indiaglobal10q123113.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549    


 
 FORM 10-Q
 

 
þ
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
   
For the quarterly period ended December 31, 2013
     
o
 
Transition report under Section 13 or 15(d) of the Exchange Act of 1934.
 
Commission file number 1-32830
 
INDIA GLOBALIZATION CAPITAL, INC.
(Exact name of small business issuer in its charter)
 
Maryland
(State or other jurisdiction of incorporation or organization)
20-2760393
(I.R.S. Employer Identification No.)
 
 4336 Montgomery Ave. Bethesda, Maryland 20814
(Address of principal executive offices)
 
(301) 983-0998
(Issuer’s telephone number)
 
Securities registered under Section 12(b) of the Exchange Act: 
 
Title of Each Class
Name of exchange on which registered
Common Stock
NYSE MKT
Common Stock Purchase Warrants
NYSE MKT
 
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ Yes     o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   þ Yes     o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  o
Accelerated Filer o
Non-Accelerated Filer   o
(Do not check if a smaller reporting company)
Smaller reporting companyþ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o Yes     þ No

Indicate the number of shares outstanding for each of the issuer’s classes of common equity as of December 31, 2013:  7,980,919 shares of $0.0001 Par Value Common Stock

Disclosures relating to common shares, options and warrants reflect a 10:1 reverse split effected on April 19, 2013. 
 
 
 

 
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED DECEMBER 31, 2013

Table of Contents

   
Page
 PART I – FINANCIAL INFORMATION
     
Item 1.
3
 
3
 
4
 
5
 
6
 
  7
 
  8
     
Item 2.
20
Item 3.
23
Item 4.
23
     
PART II – OTHER INFORMATION
     
Item 1.
24
Item 1A.
24
Item 2.
24
Item 3.
24
Item 4.
24
Item 5.
24
Item 6.
24
     
 
25
 
 
 

  
PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements
 
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
All amounts in USD except share data
 
       
   
As of
 
   
December 31, 2013
   
March 31, 2013
 
   
(un-audited)
   
(audited)
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 440,626     $ 1,064,421  
Accounts receivable, net of allowances
    890,134       1,066,650  
Inventories
    687,881       407,060  
Prepaid expenses and other current assets
    1,781,591       1,730,514  
Total current assets
  $ 3,800,232     $ 4,268,645  
Non-current assets:
               
Intangible Assets
    592,274       592,274  
Property, plant and equipment, net
    7,731,628       8,184,230  
Investments in former affiliates
    5,109,057       5,109,057  
Investments-others
    48,450       83,489  
Deferred acquisition costs
    207,337       207,338  
Deferred Income taxes
    298,635       341,455  
Other non-current assets
    400,339       466,105  
Total non-current assets
    14,387,720       14,983,948  
Total assets
  $ 18,187,952     $ 19,252,593  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current liabilities:
               
Trade payables
    577,878       600,702  
Accrued expenses
    340,263       466,960  
Notes payable
    1,800,000       -  
Loans  — others
    304,010       446,694  
Other current liabilities
    228,943       310,619  
Total current liabilities
  $ 3,251,094     $ 1,824,975  
Non-current liabilities:
               
Notes payable
    -       1,800,000  
Other non-current liabilities
    656,291       653,388  
Total Non-current liabilities
  $ 656,291     $ 2,453,388  
Total liabilities
  $ 3,907,385     $ 4,278,363  
Stockholders' equity:
               
Common stock — $.0001 par value; 150,000,000 shares authorized; 6,980,098 issued and outstanding as of March 31, 2013 and 7,980,919 issued and outstanding as of December 31, 2013.
  $ 798     $ 698  
 Additional paid-in capital
    57,192,952       56,153,375  
 Accumulated other comprehensive income
    (2,188,626 )     (2,020,764 )
 Retained earnings (Deficit)
    (41,256,329 )     (39,697,179 )
Total equity attributable to Parent
  $ 13,748,795     $ 14,436,130  
Non-controlling interest
  $ 531,772     $ 538,100  
Total stockholders' equity
    14,280,567       14,974,230  
Total liabilities and stockholders' equity
  $ 18,187,952     $ 19,252,593  
 
The accompanying notes should be read in connection with the financial statements.
 
 
3

 
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
All amounts in USD except share data
 
                         
   
Three months ended December 31,
   
Nine months ended December 31,
 
   
2013
   
2012
   
2013
   
2012
 
                         
 Revenues
  $ 17,529       3,933,906     $ 2,275,018     $ 6,553,052  
     Cost of revenues (excluding depreciation)
    (7,789 )     (3,189,950 )     (1,887,521 )     (5,235,751 )
     Selling, general and administrative expenses
    (156,048 )     (153,789 )     (930,124 )     (936,348 )
     Depreciation
    (147,708 )     (134,785 )     (444,852 )     (463,503 )
    Operating income (loss)
    (294,016 )     455,382       (987,479 )     (82,550 )
      Interest expense
    (52,502 )     (2,651 )     (233,466 )     (28,950 )
      Interest income
    1,824       2,051       8,157       2,888  
      Other income, net
    41,439       43,641       (335,046 )     (120,595 )
Income before income taxes and minority interest attributable to non-controlling interest
  $ (303,255 )     498,423     $ (1,547,834 )   $ (229,207 )
      Income taxes benefit/ (expense)
    (1,885 )     (453 )     (4,988 )     21,522  
      Net income/(loss)
  $ (305,140 )     497,970     $ (1,552,822 )   $ (207,685 )
  Non-controlling interests in earnings of subsidiaries
    (5,336 )     (187,078 )     (6,328 )     (152,449 )
Net income / (loss) attributable to common stockholders
  $ (310,476 )     310,892     $ (1,559,150 )   $ (360,134 )
Earnings/(loss) per share attributable to common stockholders:
                               
      Basic
  $ (0.04 )     0.05     $ (0.20 )   $ (0.06 )
      Diluted
  $ (0.04 )     0.05     $ (0.20 )   $ (0.06 )
Weighted-average number of shares used in computing earnings per share amounts:                                
      Basic
    7,734,444       6,006,174       7,734,444       6,006,174  
      Diluted
    7,734,444       6,006,174       7,734,444       6,006,174  
 
The accompanying notes should be read in connection with the financial statements.
 
 
4

 
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
   
All amounts in USD except share data
 
       
 
 
Three months ended December 31,
 
 
 
2013
   
2012
 
 
 
IGC
   
Non-controlling interest
   
Total
   
IGC
   
Non-controlling interest
   
Total
 
Net income / (loss)
  $ (310,476 )     (5,336 )   $ (315,812 )   $ 310,892       187,078     $ 497,970  
Foreign currency translation adjustments
  $ (382,651 )           $ (382,651 )   $ 2,434       (17,369 )   $ (14,935 )
Comprehensive income (loss)
  $ (693,127 )     (5,336 )   $ (698,463 )   $ 313,326       169,709     $ 483,035  
 
 
 
Nine months ended December 31,
 
 
  2013     2012  
   
IGC
   
Non-controlling interest
   
Total
   
IGC
   
Non-controlling interest
   
Total
 
Net income / (loss)
  $ (1,559,150 )     (6,328 )   $ (1,565,478 )   $ (360,134 )     152,449     $ (207,685 )
Foreign currency translation adjustments
  $ (167,862 )           $ (167,862 )   $ 77,635       (25,828 )   $ 51,807  
Comprehensive income (loss)
  $ (1,727,012 )     (6,328 )   $ (1,733,340 )   $ (282,499 )     126,621     $ (155,878 )
 
The accompanying notes should be read in connection with the financial statements.
 
