equipment, net
3,695
8,213
Claims and advances
688
1,003
Operating lease asset
198
326
Total non-current assets
6,197
10,712
Total assets
9,902
17,178
LIABILITIES AND STOCKHOLDERS ’ EQUITY
Current liabilities:
Accounts payable
773
530
Accrued liabilities and others
1,567
1,368
Total current liabilities
2,340
1,898
Non-current liabilities:
Long-term loans
137
141
Other liabilities
20
21
Operating lease liability
84
207
Total non-current liabilities
241
369
Total liabilities
2,581
2,267
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, 2024, or March 31, 2023.
Common stock and additional paid-in capital, $ 0.0001 par value: 150,000,000 shares authorized; 66,691,195 and 53,077,436 shares issued and outstanding as of March 31, 2024, and March 31, 2023, respectively.
124,409
118,965
Accumulated other comprehensive loss
( 3,423
)
( 3,389
)
Accumulated deficit
( 113,665
)
( 100,665
)
Total stockholders ’ equity
7,321
14,911
Total liabilities and stockholders ’ equity
9,902
17,178
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,
2024
($)
2023
($)
Revenue
1,345
911
Cost of revenue
( 612
)
( 469
)
Gross profit
733
442
Selling, general and administrative expenses
( 6,758
)
( 8,552
)
Research and development expenses
( 3,773
)
( 3,461
)
Operating loss
( 9,798
)
( 11,571
)
Impairment loss on PPE
( 3,345
)
-
Other income, net
143
65
Loss before income taxes
( 13,000
)
( 11,506
)
Income tax expense/benefit
-
-
Net loss attributable to common stockholders
( 13,000
)
( 11,506
)
Foreign currency translation adjustments
( 34
)
( 421
)
Comprehensive loss
( 13,034
)
( 11,927
)
Net loss per share attributable to common stockholders:
Basic and diluted
$
( 0.22
)
$
( 0.22
)
Weighted-average number of shares used in computing loss per share amounts:
58,839,868
52,576,258
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, 2022
51,054
116,019
( 89,159
)
( 2,968
)
23,892
Common stock-based compensation & expenses, net
1,815
2,843
-
-
2,843
Issuance of common stock through offering (net of expenses)
208
103
-
-
103
Cancellation/forfeiture of shares
-
-
-
-
-
Common stock subscribed
-
-
-
-
-
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
Balances as of April 1, 2023
53,077
118,965
( 100,665
)
( 3,389
)
14,911
Common stock-based compensation & expenses, net
3,534
1,917
-
-
1,917
Issuance of common stock through offering (net of expenses)
10,580
3,027
-
-
3,027
Cancellation/forfeiture of shares
( 500
)
-
-
-
-
Common stock subscribed
-
500
-
-
500
Net loss
-
-
( 13,000
)
-
( 13,000
)
Foreign currency translation adjustments
-
-
-
( 34
)
( 34
)
Balances as of March 31, 2024
66,691
124,409
( 113,665
)
( 3,423
)
7,321
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,
2024
($)
2023
($)
Cash flows from operating activities:
Net loss
( 13,000
)
( 11,506
)
Adjustment to reconcile net loss to net cash:
Depreciation and amortization
637
657
Provision for bad debt
93
126
Impairment of assets
3,448
-
Common stock-based compensation and expenses, net
1,773
2,843
Profit/Loss on sale of fixed assets, net
( 44
)
39
Changes in:
Accounts receivables, net
( 25
)
5
Inventory
1,008
897
Deposits and advances
150
591
Claims and advances
315
( 150
)
Accounts payable
243
( 451
)
Accrued and other liabilities
197
( 88
)
Operating lease asset
129
124
Operating lease liability
( 123
)
( 134
)
Net cash used in operating activities
( 5,199
)
( 7,047
)
Cash flow from investing activities:
Purchase of property, plant, and equipment
( 138
)
( 310
)
Sale of property, plant, and equipment
44
538
Proceeds from (Purchase of) short-term investments
154
( 154
)
Acquisition and development of intangible assets
( 377
)
( 309
)
Net cash used in investing activities
( 317
)
( 235
)
Cash flows from financing activities:
Net proceeds from the issuance of common stock
3,027
103
Proceeds from common stock subscribed
500
-
Repayment of long-term loan
( 3
)
( 3
)
Net cash provided by financing activities
3,524
100
Effects of exchange rate changes on cash and cash equivalents
( 6
)
( 82
)
Net decrease in cash and cash equivalents
( 1,998
)
( 7,264
)
Cash and cash equivalents at the beginning of the period
3,196
10,460
Cash and cash equivalents at the end of the period
1,198
3,196
Supplementary information:
Non-cash items:
Common stock issued/granted for stock-based compensation, including patent acquisition
1,773
2,843
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, 2024, and 2023
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
IGC Pharma is on a mission to transform Alzheimer’s treatment. We are building a robust pipeline of five drug candidates, each targeting different aspects of the disease.
