IGC 10-Q Summary
Entity note: The filing is for India Globalization Capital, Inc. (IGC), not a company identified as IGC Pharma. It covers the quarter and six months ended September 30, 2013, in IGC’s fiscal year ending March 31, 2014. Amounts are in U.S. dollars; statements are unaudited. Share and per-share figures reflect a 10-for-1 reverse split in April 2013.
Business context and reporting period
IGC describes itself as a materials and infrastructure company operating in India and China. Its activities include iron ore trading and processing, mining, logistics, and construction. Revenue in the periods presented came from iron ore trading. Indian mines remained closed; the company said it had begun operationalizing the first of three plants in Inner Mongolia.
Financial performance and position
| Metric | Three months ended September 30, 2013 | Six months ended September 30, 2013 |
|---|---|---|
| Revenue | $1.134 million | $2.257 million |
| Operating loss | $433,000 | $693,000 |
| Net loss attributable to common stockholders | $615,000; $0.09 per share | $1.249 million; $0.18 per share |
| Operating cash used | $416,000 for the six months |
- For the quarter, cost of revenue excluding depreciation was $943,000, leaving approximately $190,000 of gross profit and a 16.8% gross margin. For the six months, these figures were approximately $1.880 million, $378,000, and 16.7%, respectively.
- At September 30, cash and cash equivalents were $727,000, down from $1.064 million at March 31. Current assets were $3.857 million and current liabilities $3.428 million; the current ratio was approximately 1.13.
- Total liabilities were $4.077 million, including $1.8 million of notes payable and $345,000 of other loans. The $1.8 million unsecured Bricoleur note was due July 31, 2014 and carried a monthly payment obligation in shares. The filing reports $416,000 of operating cash use and $202,000 of cash proceeds from share issuance in the six-month period.
- Property, plant and equipment, net, was $7.998 million. Total assets were $18.542 million and total stockholders’ equity was $14.465 million.
Material changes versus prior comparable periods
- Quarterly revenue declined 16% from $1.351 million; six-month revenue declined 14% from $2.619 million.
- Quarterly net loss attributable to common stockholders widened from $143,000 to $615,000. For six months, it widened from $671,000 to $1.249 million.
- Quarterly SG&A rose to $475,000 from $342,000, which management attributed largely to employee stock awards. Six-month SG&A was $774,000 versus $783,000.
- Interest expense increased to $69,000 for the quarter and $181,000 for six months, compared with $16,000 and $26,000, respectively; management attributed the increase mainly to non-cash share payments to Bricoleur.
- Foreign exchange losses and other-income presentation affected results. The filing reports a $356,000 six-month foreign exchange loss, primarily related to remeasurement of intercompany receivables and currency movements.
- Shares outstanding increased to 7,481,426 from 6,980,098 at March 31, partly through ATM sales and stock issued for debt interest and services.
Outlook, commentary, and risks
- Management expected revenue and margins to rise as the Inner Mongolia plant becomes operational, iron ore prices improve, and the company sources ore from its own mines and beneficiation plants. These are expectations, not quantified guidance.
- IGC had an ATM agreement allowing up to $4 million of share sales; it issued 246,462 shares valued at approximately $202,000 during the quarter. Proceeds were intended for working capital, debt repayment, and general corporate purposes.
- Five Chinese customers represented approximately 90% of gross accounts receivable. The filing also identifies approximately $500,000 in aged receivables, including amounts due from Cochin International Airport that remained outstanding for over a year; the company said an arbitration ruling was in its favor.
- Management highlighted exposure to iron ore demand and prices, competition, government actions in India, China, and Mongolia, labor and logistics constraints, funding needs, and currency volatility. China holdings were being evaluated and restructured, which could result in a small charge.
- The filing reports no significant commitments or contingencies for the quarter, no material legal proceedings, and no subsequent events. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether the Inner Mongolia plant became operational as planned and whether it produces sustained revenue and margin improvement.
- Collection timing and recoverability of the aged $500,000 receivable and the concentration of receivables among five customers.
- Cash needs, the status and terms of the $1.8 million Bricoleur note, other loans, and any further ATM share sales or dilution.
- The effects of currency movements and the China restructuring on reported earnings, asset values, and potential charges.
- Reconciliation of the filing’s cash and restricted-cash wording: the balance sheet reports $727,000 of cash and cash equivalents, while MD&A describes that amount as cash “along with restricted cash.”