 
5


INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
    All amounts in USD except share data  
       
   
No of Shares
   
Amount
   
Additional Paid in Capital
   
Accumulated Earnings (Deficit)
   
Accumulated Other Comprehensive Income/(loss)
   
Non-Controlling Interest
   
Total Stockholders' Equity
 
                                                         
Balance at March 31, 2013 (audited)
    6,980,098     $ 698     $ 56,153,375     $ (39,697,179 )   $ (2,020,764 )   $ 538,100     $ 14,974,230  
Bricoleur loan interest payments
    153,900       15       219,720                               219,735  
IR and other shares
    36,193       4       40,796                               40,800  
ESOP Shares
    146,073       15       140,215                               140,230  
ATM Sale
    664,655       66       638,846                               638,912  
Loss on Translation
                                    (167,862 )             (167,862 )
Net income for non-controlling interest
                                            (6,328 )     (6,328 )
Net income / (loss)
                            (1,559,150 )                     (1,559,150 )
Balance at December 31, 2013 (unaudited)
    7,980,919     $ 798     $ 57,192,952     $ (41,256,329 )   $ (2,188,626 )   $ 531,772     $ 14,280,567  
  
The accompanying notes should be read in connection with the financial statements.
 
 
6


INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
All amounts in USD except share data
 
       
   
Nine months ended December 31,
 
   
2013
   
2012
 
Cash flows from operating activities:
           
Net income (loss)
  $ (1,552,822 )   $ (207,685 )
Adjustment to reconcile net income (loss) to net cash:
               
    Deferred taxes
    4,988       -  
    Depreciation
    444,852       463,503  
    Unrealized exchange losses/(gains)
    322,682       313,200  
    Unrealized share in the profit/loss of joint venture
    28,463       -  
    Non-cash interest expenses
    219,735       -  
     ESOP and IR shares
    181,030       -  
Changes in:
               
 Accounts receivable
    95,692       856,461  
    Inventories
    (280,819 )     (102,548 )
    Prepaid expenses and other assets
    (143,170 )     140,333  
    Trade payables
    (5,992 )     46,106  
    Other current liabilities
    (58,222 )     5,849  
    Other non – current liabilities
    (7,310 )     8,269  
    Non-current assets
    10,701       (50,036 )
    Accrued Expenses
    (126,697 )     (192,546 )
    Inter-company balances
            (21,291 )
Net cash used in operating activities
  $ (866,889 )   $ 1,259,615  
                 
Cash flow from investing activities:
               
   Proceeds from short term investment
            359,338  
   Proceeds from sale of property and equipment
    -       4,202  
Restricted Cash
    -       9,456  
   Issuance of equity shares
    638,912       -  
Net cash provided/(used) by investing activities
  $ 638,912     $ 372,996  
                 
Cash flows from financing activities:
               
   Net movement in other short-term borrowings
    -       (197,399 )
   Proceeds  from loans     (142,684     192,049  
Net cash provided/(used) by financing activities
  $ (142,684 )   $ (5,350 )
                 
Effects of exchange rate changes on cash and cash equivalents
    (253,134 )     (81,883 )
Net increase/(decrease) in cash and cash equivalents
    (623,795 )     1,545,378  
Cash and cash equivalent at the beginning of the period
    1,064,421       562,948  
Cash and cash equivalent at the end of the period
  $ 440,626     $ 2,108,326  
                 
                 
Supplementary information:
               
Cash paid for interest
  $ 13,731     $ 28,950  
Cash paid for taxes
  $ 0     $ 0  
                 
Non-cash items:
               
Common stock issued for interest payment on notes payable
  $ 219,735     $Nil  
Common stock issued  including ESOP
    181,030     $Nil  
 
The accompanying notes should be read in connection with the financial statements.
 
 
 
7

 
INDIA GLOBALIZATION CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 – OVERVIEW
 
a)  Description of the Company
 
We are India Globalization Capital, Inc. (the “Company” or “IGC”), a Maryland corporation, organized on April 29, 2005, as a blank check company formed for the purpose of acquiring one or more businesses with operations primarily in India through a merger, capital stock exchange, asset acquisition or other similar business combination or acquisition.  On March 8, 2006, we completed an initial public offering of our Common Stock.  On February 19, 2007, we incorporated India Globalization Capital, Mauritius, Limited (IGC-M), a wholly owned subsidiary, under the laws of Mauritius.  On March 7, 2008, we consummated the acquisition of interests in two companies in India, Techni Bharathi Limited (“TBL”) and Sricon Infrastructure Private Limited (“Sricon”). Both of these companies’ shares are held by IGC-M. Currently, IGC owns 22% of Sricon and 100% of TBL, a company focused on the infrastructure industry.  On June 21, 2012, IGC entered into a Memorandum of Settlement (the “MoS”) with Sricon and related parties, pursuant to which the Company gave up the 22% minority interest in Sricon in exchange for approximately 5 acres of land in Nagpur. The settlement is expected to close by the end of this financial year. On March 31, 2013, IGC became the 100% owner of TBL by purchasing the remaining 23.1% shares from TBL’s promoters.

On February 19, 2009, IGC-M beneficially purchased 100% of IGC Mining and Trading Private Limited (IGC-IMT) based in Chennai, India.  IGC-IMT was formed on December 16, 2008, as a privately held start-up company engaged in the business of mining and trading.  Its current activity is to operate shipping hubs and to trade iron ore.  On July 4, 2009, IGC-M beneficially purchased 100% of IGC Materials, Private Limited (IGC-MPL) based in Nagpur, India, which conducts IGC’s quarrying business, and 100% of IGC Logistics, Private Limited (IGC-LPL) based in Nagpur, India, which is involved in the transport and delivery of iron ore, cement, aggregate and other materials.  Together these companies carry out our mining and trading business in India.  Each of IGC-IMT, IGC-MPL and IGC-LPL were formed by third parties at the behest of IGC-M to facilitate the creation of the subsidiaries.  The purchase price paid for each of IGC-IMT, IGC-MPL and IGC-LPL was equal to the expenses incurred in incorporating the respective entities with no premium paid.

On December 30, 2011, IGC obtained stock holder approval for the acquisition of 95% equity interest in Linxi HeFei Economic and Trade Co., aka Linxi H&F Economic and Trade Co., a People’s Republic of China-based company ("PRC Ironman") by acquiring 100% of the equity of H&F Ironman Limited, a Hong Kong company ("HK Ironman").  Collectively, PRC Ironman and HK Ironman are referred to as "Ironman."

On January 21, 2013, we incorporated IGC HK Mining and Trading Limited (“IGC-HK”) in Hong Kong. IGC-HK is a wholly owned subsidiary of IGC-Mauritius.  On May 24, 2013, IGC Linxi Industrial and Trading Limited (“IGC-Linxi”) was incorporated by two Chinese citizens, who acted as the initial directors of this company.  This is as per the regulatory requirements for incorporation of companies.  Once this company was incorporated, IGC-HK took control of 95% of the shares of IGC-Linxi.  The necessary regulatory requirements for the ownership of IGC-Linxi by IGC-HK are expected to take three to four months and the process is expected to be routine. In the meantime the IGC-Linxi is under the control of IGC-HK.  No premium was paid to the individuals for incorporating IGC-Linxi. The company was not operational at the time of purchase and therefore no revenue or earnings were recorded. The individuals were reimbursed a total of $267.56 (1,650 RMB) for the amounts they paid to incorporate the company.  Therefore effectively, this company is not an acquisition but an incorporation by IGC. This incorporation is part of our internal re-structuring.

India Globalization Capital, Inc. (”IGC,” the “Company,” or “we”) is a holding company.  We are engaged in acquiring, incubating, financing and growing distressed microcap companies. We currently are engaged in the mining and infrastructure industries. We operate in the US, India and China. The Company’s plans in the short term are to create cash flow from existing assets and in the medium term continue to build its assets through opportunistic acquisitions. 
 
 
8


b)  List of subsidiaries with percentage holding
 
The operations of IGC are based in India and China. The financial statements of the following subsidiaries have been considered for consolidation.