●
IGC-AD1 : Our lead investigational drug tackles agitation, a major burden for patients and caregivers. By addressing neuroinflammation, it offers a faster-acting solution compared to traditional medications.
●
TGR-63 : Through pre-clinical studies, TGR-63 has demonstrated its potential to disrupt the progression of Alzheimer’s by targeting Aβ plaques, a key disease hallmark.
●
IGC-1C : At the preclinical stage, IGC-1C represents a potential breakthrough by targeting tau protein and neurofibrillary tangles, aiming to modify the disease course.
●
IGC-M3 : Also in preclinical development, IGC-M3 focuses on early intervention by inhibiting Aβ plaque formation, potentially slowing cognitive decline.
●
LMP : In preclinical development, LMP is designed to target multiple hallmarks of Alzheimer’s disease, including Aβ plaques and neurofibrillary tangles for a comprehensive therapeutic effect.
We are also harnessing the power of Artificial Intelligence (“AI”) to develop early detection models, optimize clinical trials, and explore new applications for our drugs including for IGC-AD1. Additionally, our 28 patent filings, including for IGC-AD1, demonstrates our commitment to innovation and protecting our intellectual property.
As of March 31, 2024, the Company had the following operating subsidiaries: Techni Bharathi Private Limited (TBL), IGCare LLC, HH Processors, LLC, IGC Pharma, LLC, SAN Holdings, LLC, Sunday Seltzer, LLC, Hamsa Biopharma India Pvt. Ltd. And Colombia-based beneficially-owned subsidiary IGC Pharma SAS. 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 has 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 Segment and Infrastructure Segment.
Life Sciences Segment
IGC Pharma, a clinical-stage company developing treatments for Alzheimer's disease, is committed to transforming patient care by offering faster-acting and more effective solutions. Our lead drug, IGC-AD1, embodies this vision by tackling a critical challenge – managing agitation in Alzheimer's dementia. Early results from our Phase 2 trial are promising: IGC-AD1 effectively reduced agitation in patients compared to a placebo, and crucially, it did so much faster than traditional medications. While existing anti-psychotics can take a long 6 to 12 weeks to show effects, IGC-AD1 has the potential to act within two weeks. This significantly faster onset of action could significantly improve patient care and represents a potential breakthrough in managing Alzheimer's-related agitation. In addition, we have created in-house wellness brands, available through online channels that are compliant with relevant federal, state, and local laws and regulations. We derive revenue from our in-house wellness non-pharmaceutical formulations that are manufactured as non-GMO, vegan, products at our facility and are sold over-the-counter (“OTC”).
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.
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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 expenses, components, manufacturing overhead, and outbound freight for our products division. In our products division, the cost of revenue also includes the cost of refurbishing or repackaging, if required, on products returned by customers that will be offered for resale.
e) Earnings/(Loss) per Share
The computation of basic loss per share for Fiscal 2024 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 2024 and 2023, used for the computation of basic earnings per share (“EPS”) is 58,839,868 and 52,576,258 , respectively. Due to the loss incurred during Fiscal 2024 and 2023, all the potential equity shares are anti-dilutive, and accordingly, the fully diluted EPS is equal to the basic EPS.
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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, 2024, and March 31, 2023, the Company incurred net losses of $ 13 million and $ 11.5 million, respectively. As of March 31, 2024, the Company’s cash and cash equivalents totaled $1.2 million. On June 30, 2023, the Company successfully obtained a working capital facility totaling approximately $ 12 million for one year, and the Company is in the process of renewing the facility for another year during the month of June 2024. In addition, on March 22, 2024, the Company entered into a share purchase agreement relating to the sale and issuance by our company to the investors of an aggregate of approximately 8.8 million shares of our common stock, for a total purchase price of $ 3 million or $ 0.34 per share, subject to the terms and subject to the conditions set forth in the 2024 SPA. As of March 31, 2024, the Company received $ 500 thousand, and the remaining $ 2.5 million was received in April 2024. 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 the resolution of related appeals or litigation processes, based on the 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 to be realized upon settlement. As of March 31, 2024, and 2023, 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 $ 39 thousand of accounts receivable, net of provision for doubtful debt of $ 24 thousand as of March 31, 2024, as compared to $ 107 thousand of accounts receivable, net of provision for doubtful debt of $ 17 thousand as of March 31, 2023.
