indiaglob20221231

indiaglob20221231_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended December 31, 2022

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-32830

INDIA GLOBALIZATION CAPITAL, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of incorporation or organization)

20-2760393

(I.R.S. Employer Identification No.)

10224 Falls Road, Potomac, Maryland

(Address of principal executive offices)

20854

(Zip Code)

(301) 983-0998

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	IGC	NYSE American LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☑		Smaller reporting company ☑
		Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

53,077,436 shares of our common stock were outstanding as of February 1, 2023.

| December 31, 2022, Form 10-Q

INDIA GLOBALIZATION CAPITAL, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2022

Table of Contents

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Changes in Shareholder’s Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34

SIGNATURES		35

| December 31, 2022, Form 10-Q

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain “forward-looking statements.” Additionally, we, or our representatives, may, from time to time, make other written or verbal forward-looking statements and discuss plans, expectations, and objectives regarding our business, financial condition, and results of operations. Without limiting the foregoing, statements that are in the future tense, and all statements accompanied by terms such as “believe,” “project,” “expect,” “trend,” “estimate,” “forecast,” “assume,” “intend,” “plan,” “target,” “anticipate,” “outlook,” “preliminary,” “will likely result,” “will continue” and variations of them and similar terms are intended to be “forward-looking statements” as defined by federal securities laws. Such statements are based on currently available information, which management has assessed but which is dynamic and subject to rapid change due to risks and uncertainties that affect our business.

For the next several years, we believe our success is highly correlated with the outcome of our clinical trials and secondarily with the sale of our products and services. The Company may not be able to complete human trials on our investigational drug candidate, or, once conducted, the results of human trials may not be favorable or as anticipated or may reflect lack of efficacy in humans or animals. Precautions, including social distancing and travel restrictions, among others, surrounding the ongoing SARS CoV 2 (“COVID-19”) pandemic could lead to delays or expenses greater than anticipated or projected. Failure or delay with respect to any of the above factors could have a material adverse effect on our business, future results of operations, stock price, and financial condition.

Our projections and investments anticipate certain regulatory changes and stable pricing, which may not hold out over the next several years. We may not be able to protect our intellectual property adequately or receive patents. We may not receive regulatory approval for our products, or trials. The patent applications we have licensed may not be granted by the United States Patent and Trademark Office (“USPTO”), even if the Company is in full compliance with USPTO requirements. We may not have adequate resources including financial resources, to successfully conduct all requisite clinical trials, to bring a product based on the above-referenced patented formulations to market, or to pay applicable maintenance fees over time. We may not be able to successfully commercialize our products even if they are successful and receive regulatory approval, including, but not limited to, based on the Food and Drug Administration’s (“FDA”) current position on hemp and hemp-based products. Failure or delay with respect to any of the factors above could have a material adverse effect on our business, future results of operations, stock price, and financial condition.

This document also contains statements that are not approved by the FDA, including statements on hemp and hemp extracts and their potential efficacy on humans and animals. While these statements and claims are intended to be in compliance with federal and state laws, we cannot guarantee such compliance.

We caution you not to place undue reliance on forward-looking statements, which are based upon assumptions, expectations, plans, and projections subject to risks and uncertainties, including those, if any, identified in the “Risk Factors” set forth in this report or in our annual report on Form 10-K for the fiscal year ended March 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on June 23, 2022, which may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements speak only as of the date when they are made. Except as required by federal securities law, we do not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements.

| December 31, 2022, Form 10-Q

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

India Globalization Capital, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

	December 31, 2022 ($)			March 31, 2022 ($)
ASSETS
Current assets:
Cash and cash equivalents		4,945			10,460
Accounts receivable, net		251			125
Short term investments		88			-
Inventory		3,748			3,548
Deposits and advances		322			978
Total current assets		9,354			15,111
Non-current assets:
Intangible assets, net		1,022			917
Property, plant, and equipment, net		8,309			9,419
Claims and advances		1,028			937
Operating lease asset		357			450
Total non-current assets		10,716			11,723
Total assets		20,070			26,834
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable		466			981
Accrued liabilities and others		890			1,460
Total current liabilities		1,356			2,441
Non-current liabilities:
Long-term loans		141			144
Other liabilities		15			16
Operating lease liability		241			341
Total non-current liabilities		397			501
Total liabilities		1,753			2,942