Subsidiaries
 
Immediate
holding company
 
Country of
Incorporation
 
Percentage of holding
as of Dec 31, 2013
   
Percentage of holding
as of March 31, 2013
 
IGC – Mauritius
("IGC-M")
 
IGC
 
Mauritius
   
100
     
100
 
IGC HK Mining and Trading Limited
(“IGC-HK”)
 
IGC-M
 
Hong Kong
   
100
     
100
 
 India Mining and Trading Private Limited
("IGC-IMT")
 
IGC-M
 
India
   
100
     
100
 
IGC Linxi Industrial and Trading Limited
(“IGC- Linxi”)
 
IGC-HK
 
China
   
95
     
0
 
IGC Logistic Private  Limited
("IGC-LPL")
 
IGC-M
 
India
   
100
     
100
 
IGC Materials Private Limited
("IGC-MPL")
 
IGC-M
 
India
   
100
     
100
 
H&F Ironman Limited
(“HK Ironman”)
 
IGC
 
Hong Kong
   
100
     
100
 
Linxi H&F Economic and Trade Co.
("PRC Ironman")
 
HK Ironman
 
Peoples’ Republic of China
   
95
     
95
 
Techni Bharathi  Private  Limited
(“TBL”)
 
IGC-M
 
India
   
100
     
100
 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
 
a)  Basis of preparation of financial statements
 
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.  Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements.  Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 filed with the SEC on July 16, 2013.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements.  The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year. The significant accounting policies adopted by the Company, in respect of these consolidated financial statements, are set out below. The Company’s current fiscal year ends on March 31, 2014.
 
b)  Principles of consolidation
 
The consolidated financial statements include the accounts of the Company and all of its subsidiaries that are more than 50% owned and controlled. The financial statements of the parent company and its majority owned or controlled subsidiaries have been combined on a line by line basis by adding together the book values of all items of assets, liabilities, incomes and expenses after eliminating all inter-company balances and transactions and resulting unrealized gain or loss. Operating results of companies acquired are included from the dates of acquisition.

c)  Non-controlling interests

Non-controlling interests in the Company’s consolidated financial statements result from the accounting for non-controlling interests in its subsidiaries.  Non-controlling interests represent the subsidiaries’ earnings and components of other comprehensive income that are attributed to the non-controlling parties’ equity interests.  The Company consolidates the subsidiaries into its consolidated financial statements.  Transactions between the Company and its subsidiaries have been eliminated in the consolidated financial statements.
 
 
9

 
The Company accounts for investments by the equity method where its investment in the voting stock gives it the ability to exercise significant influence over the investee but not control.  In situations, such as the Company’s ownership interest in Sricon Infrastructure Private Limited (“Sricon”), wherein the Company is not able to exercise significant influence in spite of having 20% or more of the voting stock, the Company has accounted for the investment based on the cost method.  In addition, the Company consolidates any Variable Interest Entity (“VIE”) if it is determined to be the primary beneficiary.  However, as of December 31, 2013, the Company does not have any interest in any VIE or equity method investment.
 
The non-controlling interest disclosed in the accompanying unaudited interim consolidated financial statements represents the non-controlling interest in Ironman and the profits or losses associated with the non-controlling interest in those operations.
 
The adoption of Accounting Standards Codification (ASC) 810-10-65 "Consolidation — Transition and Open Effective Date Information" (previously referred to as SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51"), has resulted in the reclassification of amounts previously attributable to minority interest (now referred to as non-controlling interest) to a separate component of shareholders’ equity on the accompanying consolidated balance sheets and consolidated statements of shareholders’ equity and comprehensive income (loss).  Additionally, net income attributable to non-controlling interest is shown separately from net income in the consolidated statements of income.  This reclassification had no effect on our previously reported financial position or results of operations.

d)  Use of estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Management believes that the estimates and assumptions used in the preparation of the consolidated financial statements are prudent and reasonable.  Significant estimates and assumptions are used for, but not limited to: allowance for uncollectible accounts receivable; future obligations under employee benefit plans; the useful lives of property, plant, equipment; intangible assets; the valuation of assets and liabilities acquired in a business combination; impairment of goodwill and investments; recoverability of advances; the valuation of options granted and warrants issued; and income tax and deferred tax valuation allowances.  Actual results could differ from those estimates.  Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates.  Critical accounting estimates could change from period to period and could have a material impact on IGC’s results, operations, financial position and cash flows.
 
Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

e)  Foreign currency translation
 
IGC mainly operates in India and China and a substantial portion of the Company’s sales are denominated in INR and RMB. As a result, changes in the relative values of the U.S. dollar and INR or the RMB affect revenues and profits as the results are translated into U.S. dollars in the consolidated and pro forma financial statements.

The accompanying financial statements are reported in U.S. dollars. The INR and the RMB are the functional currencies for the Company. The translation of the functional currencies into U.S. dollars is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues, costs and expenses using average exchange rates prevailing during the reporting periods. Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive income/(loss), a separate component of shareholders’ equity. The exchange rates used for translation purposes are as follows:
 
Period
 
Period End Average Rate
(P&L rate)
 
Period End Rate
(Balance sheet rate)
Three months ended December 31, 2012
 
INR 52.88 per USD
 
INR 54.86 per USD
   
RMB 6.29 per USD
 
RMB 6.29 per USD
Year ended March 31, 2013
 
INR 54.36 per USD
 
INR 54.52 per USD
   
RMB 6.28 per USD
 
RMB 6.21 per USD
   
HKD 7.77 per USD
 
HKD 7.76 per USD
Three months ended December 31, 2013
 
INR 58.22 per USD
 
INR61.92 per USD
   
RMB 6.13 per USD
 
RMB 6.05 per USD
   
HKD7.75 per USD
 
HKD 7.75 per USD
 
 
10

 
f)  Revenue recognition
 
The majority of the revenue recognized for the three month period ended December 31, 2013 and 2012 was derived from the Company’s subsidiaries, when all of the following criteria have been satisfied:

Revenue is recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectability is reasonably assured.  In government contracting, the Company recognizes revenue when a government consultant verifies and certifies an invoice for payment.
 
Revenue from sale of goods is recognized when substantial risks and rewards of ownership are transferred to the buyer under the terms of the contract.

For the sale of goods, the timing of the transfer of substantial risks and rewards of ownership is based on the contract terms negotiated with the buyer, e.g., FOB or CIF.  IGC considers the guidance provided under Staff Accounting Bulletin (“SAB”) 104 in determining revenue from sales of goods.  Considerations have been given to all four conditions for revenue recognition under that guidance.  The four conditions are:
  
 
· Contract – Persuasive evidence of our arrangement with the customers;
 
· Delivery – Based on the terms of the contracts, the Company assesses whether the underlying goods have been delivered and therefore the risks and rewards of ownership are completely transferred;
 
· Fixed or determinable price – The Company enters into contracts where the price for the goods being sold is fixed and not contingent upon other factors.
 
· Collection is deemed probable – At the time of recognition of revenue, the Company makes an assessment of its ability to collect the receivable arising on the sale of the goods and determines that collection is probable.
 
Revenue for any sale is recognized only if all of the four conditions set forth above are met.  The Company assesses these criteria at the time of each sale.  In the absence of meeting any of the criteria set out above, the Company defers revenue recognition until all of the four conditions are met.

Specifically, our beneficiation plants in Inner Mongolia have two processes for refining iron ore.  The first, a dry process, takes low-grade iron ore and magnetically separates it into a higher-grade iron ore.  This is then fed into a wet process that further refines the iron ore into high-grade iron ore (finished product) that is sold to steel factories. Typically, revenue is recognized when the finished product is sold and meets the criteria set out above.  Our customers, typically, buy the finished product on a spot basis with a deposit and a 60-day payment term, or in some cases for cash on delivery.   In cases where iron ore is shipped from India to a customer in China, as an example, a typical CIF contract pays 95% at the time that the ship leaves port and the remaining 5% when the iron ore passes inspection in China. Therefore 95% of the revenue is recognized first and the remaining 5% is recognized later, and can take up to 90 days. CIF contracts are guaranteed by letters of credit from the customer.