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, 2024, and 2023 were approximately $ 1.2 million and $ 3.2 million, respectively.
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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 that 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, 2024, 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 ” )
PP&E 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 PP&E are de-recognized, and any gain or loss is reflected in the results of the operation. The 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.
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 2024, sales were spread across customers in Asia and U.S., and the credit concentration risk is low.
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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 the 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.
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 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.
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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) Software Development Costs
Software development costs, including costs to develop software products or the software component of products to be marketed or sold to external users, are expensed before the software or technology reaches technological feasibility, which is typically reached shortly before the release of such products.
Software development costs also include the costs of developing software to be used solely to meet internal needs and applications used to deliver our services. These software development costs meet the criteria for capitalization once the preliminary project stage is complete, and it is probable that the project will be completed, and the software will be used to perform the function intended.
s) 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, 2024, and 2023, our consolidated balance sheet reported approximately $ 392 thousand and $ 407 thousand 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.
t) Cybersecurity
We have a cybersecurity policy in place and tighter cybersecurity measures to safeguard against hackers. In Fiscal 2024, there were no impactful breaches in cybersecurity.
u) Research and Development Expenses
During Fiscal 2024 and 2023, the Company recorded research and development expenses of approximately $ 3.8 million and $ 3.5 million, respectively. All research and development costs are expensed in the period in which they are incurred.
v) 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.
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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.
w) 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, 2024
($)
As of
March 31, 2023
($)
Raw materials
1,099
2,100
Work-in-progress
-
18
Finished goods
441
533
Total
1,540
2,651
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During Fiscal 2024, and Fiscal 2023, the Company wrote off approximately $ 1 million and $ 376 thousand of inventory due to abnormal loss due to the NRV adjustment, product expiration, idle facility expense, freight, handling costs, scrap, and wasted material (spoilage). This charge was recorded in Selling, General, and Administrative Expenses.
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, 2024, and March 31, 2023, our consolidated balance sheet reported approximately $ 392 thousand and $ 407 thousand clinical trial-related inventory, respectively.
NOTE 4 – DEPOSITS AND ADVANCES
(in thousands)
As of
March 31, 2024
($)
As of
March 31, 2023
($)
Advances to suppliers and consultants
41
72
Other receivables and deposits
52
24
Prepaid expense and other current assets
115
262
Total
208
358
The Advances to suppliers and consultants primarily relate to advances to vendors. Prepaid and other current assets include approximately $ 39 thousand and approximately $ 25 thousand in statutory advances for Fiscal 2024 and Fiscal 2023, respectively.
NOTE 5 – INTANGIBLE ASSETS
Amortized intangible assets
(in thousands)
As of
March 31, 2024
($)
As of
March 31, 2023
($)
Patents
836
709
Other intangibles
34
34
Accumulated amortization
( 181
)
( 107
)
Total amortized intangible assets
689
636
Unamortized intangible assets
Patents
521
534
Software development cost
406
-
Total unamortized intangible assets
927
534
Total intangible assets
1,616
1,170
The value of intangible assets includes the cost of acquiring patent rights, supporting data, and the expense associated with filing various patent applications in different countries along with 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 expenses in Fiscal 2024 and 2023 amounted to approximately $ 74 thousand and $ 57 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 conclude that, as of March 31, 2024, there was no impairment.