Commitments and Contingencies – See Note 12

Stockholders’ equity:
Preferred stock, $0.0001 par value: authorized 1,000,000 shares, no shares issued or outstanding as of December 31, 2022, and March 31, 2022.
Common stock and additional paid-in capital, $0.0001 par value: 150,000,000 shares authorized; 53,077,436 and 51,054,017 shares issued and outstanding as of December 31, 2022, and March 31, 2022, respectively.		118,382			116,019
Accumulated other comprehensive loss		(3,430	)		(2,968	)
Accumulated deficit		(96,635	)		(89,159	)
Total stockholders’ equity		18,317			23,892
Total liabilities and stockholders’ equity		20,070			26,834

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2022, Form 10-Q

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India Globalization Capital, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except loss per share and share data)

(Unaudited)

	Three months ended December 31,						Nine months ended December 31,
	2022			2021			2022			2021
	($)			($)			($)			($)

Revenue		332			142			745			275
Cost of revenue		(230	)		(80	)		(366	)		(149	)
Gross profit		102			62			379			126
Selling, general and administrative expenses		(1,574	)		(2,070	)		(4,943	)		(7,956	)
Research and development expenses		(806	)		(377	)		(2,968	)		(1,097	)
Operating loss		(2,278	)		(2,385	)		(7,532	)		(8,927	)
Impairment of investment		-			-			-			(37	)
Other income, net		29			4			56			451
Loss before income taxes		(2,249	)		(2,381	)		(7,476	)		(8,513	)
Income tax expense/benefit		-			-			-			-
Net loss attributable to common stockholders		(2,249	)		(2,381	)		(7,476	)		(8,513	)
Foreign currency translation adjustments		(61	)		77			(462	)		11
Comprehensive loss		(2,310	)		(2,304	)		(7,938	)		(8,502	)

Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.04	)		(0.05	)		(0.14	)		(0.18	)
Weighted-average number of shares used in computing net loss per share amounts:		53,063,473			51,053,191			52,412,830			49,643,942

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2022, Form 10-Q

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India Globalization Capital, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)

Three months ended December 31, 2021	Number of Common Shares		Common Stock and Additional Paid in Capital ($)		Accumulated Deficit ($)			Accumulated Other Comprehensive Loss ($)			Total Stockholders’ Equity ($)
Balances as of September 30, 2021		51,041		114,371		(80,275	)		(2,840	)		31,256
Common stock-based compensation & expenses, net		13		523		-			-			523
Issuance of common stock through offering (net of expenses)		-		-		-			-			-
Net loss		-		-		(2,381	)		-			(2,381	)
Foreign currency translation adjustments		-		-		-			77			77
Balances as of December 31, 2021		51,054		114,894		(82,656	)		(2,763	)		29,475

Three months ended December 31, 2022
Balances as of September 30, 2022		53,058		117,899		(94,386	)		(3,369	)		20,144
Common stock-based compensation & expenses, net		19		483		-			-			483
Issuance of common stock through offering (net of expenses)		-		-		-			-			-
Net loss		-		-		(2,249	)		-			(2,249	)
Foreign currency translation adjustments		-		-		-			(61	)		(61	)
Balances as of December 31, 2022		53,077		118,382		(96,635	)		(3,430	)		18,317

Nine months ended December 31, 2021	Number of Common Shares			Common Stock and Additional Paid in Capital ($)			Accumulated Deficit ($)			Accumulated Other Comprehensive Loss ($)			Total Stockholders’ Equity ($)
Balances as of March 31, 2021		47,827			109,720			(74,143	)		(2,774	)		32,803
Common stock-based compensation & expenses, net		1,520			1,072			-			-			1,072
Issuance of common stock through offering (net of expenses)		1,750			4,145			-			-			4,145
Other adjustments		(43	)		(43	)		-			-			(43	)
Net loss		-			-			(8,513	)		-			(8,513	)
Foreign currency translation adjustments		-			-			-			11			11
Balances as of December 31, 2021		51,054			114,894			(82,656	)		(2,763	)		29,475

Nine months ended December 31, 2022
Balances as of March 31, 2022		51,054			116,019			(89,159	)		(2,968	)		23,892
Common stock-based compensation & expenses, net		1,815			2,260			-			-			2,260
Issuance of common stock through offering (net of expenses)		208			103			-			-			103
Net loss		-			-			(7,476	)		-			(7,476	)
Foreign currency translation adjustments		-			-			-			(462	)		(462	)
Balances as of December 31, 2022		53,077			118,382			(96,635	)		(3,430	)		18,317