Revenue from construction/project related activity and contracts for supply/commissioning of complex plant and equipment is recognized as follows:
 
 
a)
Cost plus contracts: Contract revenue is determined by adding the aggregate cost plus proportionate margin as agreed with the customer and expected to be realized.
 
 
b)
Fixed price contracts: Contract revenue is recognized using the percentage completion method and the percentage of completion is determined as a proportion of cost incurred-to-date to the total estimated contract cost.  Changes in estimates for revenues, costs to complete, and profit margins are recognized in the period in which they are reasonably determinable.
 
§  
In many of the fixed price contracts entered into by the Company, significant expenses are incurred in the mobilization stage in the early stages of the contract.  The expenses include those that are incurred in the transportation of machinery, erection of heavy machinery, clearing of the campsite, workshop ground cost, overheads, etc.  All such costs are booked to deferred expenses and written off over the period in proportion to revenues earned.
§  
Where the modifications of the original contract are such that they effectively add to the existing scope of the contract, the same are treated as a change orders.  On the other hand, where the modifications are such that they change or add an altogether new scope, these are accounted for as a separate new contract.  The Company adjusts contract revenue and costs in connection with change orders only when both, the customer and the Company with respect to both the scope and invoicing and payment terms, approve them.
§  
In the event of claims in our percentage of completion contracts, the additional contract revenue relating to claims is only accounted after the proper award of the claim by the competent authority.  The contract claims are considered in the percentage of completion only after the proper award of the claim by the competent authority. 
 
 
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Full provision is made for any loss in the period in which it is foreseen.
 
Revenue from service related activities and miscellaneous other contracts are recognized when the service is rendered using the proportionate completion method or completed service contract method.
 
g)  Accounts receivable
 
We make estimates of the collectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness, and current economic trends.  If the financial condition of a customer deteriorates, additional allowances may be required.
 
h) Inventories
 
We provide for inventory obsolescence, excess inventory and inventories with carrying values in excess of market values based on our assessment of the future demands, market conditions and our specific inventory management procedures.  If market conditions and actual demands are less favorable than our estimates, additional inventory write-downs may be required.  In all cases inventory is carried at the lower of historical cost or market value.
 
i)  Investments
 
Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs.  The Company's equity in the earnings/(losses) of affiliates is included in the statement of income and the Company's share of net assets of affiliates is included in the balance sheet.  Where the Company’s ownership interest in spite of being in excess of 20% is not sufficient to exercise significant influence, the Company has accounted for the investment based on the cost method. 
 
j)  Property, Plant and Equipment (PP&E)
 
Property and equipment are recorded at cost net of accumulated depreciation and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
 
Buildings
5-25 years
Plant and machinery
10-20 years
Computer equipment
3-5 years
Office equipment
3-5 years
Furniture and fixtures
5-10 years
Vehicles
5-10 years
 
Upon retirement or disposition, cost and related accumulated depreciation of the property and equipment are de-recognized from the books of accounts and the gain or loss is reflected in the results of operation.  Cost of additions and substantial improvements to property and equipment are capitalized in the books of accounts.  The cost of maintenance and repairs of the property and equipment are charged to operating expenses as incurred.
 
k)  Impairment of long – lived assets

The Company reviews its long-lived assets, with finite lives, for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable.  Such circumstances include, though are not limited to, significant or sustained declines in revenues or earnings, future anticipated cash flows, business plans and material adverse changes in the economic climate, such as changes in operating environment, competitive information, impact of change in government policies, etc.  For assets that the Company intends to hold for use, if the total of the expected future undiscounted cash flows produced by the assets or subsidiary company is less than the carrying amount of the assets, a loss is recognized for the difference between the fair value and carrying value of the assets.  For assets the Company intends to dispose of by sale, a loss is recognized for the amount by which the estimated fair value less cost to sell is less than the carrying value of the assets.  Fair value is determined based on quoted market prices, if available, or other valuation techniques including discounted future net cash flows.
  
l)  Earnings per common share
 
Basic earnings per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the additional dilution from all potentially dilutive securities such as stock warrants and options.
 
 
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m)  Income taxes

The Company accounts for income taxes under the asset and liability method, in accordance with ASC 740, Income Taxes, which requires an entity to recognize deferred tax liabilities and assets.  Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and operating loss and tax credit carry forwards.  Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.  A valuation allowance is established and recorded when management determines that some or all of the deferred tax assets are not likely to be realized and therefore, it is necessary to reduce deferred tax assets to the amount expected to be realized.
 
In evaluating a tax position for recognition, management evaluates whether it is more-likely-than-not that a position will be sustained upon examination, including resolution of related appeals or litigation processes, based on technical merits of the position.  If the tax position meets the more-likely-than-not recognition threshold, the tax position is measured and recognized in the Company’s financial statements as the largest amount of tax benefit that, in management’s judgment, is greater than 50% likely of being realized upon settlement.  
 
n) Cash and cash equivalents
 
For financial statement purposes, the Company considers all highly liquid debt instruments with maturity of three months or less, to be cash equivalents.  The Company maintains its cash in bank accounts in the United States of America, Mauritius, India and China, which at times may exceed applicable insurance limits.  The Company has not experienced any losses in such accounts.  The Company believes it is not exposed to any significant credit risk on cash and cash equivalent.  The Company does not invest its cash in securities that have an exposure to U.S. mortgages.
 
o)  Restricted cash
 
Restricted cash consists of deposits pledged to various government authorities and deposits used as collateral with banks for guarantees and letters of credit, given by the Company to its customers or vendors.
 
p)  Fair value of financial instruments
 
As of December 31, 2013 and March 31, 2013, the carrying amounts of the Company's financial instruments, which included cash and cash equivalents, accounts receivable, unbilled accounts receivable, restricted cash, accounts payable, accrued employee compensation and benefits and other accrued expenses, approximate their fair values due to the nature of the items.
 
q)  Concentration of credit risk and significant customers
 
Financial instruments, which potentially expose the Company to concentrations of credit risk, are primarily comprised of cash and cash equivalents, investments, derivatives, accounts receivable and unbilled accounts receivable.  The Company places its cash, investments and derivatives in highly rated financial institutions.  The Company adheres to a formal investment policy with the primary objective of preservation of principal, which contains credit rating minimums and diversification requirements.  Management believes its credit policies reflect normal industry terms and business risk.  The Company does not anticipate non-performance by the counterparties and, accordingly, does not require collateral.
 
A significant portion of the Company’s sales in China is to key customers.  Five of such customers accounted for approximately 90% of gross accounts receivable as of December 31, 2013.

r) Leased mineral rights

In China, costs to obtain leased mineral rights are capitalized and amortized to operations as depletion expense within the leased periods, using the straight-line method.  Depletion expenses are included in depreciation and amortization on the accompanying statement of operations.

s)  Business combination
 
In accordance with ASC Topic 805, Business Combinations, the Company uses the purchase method of accounting for all business combinations consummated after June 30, 2001.  Intangible assets acquired in a business combination are recognized and reported apart from goodwill if they meet the criteria specified in ASC Topic 805.  Any purchase price allocated to an assembled workforce is not accounted separately.
 
 
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t)  Employee benefits plan
 
In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan) covering certain categories of employees.  The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company.  In addition, all employees receive benefits from a provident fund, a defined contribution plan.  The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary.  The contribution is made to the Government’s provident fund.
 
At this time the Company doesn’t participate in a multi-employer defined contribution plan in China to provide employees with certain retirement, medical and other fringe benefits because most of our workers are contractors employed through agencies or other companies.
 
u)  Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
 
v)  Accounting for goodwill and related impairment
 
Goodwill represents the excess cost of an acquisition over the fair value of our share of net identifiable assets of the acquired subsidiary at the date of acquisition.  Goodwill on acquisition of subsidiaries is disclosed separately.  Goodwill is stated at cost less impairment losses incurred, if any.
 
