IGC Pharma, Inc. (filed as India Globalization Capital, Inc.) — Form 10-Q
Reporting period: Quarter and nine months ended December 31, 2013; fiscal year ends March 31. The filing describes a mining, materials and infrastructure business operating in India and China, including iron-ore trading and beneficiation, equipment leasing and construction activities.
Financial performance and position
| Metric | Three months ended Dec. 31, 2013 | Nine months ended Dec. 31, 2013 |
|---|---|---|
| Revenue | $17,529 | $2.275 million |
| Operating loss | $294,016 | $987,479 |
| Interest expense | $52,502 | $233,466 |
| Net loss attributable to common stockholders | $310,476 | $1.559 million |
| Loss per share, basic and diluted | $0.04 | $0.20 |
| Net cash used in operating activities | Not presented for quarter | $866,889 |
For the nine months, revenue fell 65% from $6.553 million in the prior-year period, and the common-stockholder loss increased from $360,134. Cash and cash equivalents were $440,626 at December 31, down from $1.064 million at March 31. Current assets were $3.800 million and current liabilities $3.251 million. Total liabilities were $3.907 million; stockholders’ equity was $14.281 million.
Debt included an unsecured $1.8 million note due July 31, 2014, reclassified as current, and $304,010 in other loans. The note’s contractual monthly payment is 17,100 common shares while unpaid. The company raised $638,912 through share sales under its at-the-market program during the nine months; shares outstanding rose to 7,980,919 from 6,980,098.
Material changes and management commentary
- Management shifted resources from lower-margin iron-ore trading to beneficiation, which it characterized as a higher-margin strategy. In the December quarter, the company ran the dry process but did not start wet processing, citing the need to build dry-process inventory and winter conditions. The partially processed material was recorded as inventory, not revenue; the quarter’s reported revenue primarily came from small equipment-rental activity.
- Management said Indian mines remained closed and the first of three Inner Mongolia plants was being operationalized. It expects revenue and margins to increase as plant-produced ore sales begin, but provided no quantified guidance.
- Management attributed the nine-month loss increase mainly to higher non-cash interest, stock-based compensation and foreign-exchange losses. Nine-month foreign-exchange losses were approximately $323,000. Operating cash flow turned negative versus $1.260 million provided in the prior-year period.
- The filing says the company had enough cash to continue operations, but not enough to expand or pursue acquisitions. It reported approximately $93,000 of non-GAAP cash burn for the December quarter, with adjustments described in MD&A.
Risks, contingencies and unusual items
- Five China customers represented approximately 90% of gross accounts receivable. Approximately $500,000 of aged receivables remained outstanding; the filing identifies a Cochin International Airport receivable with a favorable arbitration ruling but no reported collection.
- Currency movements, government actions in India, China and Mongolia, iron-ore demand and competition, logistics and labor issues, and cash requirements are identified risks. The company also disclosed possible charges from restructuring its Inner Mongolia holdings.
- The $1.8 million note generates non-cash share payments; the filing reports $219,735 of common stock issued for note interest during the nine months. No significant commitments or contingencies were reported for the quarter, and no material legal proceedings were disclosed.
- Management stated disclosure controls were effective and reported no material changes in internal control over financial reporting during the quarter.
Investor verification priorities
- Verify the timing, operating readiness and economics of wet-process beneficiation, and whether partial-product inventory can be converted into sales and cash.
- Assess liquidity and refinancing or repayment plans for the $1.8 million note due July 2014, alongside continuing cash use and potential dilution from equity issuance.
- Confirm collectability and timing of the aged receivables, including the Cochin award, and evaluate the concentration in five China customers.
- Reconcile the filing’s differing descriptions of quarterly net loss: the statements report $310,476 attributable to common stockholders, while MD&A cites approximately $299,800. Also confirm the correct cash-flow and cash-burn measures.
- Monitor foreign-exchange exposure, the Inner Mongolia restructuring and any related charges, and progress toward the company’s stated profitability and growth plans.