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2022, Form 10-Q

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India Globalization Capital, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine months Ended December 31,
	2022 ($)			2021 ($)
Cash flows from operating activities:
Net loss		(7,476	)		(8,513	)
Adjustment to reconcile net loss to net cash:
Depreciation and amortization		504			486
Provision for bad debt		-			1,718
Impairment of non-marketable securities		-			37
Common stock-based compensation and expenses, net		2,260			1,072
Net loss on sale of property, plant, and equipment		39			-
Forgiveness of PPP Loan		-			(430	)

Changes in operating assets and liabilities:
Accounts receivables, net		(127	)		11
Inventory		(200	)		51
Deposits and advances		656			(186	)
Claims and advances		(91	)		(10	)
Accounts payable		(516	)		(117	)
Accrued and other liabilities		(572	)		(669	)
Operating lease asset		93			6
Operating lease liability		(100	)		(31	)
Net cash used in operating activities		(5,530	)		(6,575	)

Cash flow from investing activities:
Net sale/(purchase) of property, plant, and equipment		239			(152	)
Investment in short term investments		(88	)		-
Acquisition and filing cost of patents and rights		(144	)		(37	)
Net cash provided by/(used in) investing activities		7			(189	)

Cash flows from financing activities:
Issuance of equity stock through offering (net of expenses)		103			4,145
Repayment of long-term loan		(2	)		(2	)
Net cash provided by financing activities		101			4,143

Effects of exchange rate changes on cash and cash equivalents		(93	)		14
Net decrease in cash and cash equivalents		(5,515	)		(2,607	)
Cash and cash equivalents at the beginning of the period		10,460			14,548
Cash and cash equivalents at the end of the period		4,945			11,941

Supplementary information:
Non-cash items:
Common stock issued/granted for stock-based compensation, including patent acquisition		2,260			1,072
Forgiveness of PPP Loan		-			(430	)

The accompanying notes should be read in connection with these Condensed Consolidated Financial Statements.

| December 31, 2022, Form 10-Q

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India Globalization Capital, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED DECEMBER 31, 2022

(in thousands, except for share data and loss per share, unaudited)

Unless the context requires otherwise, all references in this report to “IGC,” “the Company,” “we,” “our” and/or “us” refer to India Globalization Capital, Inc., dba IGC Inc., together with our subsidiaries and beneficially owned subsidiary. Our public filings with the Securities and Exchange Commission, the “SEC,” are available on www.sec.gov. The information contained on our various websites, including www.igcinc.us, is not incorporated by reference in this report, and you should not consider such information to be a part of this report. We exclude our investments and minority non-controlling interests, and any information provided by them is not incorporated by reference in this report, and you should not consider such information to be a part of this report.

NOTE 1 – BUSINESS DESCRIPTION

Corporate History

India Globalization Capital, Inc. (dba IGC, Inc., IGC) is a Maryland corporation established in 2005. Our fiscal year is the 52- or 53-week period ending March 31.

Business Overview

IGC develops advanced formulations for treating diseases and conditions, including Alzheimer’s disease (AD), menstrual cramps (dysmenorrhea), premenstrual syndrome (PMS) and chronic pain. The Company’s leading drug candidate, IGC-AD1, has demonstrated in Alzheimer’s cell lines the potential to be effective in suppressing or ameliorating two key hallmarks of AD: plaques and tangles. IGC-AD1 is currently in a Phase 2B safety and efficacy clinical trial for agitation in dementia from Alzheimer’s (clinicaltrials.gov, NCT05543681). The Company markets two wellness brands Holief and Sunday Seltzer. Holief includes pain relief creams and gels for women experiencing PMS and menstrual cramps, and Sunday Seltzer, a lifestyle energy beverage brand.

The Company currently has two main investigational small molecules in various stages of development:

IGC-AD1, our lead therapeutic candidate, is a tetrahydrocannabinol (THC) based formulation that has demonstrated in AD cell lines, in vitro, the potential in reducing a key peptide responsible for Aβ plaques, and the potential to decrease or inhibit the phosphorylation of tau a protein that is responsible for the formation of neurofibrillary tangles, both important hallmarks of AD. In addition, in the Phase 1 human trial it demonstrated the potential to reduce agitation in dementia due to AD. IGC-AD1 is currently in Phase 2B trials for treating agitation in dementia from AD, a condition that affects over 10-million individuals in North America and Europe, and

TGR-63, a non-cannabinoid molecule, is an enzyme inhibitor shown in pre-clinical trials to reduce neurotoxicity in Alzheimer’s cell lines.