The Company adopted the provisions of Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Others” (previously referred to as SFAS No. 142, "Goodwill and Other Intangible Assets," which sets forth the accounting for goodwill and intangible assets subsequent to their acquisition.  ASC 350 requires that goodwill and indefinite-lived intangible assets be allocated to the reporting unit level, which the Company defines as each subsidiary.  ASC 350 also prohibits the amortization of goodwill and indefinite-lived intangible assets upon adoption, but requires that they be tested for impairment at least annually, or more frequently as warranted, at the reporting unit level.
 
As per ASC 350-20-35-4 through 35-19, the impairment testing of goodwill is a two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.  The loss recognized cannot exceed the carrying amount of goodwill.  After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill shall be its new accounting basis.  Subsequent reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is completed.

In ASC 350.20.20, a reporting unit is defined as an operating segment or one level below the operating segment.  A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component.  The Company has determined that IGC operates in a single operating segment.  While the CEO reviews the consolidated financial information for the purposes of decisions relating to resource allocation, the CFO, on a need basis, looks at the financial statements of the individual legal entities in India for the limited purpose of consolidation.  Given the existence of discrete financial statements at an individual entity level in India, the Company believes that each of these entities constitute a separate reporting unit under a single operating segment.
 
In FYE 2013, the Company acquired 23% ownership of its Indian Subsidiary –Techni Bharathi Pvt. Ltd. from the promoters and combined with its previous purchase holds 100% ownership in Techni Bharathi Pvt. Ltd. Therefore, the first step in the impairment testing for goodwill is the identification of reporting units and the allocation of goodwill to these reporting units.  Accordingly, TBL, which is one of the legal entities, is also considered a separate reporting unit and therefore the Company believes that the assessment of goodwill impairment at the subsidiary level, which is also a reporting unit, is appropriate.
 
 
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The analysis of fair value is based on the estimate of the recoverable value of the underlying assets.  For long-lived assets such as land, the Company obtains appraisals from independent professional appraisers to determine the recoverable value.  For other assets such as receivables, the recoverable value is determined based on an assessment of the collectability and any potential losses due to default by the counter parties.  Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.
 
w)  Reclassifications

None.
  
x)  Recently issued and adopted accounting pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates ("ASUs”) to the FASB's Accounting Standards Codification.  The Company considers the applicability and impact of all ASUs.  Newly issued ASUs not listed below are expected to have no impact on the Company’s consolidated financial position and results of operations, because either the ASU is not applicable or the impact is expected to be immaterial.
 
Effective January 1, 2012, Company adopted amendments from the FASB to Fair Value Accounting. The amendments clarify the application of the highest and best use, and valuation premise concepts, preclude the application of "blockage factors" in the valuation of all financial instruments and include criteria for applying the fair value measurement principles to portfolios of financial instruments. The amendments also prescribe additional disclosures for Level 3 fair value measurements and financial instruments not carried at fair value. The adoption of this guidance did not have a material impact on Company's consolidated financial position or results of operations.
 
In December 2011, the FASB issued new accounting disclosure requirements about the nature and exposure of offsetting arrangements related to financial and derivative instruments. The requirements are effective for fiscal years beginning after January 1, 2013, which for us is the fiscal year ending March 2014. The adoption of this guidance will not have a material impact on Company's consolidated financial position or results of operations.

In September 2011, the FASB issued an Accounting Standards Update that permits companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill is impaired before performing the two-step goodwill impairment test required under current accounting standards. The guidance is effective for us beginning in the first quarter of fiscal 2013, with early adoption permitted. The adoption of this standard will not impact our financial results.

In June 2011, the FASB issued ASU 2011-05, which is now part of ASC 220: “Presentation of Comprehensive Income".  The new guidance will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements.  It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity.  The standard does not change the items, which must be reported in other comprehensive income.  These provisions are to be applied retrospectively and will be effective for us as of January 1, 2012.  Because this guidance impacts presentation only, it has no effect on our financial condition, results of operations or cash flows. 
 
In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-04, “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”.  This update defines fair value, clarifies a framework to measure fair value and requires specific disclosures of fair value measurements.  The guidance is effective for interim and annual reporting periods beginning after January 1, 2012 and is required to be applied retrospectively.  The adoption of this guidance did not have a material impact on Company’s consolidated financial position or results of operations.
 
In April 2011, the Financial Accounting Standards Board (the "FASB") issued new accounting guidance that addresses effective control in repurchase agreements and eliminated the requirement for entities to consider whether the transferor/seller has the ability to repurchase the financial assets in a repurchase agreement. This new accounting guidance was effective, on a prospective basis, for new transactions or modifications to existing transactions, on January 1, 2012. The adoption of this guidance did not have a material impact on Company's consolidated financial position or results of operations.
 
 
15

 
NOTE 3 – OTHER CURRENT AND NON-CURRENT ASSETS

The $5,109,057 investments in former affiliates relates to Sricon. On June 21, 2012, IGC entered into a Memorandum of Settlement (the “MoS”) with Sricon and related parties, pursuant to which the Company gave up the 22% minority interest in Sricon in exchange for approximately 5 acres of land in Nagpur. The settlement is expected to close by the end of this year.
 
Prepaid expenses and other current assets consist of the following:
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Prepaid /preliminary expenses
  $ 718     $ 3,053  
Advance to suppliers & services
    563,113       737,199  
Security/statutory  advances
    48,394       65,369  
Advances to employees
    1,016,299       905,219  
Prepaid /accrued interest
    662       2,825  
Deposit and other current assets
    152,405       16,849  
Total
  $ 1,781,591     $ 1,730,514  
 
* Advances to Employees represent advances made to employees of Ironman by Ironman, prior to its acquisition by IGC.
 
Other non-current assets consist of the following:
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Sundry Debtors  - old
  $ 0     $ 11,318  
Other Advance - old
    400,339       454,787  
Total
  $ 400,339     $ 466,105  
 
NOTE 4 – ACCOUNTS RECEIVABLES

The accounts receivable, net of allowances, amounted to $890,134 and $1,066,650, as of December 31, 2013 and March 31, 2013, respectively.  The accounts receivable net of reserves for the quarter ended December 31, 2013 comes primarily from iron ore traders associated with our iron ore business. The Company maintains an allowance for doubtful accounts based on present and prospective financial condition of the customer and the inherent credit risk.  Accounts receivable are not pledged.

NOTE 5 – LEFT BLANK INTENTIONALLY

NOTE 6 – OTHER CURRENT AND NON-CURRENT LIABILITIES
 
Other current liabilities consist of the following:
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Statutory payables
  $ 4,017     $ 18,139  
Employee related liabilities
    45,591       49,751  
Other liabilities /expenses payable
    179,335       242,729  
Total
  $ 228,943     $ 310,619  
 
Other non-current liabilities consist of the following:
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Creditors  - old
  $ 38,792     $ 51,864  
Special reserve
    617,499       601,524  
Total
  $ 656,291     $ 653,388  
 
Sundry creditors consist primarily of creditors to whom amounts are due for supplies and materials received in the normal course of business.   
 
 
16

 
NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The fair value of the Company’s current assets and current liabilities approximate their carrying value because of their short-term nature.  Such financial instruments are classified as current and are expected to be liquidated within the next twelve months.
 
NOTE 8 – INTANGIBLE ASSETS AND GOODWILL
 
The movement in intangible assets and goodwill is given below.
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Balance at the beginning of the period
  $ 592,274     $ 4,803,828  
Adjustment form Ironman acquisition
    -       (3,849,877 )
Impairment of goodwill
    -       (301,141 )
Effect of foreign exchange translation
    -       (60,536 )
Total
  $ 592,274     $ 592,274  
 
NOTE 9 – NOTES PAYABLE AND LOANS - OTHERS

As reported previously, the Company has an unsecured Note Payable to Bricoleur Partners, L. P. in the amount of $1,800,000 promissory note (“2012 Security”), due July 31, 2014. Contractually the Company makes a penalty payment (booked under interest payment) of 17,100 shares of common stock for each month the loan remains unpaid.  No other "interest" payment is made on the loan.
 
