IGC 10-Q Summary
Company and period: India Globalization Capital, Inc. (IGC), reporting for the quarter and six months ended September 30, 2020. Amounts below are in U.S. dollars; financial statement figures are in thousands unless stated otherwise. The company operates Infrastructure and Life Sciences segments.
Financial results
| Metric | Three months ended Sep. 30, 2020 | Six months ended Sep. 30, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | $125 | $709 | $1,821 quarter; $3,470 six months |
| Gross profit | $26 | $72 | $28 quarter; $69 six months |
| Operating loss | $(1,676) | $(3,607) | $(1,288) quarter; $(2,743) six months |
| Net loss | $(1,657) | $(3,539) | $(1,179) quarter; $(2,558) six months |
| Basic and diluted loss per share | $(0.04) | $(0.09) | $(0.03) quarter; $(0.06) six months |
- Gross margin was approximately 21% for the quarter and 10% for the six months, versus approximately 2% in each 2019 comparable period. Gross profit remained small relative to operating expenses.
- Six-month revenue mix shifted substantially: Life Sciences contributed $642 (90% of revenue), compared with $379 in 2019; Infrastructure contributed $67, versus $3,091 in 2019. For the September quarter, revenue was $67 from Infrastructure and $58 from Life Sciences.
- General and administrative expense rose 36% for the quarter to $1,483 and 38% for the six months to $3,238. Management cited compensation and payroll accruals, brand marketing, depreciation, and a one-time settlement expense of about $50.
Cash flow, balance sheet and liquidity
- At September 30, cash and cash equivalents were $1,151, marketable securities $3,850, current assets $13,687, and current liabilities $1,898. Working capital was $11,789. Cash plus marketable securities totaled $5,001.
- Cash declined $6,107 from March 31, 2020. Six-month operating cash use was $6,450, investing cash use $195, and financing cash inflow $530. Inventory growth used $2,439 of operating cash; capital spending was $1,229.
- Total liabilities were $2,748 and stockholders’ equity was $23,598. Loans totaled $580, comprising approximately $430 of Paycheck Protection Program borrowing and $150 of Economic Injury Disaster Loan borrowing. The PPP loan bears 1% interest and may qualify for forgiveness, but forgiveness is not assured; the EIDL bears 3.75% interest.
- Inventory was $6,684, up from $4,245 at March 31. Property, plant and equipment was $10,906, up from $9,780. Shares outstanding were 41,304,365 at September 30, compared with 39,320,116 at March 31.
Changes, outlook and material risks
- Management attributed the severe revenue decline primarily to COVID-19 disruptions, including store closures, abandoned hemp harvests, facility and office closures, and delayed infrastructure work. It reported limited visibility and expected volatility in both segments.
- The company began a 12-subject, placebo-controlled Phase 1 study of IGC-AD1 after FDA clearance to proceed in July 2020. Subsequent to quarter-end, it received IRB approval, engaged a study site and principal investigator, and began enrolling participants. Management expects R&D expense to increase as the trial proceeds; clinical efficacy and eventual regulatory approval are not established.
- A Kerala road-building contract valued at approximately $1.2 million was partially resumed during the quarter; management estimated completion would take 12–15 months, subject to pandemic conditions. Processing-equipment commissioning and certification were delayed.
- Management said existing cash, cash equivalents, marketable securities and other short-term liquidity arrangements should cover existing needs over the next 12 months, while also stating it expects to raise money when able. The filing reports substantial cash use and does not provide a specific financing plan or quantified runway.
- After quarter-end, the company was informed of a theft involving $1.73 million of inventory held by a processor. The processor’s insurance was expected to cover the inventory and the processor assured delivery; recovery and timing were not established in the filing.
- The company may ultimately terminate its Evolve I, Inc. acquisition. It had invested $249 and held approximately 19.8% of Evolve at quarter-end.
- Shareholder class-action litigation remained pending; the company’s motion to dismiss was unresolved. A separate regulatory risk concerns the DEA rule treating cannabis-derived intermediates above 0.3% THC as Schedule I controlled substances, which management said could affect hemp extraction operations.
- Additional risks include continued COVID-19 effects, clinical-trial delays or unfavorable results, regulatory and commercialization uncertainty, foreign-exchange exposure, and the collectability of a $380 claim receivable due from Cochin International Airport that had been outstanding for over a year.
Important facts for investors to verify
- Whether operating cash burn continues and whether additional financing is required; track cash and marketable securities together with working-capital needs.
- Whether the $1.73 million stolen inventory is recovered, insured, or otherwise results in a loss, and how it is reflected in subsequent reporting.
- Enrollment, safety findings, costs, and future milestones for the IGC-AD1 Phase 1 trial, without treating trial activity as evidence of efficacy.
- Actual sales recovery and segment economics, particularly whether Life Sciences revenue can offset persistent weakness in Infrastructure.
- PPP loan forgiveness, Evolve transaction status, the shareholder litigation outcome, and compliance implications of the DEA THC rule.