Estimated amortization expense
(in thousands)
($)
For the year ended 2025
82
For the year ended 2026
90
For the year ended 2027
99
For the year ended 2028
109
For the year ended 2029
120
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NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT
(in thousands, except useful life)
Useful Life (years)
As of
March 31, 2024
($)
As of
March 31, 2023
($)
Land
N/A
-
4,100
Buildings and facilities
25
2,303
2,298
Plant and machinery
5 - 20
3,334
3,335
Computer equipment’s
3
166
138
Office equipment’s
3 - 5
140
84
Furniture and fixtures
5
93
92
Vehicles
5
101
102
Construction in progress
N/A
-
-
Total gross value
6,137
10,149
Less: Accumulated depreciation
( 2,442
)
( 1,936
)
Total property, plant, and equipment, net
3,695
8,213
The depreciation expense in Fiscal 2024 and 2023 amounted to approximately $ 563 thousand and $ 417 thousand, respectively. The net decrease in total property, plant, and equipment is primarily due to the impairment of land by approximately $ 3.3 million. During Fiscal 2024, the Company focused on liquidating all non-operating assets to reduce costs and generate cash. As a result, the Company sold a fully depreciated property in India for net proceeds of approximately $ 43 thousand and accounted for the same in other income, and impaired the land situated in Nagpur, India, by approximately $ 3.3 million to $ 720 thousand from $ 4.1 million. The company believes it can sell the above-said non-operating land as it is without any improvement. Selling this land will give immediate cash, which the company can use in its operating segments. 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
NOTE 8 – CLAIMS AND ADVANCES
(in thousands)
As of
March 31, 2024
($)
As of
March 31, 2023
($)
Claims receivable (1)
686
951
Non-current deposits
2
27
Non-current advances
-
25
Total
688
1,003
(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.
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 2024 and 2023 are approximately $ 100 thousand and $ 178 thousand, respectively. The Company also has four operating leases as of March 31, 2024.
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 1.6 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.
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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 $ 18 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 less than 1 year 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, 2024
($)
(in thousands)
Year Ended
March 31, 2023
($)
Operating lease costs
141
148
Short term lease costs
100
178
Total lease costs
241
326
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, 2024
($)
Year Ended
March 31, 2023
($)
Assets
Operating lease asset
198
326
Total lease assets
198
326
Liabilities
Current liabilities:
Accrued liabilities and others (current portion – operating lease liability)
124
133
Noncurrent liabilities:
Operating lease liability (non-current portion – operating lease liability)
84
207
Total lease liability
208
340
Supplemental cash flow and non-cash information related to leases is as follows:
(in thousands)
Year Ended
March 31, 2024
($)
(in thousands)
Year Ended
March 31, 2023
($)
Cash paid for amounts included in the measurement of lease liabilities
–Operating cash flows from operating leases
140
118
Right-of-use assets obtained in exchange for operating lease obligations
198
326
As of March 31, 2024, the following table summarizes the maturity of our lease liabilities:
Mar-25
132
Mar-26
87
Mar-27
-
Mar-28
-
Less: Present value discount
( 11
)
Total Lease liabilities
208
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NOTE 10 – ACCRUED LIABILITIES AND OTHERS
(in thousands)
As of
March 31, 2024
($)
As of
March 31, 2023
($)
Compensation and other contributions
816
619
Provision for expenses
208
258
Short-term lease liability
124
133
Other current liability
419
358
Total
1,567
1,368
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 $ 25 thousand and $ 31 thousand as of March 31, 2024, and March 31, 2023, respectively, and approximately $ 3 thousand of short-term loans as of March 31, 2024, and March 31, 2023, respectively.
NOTE 11 – LOANS AND OTHER LIABILITIES
Loan as of March 31, 2024:
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 the principal. All remaining principal and accrued interest are due and payable 30 years from the date of the loan. For Fiscal 2024, the interest expense and principal payment for the EIDL were approximately $ 5 thousand and $ 3 thousand, respectively. As of March 31, 2024, approximately $ 137 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,
2024
($)
2023
($)
Statutory reserve
20
21
Total
20
21
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, 2024, 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 as required by the law. The contribution is made to the Foreign Government’s funds.
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NOTE 13 – SECURITIES
As of March 31, 2024, the Company was authorized to issue up to 150,000,000 shares of common stock, par value of $ 0.0001 per share, and 66,691,195 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 of $ 0.0001 per share, and no preferred shares were issued and outstanding as of March 31, 2024. 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 October 27, 2023, the Company entered into a Sales Agreement (the “Agreement”) with A.G.P./Alliance Global Partners (the “Agent”) pursuant to which the Company may offer and sell, from time to time, through the Agent, as sales agent and/or principal shares of its common stock having an aggregate offering price of up to $ 60 million (“Shares”), subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the Sales Agreement (the “Offering”). Prior to entering into the Sales Agreement with A.G.P./Alliance Global Partners, the Company terminated the Sales Agreement dated January 13, 2021, with The Benchmark Company.
