IGC Pharma, Inc. (then India Globalization Capital, Inc.) — Form 10-Q Summary
Reporting period: Fiscal first quarter ended June 30, 2013; filed August 16, 2013. Financial statements are unaudited. The company operated mining, iron-ore trading and construction businesses in India and China; this filing describes no pharmaceutical business.
Financial results and condition
| Metric | Three months ended June 30, 2013 | Comparable 2012 period |
|---|---|---|
| Revenue | $1.124 million | $1.268 million |
| Cost of revenue, excluding depreciation | $936,239 | $937,444 |
| Gross profit, calculated | $187,665; 16.7% margin | $330,236; 26.0% margin |
| Operating loss | $260,754; 23.2% operating loss margin | $194,133; 15.3% operating loss margin |
| Interest expense | $112,136 | $10,557 |
| Net loss attributable to common stockholders | $633,487; $0.09 per share | $528,316; $0.14 per share |
| Cash used in operating activities | $243,564 | $80,504 |
- Other income was a net loss of $261,908, including foreign-exchange losses; the filing reports FX losses of $233,775 for the quarter, largely attributed to Indian rupee depreciation against the U.S. dollar.
- At June 30, cash and cash equivalents were $651,465, down from $1,064,421 at March 31. Total current assets were $3.722 million and current liabilities $1.655 million, implying working capital of approximately $2.067 million.
- Total liabilities were $4.112 million; total equity was $14.463 million. The $1.8 million Bricoleur promissory note was classified as long-term after its maturity was extended to July 31, 2014. Other loans totaled $446,803 at quarter-end.
- Net property, plant and equipment was $8.126 million. Total assets were $18.575 million.
Changes, outlook and risks
- Revenue fell about 11% year over year. Management said revenue came from iron-ore trading and that lower SG&A reflected reduced overhead and realignment toward mining. Depreciation increased to $149,294 from $83,594, and interest expense rose substantially, largely due to non-cash interest paid in shares to Bricoleur.
- Management said plants were being operationalized and expected revenue and margins to rise with plant activity and stronger iron-ore prices. These were expectations, not quantified guidance.
- Management reported approximately $116,000 of “non-GAAP cash burn” after adjustments, while GAAP operating cash use was $243,564. Investors should note the distinction and review the stated adjustments.
- Key risks include iron-ore demand and prices, competition, government actions in India, China and Mongolia, logistics and labor, currency volatility, and additional cash requirements. The company also disclosed that restructuring its Inner Mongolia holdings could result in a small charge.
- Five Chinese customers represented approximately 90% of gross accounts receivable. Approximately $0.5 million of aged receivables had been outstanding for more than a year; the company classified them as current after prevailing in arbitration involving Cochin International Airport.
- The filing reported no significant commitments or contingencies for the quarter and no material legal proceedings. A new Chinese subsidiary was incorporated after quarter-end as part of internal restructuring.
Important facts for investors to verify
- Whether planned plant operations and iron-ore market conditions translate into improved sales and margins.
- Cash runway and funding needs, given declining cash and continued operating cash outflow.
- Terms, interest cost and maturity of the $1.8 million Bricoleur note, including recurring stock-based interest payments.
- Collectability and timing of the aged receivables, and the concentration of receivables among five Chinese customers.
- Exposure to foreign-exchange movements and the potential effects of the Inner Mongolia restructuring.
- Share count and dilution: 7,031,398 shares were outstanding at June 30; the cover page reports 7,054,498 as of August 4, 2013. The filing also notes a 10-for-1 reverse split effective April 19, 2013.