The Company controls nine patents and seven patent applications, including two each for IGC-AD1 and TGR-63 and their uses related to Alzheimer’s.

The Company’s various personal care CBD-based over the counter (“OTC”) consumer products are sold through online and wholesale channels under the following two brands:

●

Holief™ is a vegan, non-GMO, cruelty free, paraben free, lab verified, CBD infused line of OTC products with plant-based ingredients aimed at supporting menstrual cramp (dysmenorrhea) discomforts and other premenstrual symptoms (“PMS”).

●

Sunday Seltzer™ is a vegan, organic, lightly carbonated energy drink with natural caffeine from green tea extract, CBD, vitamin B, and vitamin C, with no added sugars, and no preservatives. The energy drink is available in two flavors, pomegranate-lemon, and peach-ginger. In addition, Sunday Seltzer™ is also available in four other flavors with no caffeine.

Both Holief™ and Sunday Seltzer™ are compliant with applicable federal, state, and local laws, and regulations.

The Company operates two segments: the Life Sciences segment described above and a legacy Infrastructure segment to execute construction contracts and the rental of heavy construction equipment in India. The Company is currently actively executing a project in this segment.

| December 31, 2022, Form 10-Q

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Other Recent Developments

The Company commenced its Phase 2 clinical trial on IGC-AD1 for agitation in dementia from Alzheimer’s at two U. S. sites. The Company also received a no-objection letter from Health Canada to begin trials in Canada and has commenced trials at a site in Montreal. The trial is intended to enroll 146 patients with one half, the treated group, receiving IGC-AD1, and the other half, the control group, receiving a placebo. The goal of the trial is to evaluate and establish the efficacy of IGC-AD1 in treating patients with Alzheimer’s dementia to reduce neuropsychiatric symptoms (“NPS”) such as agitation, which affects 76% of individuals with Alzheimer’s (Mussele et al., 2015). The Company hopes to be the first natural tetrahydrocannabinol (“THC”) based medication for treating agitation in dementia from Alzheimer’s. The trial is registered on clinicaltrials.gov with NCT05543681.

Business Organization

As of December 31, 2022, the Company had the following operating subsidiaries: Techni Bharathi Private Limited (“TBL”), IGCare LLC, Holi Hemp LLC, IGC Pharma LLC, SAN Holdings LLC, Sunday Seltzer, LLC, Hamsa Biopharma India Pvt. Ltd., and Colombia-based beneficially owned subsidiary Hamsa Biopharma Colombia SAS (formerly Hamsa Biochem SAS). The Company’s fiscal year is the 52- or 53-week period ending on March 31. The Company is a Maryland corporation, established in 2005. The Company’s public filings with the SEC are available on www.sec.gov.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying condensed consolidated balance sheet as of December 31, 2022, and March 31, 2022, condensed consolidated statements of operations for the three months and nine months ended December 31, 2022, and 2021, and condensed consolidated statements of changes in stockholders’ deficit for the three months and nine months ended December 31, 2022, and 2021, and condensed consolidated statements of cash flows for the nine months ended December 31, 2022, and 2021, are unaudited. The consolidated balance sheet as of March 31, 2022, has been derived from audited financial statements, and the accompanying unaudited condensed consolidated financial statements (“interim statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (the “FASB”) within its Accounting Standards Codification (“ASC”) and under the rules and regulations of the SEC.

Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2022 (“Fiscal 2022”) contained in the Company’s Form 10-K for Fiscal 2022, filed with the SEC on June 23, 2022, specifically in Note 2 to the consolidated financial statements.

Principles of consolidation

The interim statements include the consolidated accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated. In the opinion of management, the interim statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

Use of estimates

The preparation of financial statements in conformity with 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.

| December 31, 2022, Form 10-Q

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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 generally used for, but not limited to, allowance for uncollectible accounts receivable; sales returns; normal loss during production; future obligations under employee benefit plans; the useful lives of property, plant, and equipment; intangible assets; valuations; impairment of goodwill and investments; recoverability of advances; the valuation of options granted, and warrants issued; and income tax and deferred tax valuation allowances, if any. 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 condensed consolidated financial statements.