On June 30, 2023, the Company entered into a Share Purchase Agreement (the “June 2023 SPA”) with Bradbury Asset Management and three unrelated investors, resulting in approximately $ 3 million in gross proceeds. The completion of the private placement is subject to customary closing conditions, including approval by the NYSE. Under the terms of the private placement, IGC issued 10 million shares of unregistered common stock at a price of $ 0.30 per share. Shares are intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of the provisions of Section 4(a)(2) of the Securities Act and Regulation D and/or Regulation S adopted thereunder.
On March 22, 2024, the Company entered into a Share Purchase Agreement (the “March 2024 SPA”) with Bradbury Strategic Investment Fund A, resulting in approximately $ 3 million in gross proceeds. The completion of the private placement is subject to customary closing conditions, including approval by the NYSE. Under the terms of the private placement, IGC will issue approximately 8.8 million shares of unregistered common stock at a price of $ 0.34 per share. In addition, the Company issued 2 million shares of unregistered common stock for consulting services related to raising capital, including the March 2024 capital raised. Shares are intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of the provisions of Section 4(a)(2) of the Securities Act and Regulation D and/or Regulation S adopted thereunder.
NOTE 14 – STOCK-BASED COMPENSATION
As of March 31, 2024, under both the Company’s previous 2008 and current 2018 Omnibus Incentive Plans approximately 9.1 million shares of common stock have been issued to employees, non-employees, and advisors. In addition, 7.6 million restricted share units (“RSUs”) fair valued at $ 4.6 million with a weighted average value of $ 0.61 per share, have been granted but not yet issued from different Incentive Plans and Grants. This includes 4.9 million RSUs granted to employees and directors, which consists of a vesting schedule based entirely on the attainment of 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 for upon certification by the management, confirming the probability of achievement of milestones. As of March 31, 2024, the management confirmed that five milestones had been achieved, and the rest were probable to be achieved by March 31, 2028.
Additionally, options held by advisors and directors to purchase 3.7 million shares of common stock fair valued at $ 925 thousand with a weighted average of $ 0.25 per share, which have been granted but are to be issued over a vesting period between Fiscal 2022 and Fiscal 2027. Options granted and issued before the vesting period are expensed when issued.
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The options are fair valued using a Black-Scholes Pricing Model, and market-based RSU are valued based on a lattice model with the following assumptions:
Granted in
Fiscal 2024
Granted in
Fiscal 2023
Expected life of options
5 years
5 years
Vested options
100 % 100 %
Risk free interest rate
5.24 % 2.42 %
Expected volatility
175 % 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 2024, the Company’s share-based expense and option-based expense shown in Selling, general, and administrative expenses (including research and development) were $ 1.7 million and $ 59 thousand, respectively.
For Fiscal 2023, the Company’s share-based expenses and option-based expenses shown in Selling, general, and administrative expenses (including research and development) were $ 2.8 million and $ 29 thousand, respectively.
Non-vested shares
Shares
(in thousands)
(#)
Weighted average
grant date fair value
($)
Non-vested shares as of March 31, 2023
4,429
1.01
Granted
5,848
0.28
Vested
( 2,535
)
0.58
Cancelled/Forfeited
( 290
)
0.31
Non-vested shares as of March 31, 2024
7,452
0.61
Options
Shares
(in thousands)
(#)
Weighted average
grant date fair value
($)
Weighted average
exercise price
($)
Options outstanding as of March 31, 2023
150
0.46
0.39
Granted
3,560
0.24
0.27
Exercised
-
-
-
Cancelled/forfeited
-
-
-
Options outstanding as of March 31, 2024
3,710
0.25
0.29
There was a combined unrecognized expense of $ 3.21 million related to non-vested shares and share options that the Company expects to be recognized over a life of up to 5 (five) years.
NOTE 15 – FAIR VALUE OF FINANCIAL INSTRUMENTS
As of March 31, 2024, 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.”
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The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2024, and 2023, and indicates the fair value hierarchy of the valuation techniques the Company used to determine such fair value:
(in thousands)
As of March 31, 2024
Particular
Adjusted Cost
($)
Gain
($)
Loss
($)
Fair Value
($)
Cash &
Cash Equivalents
($)
Short Term
Investments
($)
Level 1
Cash
912
-
-
912
912
-
Money Market Fund
-
-
-
-
-
-
Debt Funds
13
-
-
13
13
-
Mutual Fund
123
-
-
123
123
-
Level 2
Certificates of Deposit
150
-
-
150
150
-
Level 3
-
-
-
-
-
-
TOTAL
1,198
-
-
1,198
1,198
-
As of March 31, 2023
Particular
Adjusted Cost
($)
Gain
($)
Loss
($)
Fair Value
($)
Cash &
Cash Equivalents
($)
Short Term
Investments
($)
Level 1
Cash
1,156
-
-
1,156
1,156
-
Money Market Fund
2,000
-
-
2,000
2,000
-
Debt Funds
40
-
-
40
40
-
Mutual Fund
152
2
-
154
-
154
Level 2
Certificates of Deposit
-
-
-
-
-
-
Level 3
-
-
-
-
-
-
TOTAL
3,348
2
-
3,350
3,196
154
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.
