IGC Pharma, Inc. (India Globalization Capital, Inc.) — FY2019 Form 10-K
Reporting period: Fiscal year ended March 31, 2019 (with comparison to fiscal 2018). This is an annual filing, not a standalone 2018 fourth-quarter report. Unless stated otherwise, amounts below are in U.S. dollars.
Business context and financial performance
IGC operated infrastructure and plant/cannabinoid businesses. Infrastructure—principally purchasing and reselling construction materials in India and Hong Kong—generated nearly all revenue. The cannabinoid business began sales late in the year. Its products and therapies were not FDA-approved pharmaceuticals.
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $5.116 million | $2.193 million |
| Gross profit / gross margin | $132,000 / 2.6% | $82,000 / 3.7% |
| Operating loss | $4.643 million | $1.789 million |
| Net loss | $4.097 million | $1.786 million |
| Basic and diluted loss per share | $0.13 | $0.06 |
| Cash used in operating activities | $3.330 million | $1.931 million |
- Revenue increased 133%, mainly from infrastructure commodity sales, which rose to $5.061 million from $2.086 million. Infrastructure generated $5.091 million, or 99% of FY2019 revenue; cannabinoid products contributed $25,000. There was no Hyalolex revenue.
- Cost of revenue rose 136% to $4.984 million; management said commodity margins remained stable. Gross margin nevertheless declined to 2.6% from 3.7%.
- G&A expense increased 103% to $3.519 million, including higher legal and professional fees associated with NYSE delisting proceedings and lawsuits. R&D expense rose to $1.256 million from $137,000, reflecting product formulation and trial/FDA preparation.
- Other income was $548,000, including a nonrecurring $300,000 gain from settling a $1.8 million Bricoleur note for $1.5 million.
Liquidity, debt, and material changes
- Cash and cash equivalents were $25.610 million at year-end, versus $1.658 million a year earlier; working capital was $25.845 million. The cash increase was primarily funded by equity issuance.
- Financing activities provided $27.598 million, including $28.508 million net from a public offering and $950,000 net from a private placement, partly offset by $1.878 million of loan repayments. The public offering issued 5.9 million shares.
- Total liabilities fell to $893,000 from $2.788 million, principally after repayment/settlement of the $1.8 million note. Remaining disclosed borrowings included a $50,000 short-term related-party loan at 15% interest.
- Operating cash use increased to $3.330 million. Investing cash use was $260,000, including a $200,000 equipment loan to a manufacturer.
- Accounts receivable declined to $84,000 from $558,000, partly because aged receivables and certain advances were reclassified as non-current. Claims and advances included $404,000 due from Cochin International Airport that had been outstanding over a year; management expected collection could take time. The filing also describes a $354,000 land-purchase advance considered unrecoverable and provided for in FY2019.
Outlook, risks, and unusual items
- Management planned to expand infrastructure contracting and equipment rental. A Kerala highway contract awarded in January 2019 was approximately $600,000; the company expected to recognize revenue in FY2020.
- For FY2020, management planned to pursue an Investigational New Drug application and a phase 2 trial for IGC-AD1/Hyalolex, and to develop hemp cultivation and processing supply. These are plans, not guaranteed outcomes. Subsequent to year-end, the company entered a phase 2 trial agreement in Puerto Rico and a 100-acre Arizona hemp cultivation agreement.
- The 2018 Farm Bill legalized hemp federally, but state licensing and testing regimes were still developing. Marijuana remained federally illegal, and cannabinoid regulation, FDA requirements, financing access, and NYSE American listing status were material risks. The company said FDA restrictions on CBD-infused drinks led it to terminate a strategic distributor/partnership agreement in FY2019.
- NYSE trading was suspended and delisting proceedings began in October 2018; after appeal, shares were relisted on NYSE American in February 2019. The company also reported four shareholder lawsuits as of March 31, 2019, with no provision recorded because potential liability could not then be determined. A further derivative complaint was filed June 6, 2019.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management also assessed controls as effective. The company reported a history of losses and warned that continued losses could require additional, potentially dilutive financing.
Important facts for investors to verify
- Whether the low-margin infrastructure commodity business can sustain growth and generate adequate gross profit.
- Cash burn and the pace at which the $25.6 million year-end cash balance is being used, including spending on R&D, trials, and expansion.
- Collectability and impairment assessment for aged receivables, claims, and advances, including the airport receivable and land-purchase advance.
- Regulatory progress, licensing, trial status, and commercial demand for cannabinoid products; none of the company’s therapies was FDA-approved in this filing.
- Developments in shareholder litigation, NYSE American listing compliance, and any additional equity issuance or dilution.