One of our previous directors has loaned the Company, on an unsecured basis, working capital of $40,000 at 10% annual interest payable on April 25, 2014.  The Company has two loans with a commercial bank the first is for $100,000 at an interest rate of 3.75% the second is for $150,000 at an interest rate of 3.25%.  Both loans are revolving interest only loans guaranteed by our CEO.
 
NOTE 10 – RELATED PARTY TRANSACTIONS

Please also see Note 9 - NOTES PAYABLE AND LOANS - OTHERS.
 
NOTE 11 – COMMITMENTS AND CONTINGENCY
 
No significant commitments and contingencies were made or incurred during the three months ended December 31, 2013.
 
NOTE 12 – PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment consist of the following:
 
Category
 
Useful Life (years)
   
Period Ended December 31, 2013
   
Year Ended March 31, 2013
 
Land
  N/A     $ 12,069     $ 12,069  
Building (flat)
  25       1,295,224       1,328,413  
Plant and machinery
  20       9,316,018       9,396,659  
Computer equipment
  3       216,747       217,659  
Office equipment
  5       165,342       166,924  
Furniture and fixtures
  5       120,395       121,943  
Vehicles
  5       566,956       569,352  
Assets under construction
  N/A       4,275,024       4,288,469  
Total
        $ 15,967,775     $ 16,101,488  
Less: Accumulated depreciation
        $ (8,236,147 )   $ (7,917,258 )
Net Assets
        $ 7,731,628     $ 8,184,230  
 
Depreciation and amortization expense for the nine months ended December 31, 2013 and 2012 was $444,852 and $463,503, respectively.  Capital work-in-progress represents advances paid towards the acquisition of property and equipment and the cost of property and equipment not put to use before the balance sheet date.
 
 
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NOTE 13 – STOCK-BASED COMPENSATION
 
On April 1, 2009 the Company adopted ASC 718, “Compensation-Stock Compensation” (previously referred to as SFAS No. 123 (revised 2004), Share Based Payment).  ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  In fiscal year ended March 31, 2013 the Company issued 625,148 shares of common stock.  As of December 31, 2013, under the 2008 Omnibus Plan, 269,345 stock options and 779,103 shares of common stock have been awarded. As of December 31, 2013, no shares of common stock remain available for future grants of options or stock awards. Disclosures relating to the common shares and options and warrants reflect a 10:1 reverse split that was affected on April 19, 2013.
 
NOTE 14 – COMMON STOCK
 
Currently, the Company has two securities listed on the NYSE MKT: (1) Common Stock, $.0001 par value (ticker symbol: IGC) (“Common Stock”) and (2) redeemable warrants to purchase Common Stock (ticker symbol: IGC.WT). As reported on Form 8-K on February 5, 2013, the Company voluntarily delisted the units from the NYSE MKT and requested its unit holders to contact IGC to get the existing units separated into Common Stock and Warrants.  Each warrant entitles the holder to purchase one share of Common Stock at an exercise price of $5.00.  The warrants expire on March 6, 2015.
 
The registration statement for the initial public offering was declared effective on March 2, 2006.  
 
Effective March 31, 2013, the Company and Bricoleur Partners, L. P. agreed to amend the outstanding $1,800,000 promissory note (“2012 Security”), subject to the same terms of the 2012 Agreement, to extend the maturity date of the 2012 Security from December 31, 2012 to July 31, 2014.  During the quarter ended December 31, 2013, the Company issued 51,300 shares valued at $47,880 to this debt holder, which constituted an element of repayment of interest.
 
During the three months ended December 31, 2013, the Company also issued 30,000 shares of Common Stock to Medical Marketing Group (MMGI) valued at $31,200 for investor relations related services rendered.
 
On August 22, 2013, IGC entered into an At The Market (“ATM”) Agency Agreement with Enclave Capital LLC. Under the ATM Agency Agreement, IGC may offer and sell shares of our common stock having an aggregate offering price of up to $4 million from time to time. Sales of the shares, if any, will be made by means of ordinary brokers’ transactions on the NYSE MKT at market prices, or as otherwise agreed with Enclave. The Company estimates that the net proceeds from the sale of the shares of common stock that are being offered will be approximately $3.6 million. IGC intends to use the net proceeds from the sale of securities offered for working capital needs, repayment of indebtedness, and other general corporate purposes. During the three months ended December 31, 2013, the Company issued 418,193 shares of common stock valued at $404,869 under this agreement.
 
Further, pursuant to IGC’s employee stock option plan, the Company has issued 269,345 stock options at an average exercise price of $7.80, all of which are outstanding as of December 31, 2013. The Company has also issued a total of 146,073 shares to some of its directors and employees.  As of December 31, 2013, IGC has 7,980,919 shares of Common Stock issued and outstanding.  Disclosures relating to the common shares and options and warrants reflect a 10:1 reverse split that was effected on April 19, 2013.
 
NOTE 15 – INCOME TAXES
 
The Company adopted ASC 740, Accounting for Uncertainty in Income Taxes. In assessing the recoverability of its deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. The management considers historical and projected future taxable income, and tax planning strategies in making this assessment.
 
The Company’s effective tax rate was 0% for the quarters ending December 31, 2013 and December 31, 2012. The Company has US deferred tax assets which have been offset by valuation allowance because of historical and expected losses.  As the Company reverses its losses and becomes profitable, we will reassess the likelihood of recovering a portion or all of the deferred tax assets.  The remaining balance of deferred tax assets, which appear on the balance sheet, are from foreign based operations in which utilization is highly probable in offsetting  future foreign income taxes.
 
The Company recorded an income tax expense of $1,885 resulting from operational results of its foreign entities for the three-month period ending December 31, 2013 as compared to a tax expense of $453 for the three month period ended December 31, 2012. As of December 31, 2013 and 2012, there was no significant liability for income tax associated with unrecognized tax benefits.
 
 
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NOTE 16 – SEGMENT INFORMATION
 
 Accounting pronouncements establish standards for the manner in which public companies report information about operating segments in annual and interim financial statements. Operating segments are component of an enterprise that have distinct financial information available and evaluated regularly by the chief operating decision-maker ("CODM") to decide how to allocate resources and evaluate performance. The Company's CODM is considered to be the Company's chief executive officer ("CEO"). The CEO reviews financial information presented on an entity level basis for purposes of making operating decisions and assessing financial performance. Therefore, the Company has determined that it operates in a single operating and reportable segment.
 
NOTE 17 – INVESTMENTS – OTHERS

Investments – others for each of the periods ended December 31, 2013 and March 31, 2013 consist of the following:
 
   
Period Ended
December 31, 2013
   
Year Ended
March 31, 2013
 
Investment in equity shares of an unlisted company
  $ 48,450     $ 55,026  
Investment in partnership
            28,463  
Total
  $ 48,450     $ 83,489  
 
NOTE 18 – OTHER INCOME

Other income for the three-month and nine-month period ended December 31, 2013 contains certain foreign exchange gains/losses arising on account of re-measurement of certain intercompany receivables between the U.S. holding company and the foreign subsidiaries. The total foreign exchange gain/loss for the three-month and nine-month periods ended December 31, 2013 amounted to $33,078 and ($322,682) respectively.

NOTE 19 – IMPAIRMENT

No impairment was made on the Company’s investments during the fiscal quarter ended December 31, 2013.  