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Income tax expense/(benefit) for each of the years ended March 31 consists of the following:
Year Ended March 31,
(in thousands)
Income Tax Expense
2024
($)
2023
($)
Net income loss before tax
( 13,000
)
( 11,506
)
Tax rate
21
%
21
%
Expected income tax recovery
( 2,730
)
( 2,416
)
Impact of tax rate differences in foreign jurisdictions
( 151
)
( 7
)
Tax rate changes and other adjustments
1,475
( 667
)
Permanent differences
-
88
Change in valuation allowance
1,406
3,002
-
-
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
2024
($)
2023
($)
Net operating loss carry-forwards foreign
287
137
Non-capital loss carry-forwards – U.S.
14,272
12,888
Temporary differences
418
548
Net deferred tax asset
14,977
13,573
Valuation allowance
( 14,977
)
( 13,573
)
-
-
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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, 2024, as under:
Year
Amount
(in thousands)
($)
2024
43
2025
-
2026
-
2027
10
2028
9
2029
-
2030
37
2031
3,082
2032
5,140
2033
627
2034
1,269
2035
1,735
2036
1,175
2037
819
2038
1,256
2039
4,131
2040
7,932
2041
8,841
2042
14,966
2043
8,552
2044
9,396
No expiry
78
Total
69,101
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, Colombia, and the U.S. The Company has a carry-forward R&D tax credit of approximately $ 4,542 thousand
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 a 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 2024 and 2023 are as follows:
(in thousands)
Year ended March 31,
2024
($)
2023
($)
Infrastructure segment
Rental income (1)
18
37
Construction contracts (2)
146
76
Life Sciences segment
Wellness and lifestyle (3)
228
416
White labeling services (4)
953
382
Total
1,345
911
(1) Rental income consists of income from the 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 the 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 the 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 and 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) Life Sciences segment and (ii) Infrastructure 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) Life Sciences segment and (b) Infrastructure segment. The Company does not include intercompany transfers between segments for Management reporting purposes.
The following provides information required by ASC 280-10-50-38 “Entity-wide Information”:
1) The table below shows revenue reported by segments:
Product & Service
(in thousands)
Segments
Fiscal 2024
($)
Percentage of
Total Revenue
(%)
Infrastructure segment
164
12
%
Life Sciences segment
1,181
88
%
Total
1,345
100
%
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(in thousands)
Segments
Fiscal 2023
($)
Percentage of
Total Revenue
(%)
Infrastructure segment
113
12
%
Life Sciences segment
798
88
%
Total
911
100
%
For information on revenue by product and service, refer to Note 17, “Revenue Recognition.”
2) The table below shows the attributes 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 2024
($)
Percentage of
Total Revenue
(%)
Asia
India
164
12
%
America
U.S.
1,179
87
%
Colombia
2
1
%
Total
1,345
100
%
(in thousands)
Segments
Country
Fiscal 2023
($)
Percentage of
Total Revenue
(%)
Asia
India
113
12
%
America
U.S.
777
86
%
Colombia
21
2
%
Total
911
100
%
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, 2024
($)
Intangible assets, net
1,616
-
1,616
Property, plant and equipment, net
3,620
75
3,695
Claims and advances
410
278
688
Operating lease asset
193
5
198
Total non-current assets
5,839
358
6,197
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(in thousands)
Nature of Assets
U.S.
(Country of Domicile)
($)
Foreign Countries
(India Hong Kong and Colombia)
($)
Total as of
March 31, 2023
($)
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
NOTE 19 – SUBSEQUENT EVENTS
As disclosed in Note 13 “Securities,” the Company entered into the 2024 SPA. As of March 31, 2024, the Company had received $ 500 thousand of the total $ 3 million due under the March 2024 SPA, while the remaining $ 2.5 million was received in April 2024. Please refer to Note 13, “Securities”, for more information.
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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.