Presentation and functional currencies

IGC operates in the U.S., India, Colombia, and Hong Kong, and a portion of the Company’s financials are denominated in the Indian Rupee (“INR”), the Hong Kong Dollar (“HKD”), or the Colombian Peso (“COP”). As a result, changes in the relative values of the U.S. Dollar (“USD”), the INR, the HKD, or the COP affect our financial statements.

The accompanying financial statements are reported in USD. The INR, HKD, and COP are the functional currencies for certain subsidiaries of the Company. The translation of the functional currencies into USD is performed for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenues 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 (loss), a separate component of shareholders’ equity. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of operations.

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 the operating environment, competitive information, and the impact of changes in government policies. 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 or profit 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. Unlike goodwill, long-lived assets are assessed for impairment only where there are any specific indicators for impairment.

No impairment has been recorded for the nine months ended December 31, 2022, and 2021.

Short-term and long-term investments

Our policy for short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations, and delivers an appropriate yield in relation to our investment guidelines and market conditions. Short-term and long-term investments consist of equity investment, mutual funds, corporate, various government securities, and municipal debt securities, as well as certificates of deposit. Certificates of deposit and commercial paper are carried at cost which approximates fair value. Available-for-sale securities: Investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position.

Investments are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs. Where the Company’s ownership interest is in excess of 20% and the Company has a significant influence, the Company has accounted for the investment based on the equity method in accordance with ASC Topic 323, “Investments – Equity method and Joint Ventures.” Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of operations and its share of post-acquisition movements in accumulated other comprehensive income/(loss) is recognized in other comprehensive income/(loss). Where the Company does not have significant influence, the Company has accounted for the investment in accordance with ASC Topic 321, “Investments-Equity Securities.”

| December 31, 2022, Form 10-Q

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We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income. Fair value is calculated based on publicly available market information or other estimates determined by management. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than the cost. To determine credit losses, we employ a systematic methodology that considers available quantitative and qualitative evidence. In addition, we consider specific adverse conditions related to the financial health of, and business outlook for, the investee. If we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in other income (expense), net and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative). We perform a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than the carrying value. Changes in value are recorded in other income (expense), net.

As of December 31, 2022, the Company has approximately $88 thousand in short-term investments.

Stock–based compensation

The Company accounts for stock-based compensation to employees and non-employees in conformity ASC Topic 718, “Stock-Based Compensation.” The Company expenses stock-based compensation to employees over the requisite vesting period based on the award’s estimated grant-date fair value. The Company accounts for forfeitures as they occur. Stock-based awards are recognized on a straight-line basis over the requisite vesting period. For stock-based employee compensation cost recognized at any date will be at least equal to the amount attributable to the share-based compensation that is vested at that date. For performance-based awards with a vesting schedule based entirely on the attainment of performance conditions, stock-based compensation expense associated with each tranche is recognized over the expected achievement period for the operational milestone, beginning at the point in time when the relevant operational milestone is considered probable to be achieved.

For market-based awards, stock-based compensation expense is recognized over the expected achievement period. The fair value of such awards is estimated on the grant date using the binomial lattice model.

The Company estimates the fair value of stock option grants using the Black-Scholes option-pricing model. The assumptions in calculating the fair value of stock-based awards represent management’s best estimates. Generally, the closing share price of the Company’s common stock on the date of grant is considered the fair value of the share. The volatility factor is determined based on the Company’s historical stock prices. The expected term represents the period that our stock-based awards are expected to be outstanding. The Company has never declared or paid any cash dividends. For further information, refer to Note 14, “Stock-Based Compensation” of Notes to Consolidated Financial Statements.