NOTE 20 – RECONCILIATION OF EPS
 
The historical weighted average per share for our shares through December 31, 2013, was applied using the treasury method of calculating the fully diluted shares.  The weighted average number of shares outstanding as of December 31, 2013 and 2012 used for the computation of basic EPS is 7,734,444 and 6,006,174, respectively. Due to the loss incurred during the three-month the period ending December 31, 2013, all of the potential equity shares are anti-dilutive and accordingly, the fully diluted EPS is equal to the basic EPS. Disclosures relating to the common shares and options and warrants reflect a 10:1 reverse split that was effected on April 19, 2013.
 
NOTE 21 – CERTAIN AGED RECEIVABLES

The receivable and other assets as of December 31, 2013 and March 31, 2013, include certain aged receivables in the amount of $0.5 million.  The aged receivables in fiscal year ended March 31, 2013 are due from the Cochin International Airport.  Cochin International Airport is partially owned by the State Government of Kerala.  The receivables have been due for periods in excess of one year as of December 31, 2013. This receivable has been classified as current because the arbitration process has concluded and ruling was given in our favor.  Our policy is to recognize disputed receivables once we win an arbitration award. The costs associated with the revenue are recognized in the period that they are incurred. Between the arbitration award and collection of the receivable we follow up with the customer in an effort to enforce the arbitration award.  Specifically, in the case of the Cochin International Airport the customer is partially owned by the State Government with very little risk of default.

 
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q, and the Annual Report filed on Form 10-K on July 16, 2013.  In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.  Our actual results could differ materially from those discussed in the forward-looking statements.  Factors that could cause or contribute to these differences include those discussed below and elsewhere in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as in our Annual Report on Form 10-K filed on July 16, 2013, including the risk factors set out in Item 1A therein.  Therefore, the financial statements included in the Report should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013 filed with the SEC on July 16, 2013.

Company Overview
 
We operate as a mining, materials and infrastructure company in India and China. In India we engage in supplying and trading iron ore and in leasing construction equipment, and to a lesser extent constructing roads, highways and supply rock aggregate. In China we own and operate iron ore beneficiation plants and iron ore mines, and supply iron ore to steel mills, specifically in Inner Mongolia. We operate a shipping hub, at the border of China and Mongolia.
 
Our plan is to build a large portfolio of iron ore assets by consolidating, through acquisitions, the fragmented iron ore sector in mineral rich Inner Mongolia and neighboring parts of Mongolia. This plan includes acquiring interests, for a combination of stock and cash, both operating mines and mines that are past the exploration stage and in the final stages of obtaining a mining license. We believe that we have a unique and exciting opportunity and strategic positioning to build a sizable asset base and create sustainable value for our shareholders.

Subsidiaries Overview

 HK Ironman is a Hong Kong-based company incorporated on December 20, 2010 to acquire PRC Ironman.  PRC Ironman was incorporated as Linxi Hefei Economic & Trade Co., Ltd. in China on January 8, 2008.  PRC Ironman is a Sino-foreign equity joint venture (“EJV”) established by both foreign and Chinese investors (i.e., Sino means “China” herein).  HK Ironman owns 95% of PRC Ironman.  PRC Ironman is engaged in the processing and extraction of iron ore from sand and dirt at its beneficiation plants in southwest Linxi in the autonomous region of eastern Inner Mongolia, under the administration of Chifeng City, Inner Mongolia, an area well connected by roads, planes and railroad. PRC Ironman owns four mining properties and operates three beneficiation plants on three separate properties, all located in Linxi.  

Incorporated on February 19, 2007, India Globalization Capital, Mauritius, Limited (IGC-M) is a Mauritius based company that manages and owns all the subsidiaries based in India: IGC Materials, Private Limited (“IGC-MPL”), IGC Logistics, Private Limited (“IGC-LPL”), IGC India Mining and Trading (“IGC-IMT”) and Techni Bharathi Limited (“TBL”).  The Indian subsidiaries including IGC-IMT are focused on the trading of materials like iron ore to customers in India and China. TBL was incorporated on June 19, 1982, in Cochin, India.   TBL is an engineering and construction company engaged in the execution of civil construction, structural engineering projects, and trading.  TBL has a focus in the Indian states of Kerala, Karnataka, and Tamil Nadu.  On March 31, 2013 TBL became a fully-owned subsidiary of IGC.  

On January 21, 2013, we incorporated IGC HK Mining and Trading Limited (“IGC-HK”) in Hong Kong. IGC-HK is a wholly owned subsidiary of IGC-Mauritius. This incorporation is part of our internal re-alignment and tax planning. Also, through IGC-HK, we controlled and beneficially owned 95% of IGC Linxi Industrial and Trading Limited (“Linxi -IGC”), a company incorporated on May 24, 2013.

Results of Operations
 
Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012
 
Revenue - Total revenue was $17.53 thousand for the three months ended December 31, 2013 as compared to $3,934 thousand for the three months ended December 31, 2012. The revenue reported for the December quarter ended 2012 was primarily from trading of iron ore. During the December 2013 quarter, however, the Company focused on beneficiation of iron ore.  We diverted all our resources to beneficiation and away from trading iron ore.  For part of the quarter we ran the dry process and accumulated the output of the dry processor.  Mainly, because we needed to build a supply of output from the dry processor and the ensuing winter and cold temperatures we did not start the wet process. Therefore we did not obtain a finished product (out put of high grade iron ore from the wet magnetic processor).  The partially finished product is reported in inventory and is not recognized as revenue till it is processed into high-grade iron ore and is sold to the steel factories. The shift from low margin trading to high margin beneficiation is part of our strategy to become profitable. The revenue that is reported in this quarter is from the leasing or rental of the heavy machinery that we own in TBL.  This business is currently very small but is growing rapidly with very good margins.  We will report on this in the future as it becomes more significant.
 
 
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Cost of Revenue (excluding depreciation) – Cost of revenue for the three months ended December 31, 2013 was $7.79 thousand as compared to $3,190 thousand for the three months ended December 31, 2012. The cost of revenue reported in the December 2012 quarter represents costs associated with the procurement of raw materials associated with the trading of iron ore.   However, in the December 2013 quarter, the cost of acquiring raw materials associated with beneficiation of iron ore are reported as part of inventory as it represents a partial completion of the process. The amount that is reported represents the cost associated with the rental business that we have begun in TBL, which is currently small but growing.

Selling, General and Administrative - Selling, general and administrative expenses were $156 thousand for the three months ended December 31, 2013 as compared to $154 thousand for the three months ended December 31, 2012.  The SG&A for the quarter ended December 2013 includes about $32 thousand of non-cash expenses associated with the award of stock to one of our vendors.
 
Depreciation – The depreciation expense was $148 thousand in the three months ended December 31, 2013 as compared to $135 thousand in the three months ended December 31, 2012.  The company is investigating and expects to, in the near future, change its depreciation policy from its current straight line depreciation to depreciation associated with beneficiation of iron ore.
 
Interest and other financial expenses – The interest expense and other financial expenses for the three months ended December 31, 2013 were $52.5 thousand as compared to $2.7 thousand for the three months ended December 31, 2012. The increase in interest is largely from a monthly non-cash payment on the loan of $1.8M.
 
Other income (loss) – Other income net loss of $41.4 thousand for the three month period ended December 31, 2013 contains certain foreign exchange gain/losses arising on account of re-measurement of certain intercompany receivables between the US holding company and the foreign subsidiaries. The total foreign exchange gain/loss for the three-month period ended December 31, 2013 and December 31, 2012 amounts to $33.07  thousand, and ($159.01)  thousand respectively.  The losses/gains are attributable largely to the depreciation/appreciation of the Indian rupee against the USD and are considered foreign exchange losses/gain.
 
Consolidated Net Income (loss) – In the three months ended December 31, 2013, the Company reported a GAAP net income loss of ($299.8) thousand and a GAAP EPS of ($0.04) compared to a GAAP net income of $311 thousand and a GAAP EPS of ($0.02) for the three months ended December 31, 2012.  The loss in the December 2013 quarter is attributable to our shift in strategy from trading to higher margin beneficiation. We expect that this strategy once fully implemented will generate consistent earnings.
 
Nine Months Ended December 31, 2013 Compared to Nine Months Ended December 31, 2012

Revenue - Total revenue was approximately $2,275 thousand for the nine months ended December 31, 2013, as compared to about $6,553 thousand for the nine months ended December 31, 2012The revenue was from trading iron ore, construction and leasing of heavy equipment to construction contractors.  In India the mines remained closed.  However, in Inner Mongolia we have begun to operationalize the first of our three plants. Our expectation is that revenue and margins will rise as we commence the sale of iron ore from our plant.

Cost of Revenue (excluding depreciation) – Cost of revenue for the nine months ended December 31, 2013 was approximately $1,888 thousand as compared to approximately $5,236 thousand for the nine months ended December 31, 2012. The cost of revenue represents the cost of acquiring raw material and logistics. The decrease in the cost of revenue is a reflection of the decreased revenue from trading and our focus on beneficiation of iron ore in our plant.
 
Selling, General and Administrative - Selling, general and administrative expenses were about $930 thousand for the nine months ended December 31, 2013 as compared to approximately $937 thousand for the nine months ended December 31, 2012.
 
Depreciation – The depreciation expense was approximately $445 thousand in the nine months ended December 31, 2013 as compared to about $464 thousand in the nine months ended December 31, 2012. The company is investigating and expects to, in the near future, change its depreciation policy from its current straight line depreciation to depreciation associated with beneficiation of iron ore.
 
Interest and other financial expenses – The interest expense and other financial expenses for the nine months ended December 31, 2013 were about $234 thousand as compared to approximately $29 thousand for the nine months ended December 31, 2012. The increase in interest is mainly the result of a monthly non-cash payment on the $1.8M loan.
 
Other income (loss) – Other income for the nine month period ended December 31, 2013 contains certain foreign exchange gain/losses arising on account of re-measurement of certain intercompany receivables between the US holding company and the foreign subsidiaries. The total foreign exchange loss/gain for the nine-month period ended December 31, 2013 and December 31, 2012 amounts to ($323) thousand, and ($334) thousand respectively.  The losses/gains are attributable largely to the depreciation/appreciation of the Indian rupee against the USD and are considered foreign exchange losses/gain.
 
 
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Consolidated Net Income (loss) – Consolidated net loss for the nine months ended December 31, 2013 was approximately ($1,547) thousand compared to a consolidated net loss of about ($360) thousand for the nine months ended December 31, 2012. The increased loss is largely attributable to three non-cash factors: 1) increased interest payment, 2) increased SG&A from the grant of ESOP shares, and 3) foreign exchange losses.
 
Off-Balance Sheet Arrangements

We do not have any undisclosed investments in special purpose entities or undisclosed borrowings or debt.
 
Liquidity and Capital Resources
 
This liquidity and capital resources discussion compares the consolidated company financial position for the nine-month periods ended December 31, 2013 and 2012.
 
During the nine months ended December 31, 2013, cash used in operating activities was ($867) thousand compared to $1,260 thousand provided by operating activities during the nine months ended December 31, 2012.
 
During the nine months ended December 31, 2013, investing activities from continuing operations provided $639 thousand of cash as compared to $373 thousand provided during the same period in 2012.
 
For the three-month period ended December 31, 2013, our non-GAAP cash burn was approximately $93 thousand after adjusting for $147 thousand of depreciation, $33 thousand of non-cash foreign exchange gain and $51 thousand of non-cash interest payment and $31 thousand other non cash items.

 At the end of December 31, 2013, our cash and cash equivalents along with restricted cash was $440,626. We have enough cash to continue operations, but not enough cash to expand the business or take advantage of the opportunities that we see, including other acquisitions.
 
Critical Accounting Policies

See Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part I, Item 1 herein for a discussion of critical accounting policies.

Forward-Looking Statements
 
We believe that some of the information in this report constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995.   You can identify these statements by forward-looking words such as “may,” “will,” “should”, “believes,” “expects,” “intends,” “anticipates,” “thinks,” “plans,” “estimates,” “seeks,” “predicts,” “potential” or similar words or the negative of these words or other variations on these words or comparable terminology.   You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or financial conditions or state or other forward-looking information.  Forward-looking statements are based on certain assumptions and expectations of future events.  IGC cannot guarantee that these assumptions and expectations are accurate or will be realized.  These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions.
 
Many factors, including those discussed more fully in documents filed with the Securities and Exchange Commission, which we refer to as the SEC, by IGC, particularly under the heading “Risk Factors” in Part 1, Item 1A of the Company’s Annual Report on Form 10-K and other risk factors reported elsewhere in this report, could cause results to differ materially from those stated.  While we believe it is important to communicate our expectations to our stockholders, there may be events in the future that we are not able to predict or over which we have no control.  The risk factors and cautionary language discussed in this report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in our forward-looking statements, including among other things:

 
·  The growth in global and specifically Asian GDP and more specifically infrastructure and the overall demand for iron ore;
 
·  Competition in the iron ore sector;
 
·  Legislation by the governments of India, China and Mongolia;
 
·  Labor, trucking, and other logistic issues;
 
·  Unanticipated cash requirements to support current operations, expand our business or incur capital expenditures;
 
·  The loss of key management or scientific personnel;
 
·  The activities of our competitors in the industry;
 
·  The effect of volatility of currency exchange rates; and
 
·  Enactment of new government laws, regulations, court decisions, regulatory interpretations or other initiatives that are adverse to us or our interests.
 
 
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You should be aware that the occurrence of the events described in the “Risk Factors” section mentioned above and elsewhere in this report, could have a material adverse effect on our business, financial condition and results of operations. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.  All forward-looking statements included herein attributable to us or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.  Any forward-looking statement made by us in this report speaks only as of the date on which we make it.
 
The information contained in this report identifies important factors that could adversely affect actual results and performance. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statements. 

Item 3.    Quantitative and Qualitative Disclosures about Market Risks
 
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
 
Item 4.    Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, management conducted an evaluation, under supervision and with the participation of the chief executive officer and its interim chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and interim chief financial officer concluded that our disclosure controls and procedures are effective.
 
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and interim principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during our fiscal quarter ended December 31, 2013 which were identified in conjunction with Management’s evaluation required by paragraph (d) of Rule 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
 
 
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PART II – OTHER INFORMATION
 
Item 1.     Legal Proceedings

There are no material legal proceedings against the Company.
 
Item 1A.  Risk Factors

There have not been any material changes with regard to the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2013 other that the risk added on Form 10-Q for the fiscal quarter ended June 30, 2013:

Restructuring of our holdings in China may result in a charge.

We are in the process of evaluating and restructuring our holdings in Inner Mongolia. This may result in a small charge into the Income Statement.

Item 2.    Unregistered Sales of Equity Securities
 
There were no unregistered securities sold by us during the quarter ended December 31, 2013.  

Item 3.    Defaults Upon Senior Securities
 
None.
 
Item 4.    (Removed and Reserved)
 
Item 5.    Other Information
 
None.
 
Item 6.    Exhibits
 
3.1
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K, as filed on August 6, 2012).
3.2
By-laws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended and filed on February 14, 2006 (Reg. No. 333-124942)).
31.1
31.2
32.1
32.2
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema Document*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*
 
*Filed as an exhibit hereto.
 
 
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SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
INDIA GLOBALIZATION CAPITAL, INC.
 
       
Date:  February 14, 2014
By:
/s/ Ram Mukunda           
 
   
Ram Mukunda
 
   
Chief Executive Officer and President
(Principal Executive Officer)
 
 
Date:  February 14, 2014
By:
/s/ Daniel Ngai                   
 
   
Daniel Ngai
 
   
Interim Treasurer, Principal Financial and
Accounting Officer
 
 
 
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