Accounts receivable

We make estimates of the collectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer creditworthiness, and current economic trends. If a customer’s financial condition deteriorates, additional allowances may be required. We had $251 thousand of accounts receivable, net of provision for the doubtful debt of $35 thousand as of December 31, 2022, as compared to $125 thousand of accounts receivable, net of provision for the doubtful debt of $93 thousand as of March 31, 2022.

| December 31, 2022, Form 10-Q

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Inventory

Inventory is valued at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Inventory consists of raw materials, finished goods related to wellness products, hand sanitizers, finished hemp-based products and beverages, among others, as well as work-in-progress such as extracted hemp crude oil, hemp-based isolate, growing crops, harvested crops, and herbal oils, among others. Work-in-progress also includes product manufacturing in process, and costs of growing hemp, in accordance with applicable laws and regulations, including but not limited to labor, utilities, fertilizers, and irrigation. Inventory is primarily accounted for using the weighted average cost method. Primary costs include raw materials, packaging, direct labor, overhead, shipping, and the depreciation of manufacturing equipment. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Abnormal amounts of idle facility expense, freight, handling costs, scrap, discontinued products, and wasted material (spoilage) are expensed in the period they are incurred.

Fair value of financial instruments

ASC 820, “Fair Value Measurement,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Earnings/(Loss) per share

The computation of basic loss per share for the nine months ended December 31, 2022, excludes potentially dilutive securities of approximately 6.1 million shares which includes share options, unvested shares such as restricted shares and restricted share units, granted to employees, non-employees, and advisors, and shares from the conversion of outstanding units, if any because their inclusion would be anti-dilutive.

The weighted average number of shares outstanding for the nine months ended December 31, 2022, and 2021, used for the computation of basic earnings per share (“EPS”), is 52,412,830 and 49,643,942, respectively. Due to the loss incurred by the Company during the nine months ended December 31, 2022, and 2021, all the potential equity shares are anti-dilutive, and accordingly, the fully diluted EPS is equal to the basic EPS.

Cybersecurity

We have a cybersecurity policy in place and have taken cybersecurity measures that, while there can be no assurance, we expect are likely to safeguard the Company against breaches. In the nine months ended December 31, 2022, there were no impactful breaches in cybersecurity.

| December 31, 2022, Form 10-Q

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Intangible assets

The Company’s intangible assets are accounted for in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Intangible assets having indefinite lives are not amortized, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value. We perform an impairment analysis on March 1 annually on the indefinite-lived intangible assets following the steps laid out in ASC 350-30-35-18. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets. If quantitative analysis is necessary, we would analyze various aspects including revenues from the business, associated with the intangible assets. In addition, intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated period of benefit. In accordance with ASC 360-10-35-21, definite lived intangibles are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.

The Company intends to capitalize trademarks and related expenses exceeding $2,500 per trademark. Management may also capitalize trademarks and related expenses up to $2,500 per trademark based on its potential and benefit in coming years.

Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (ASC 606). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

ASC 606 prescribes a 5-step process to achieve its core principle. The Company recognizes revenue from trading, rental, or product sales as follows:

I. Identify the contract with the customer.

II. Identify the contractual performance obligations.

III. Determine the amount of consideration/price for the transaction.

IV. Allocate the determined amount of consideration/price to the performance obligations.

V. Recognize revenue when or as the performing party satisfies performance obligations.

The consideration/price for the transaction (performance obligation(s)) is determined as per the agreement or invoice (contract) for the services and products in the Infrastructure and Life Sciences segment.

Revenue in the Infrastructure segment is recognized for the renting business when the equipment is rented, and terms of the agreement have been fulfilled during the period. Revenue from the execution of infrastructure contracts is recognized on the basis of the output method as and when part of the performance obligation has been completed, and approval from the contracting agency has been obtained after a survey of the performance completion as of that date. In the Life Sciences segment, the revenue from the wellness and lifestyle business is recognized once goods have been sold to the customer and the performance obligation has been completed. In retail sales, we offer consumer products through our online stores. Revenue is recognized when control of the goods is transferred to the customer. This generally occurs upon our delivery to a third-party carrier or, to the customer directly. Revenue from tolling services is recognized when the performance obligation, such as processing of the material, has been completed and output material has been transferred to the customer. We license our products to processors. The royalty income from licensing is recognized once goods have been sold by the processor to its customers.

| December 31, 2022, Form 10-Q

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Net sales disaggregated by significant products and services for the nine months ended December 31, 2022, and 2021 are as follows:

	*(in thousands)* *Nine months ended December 31,*
	2022 ($)		2021 ($)
Infrastructure segment
Rental income (1)		25		11
Construction contracts (2)		34		15

Life Sciences segment
Wellness and lifestyle (3)		334		227
White labeling services (4)		352		22
Total		745		275

(1) Rental income consists of income from the rental of heavy construction equipment.

(2) Construction contracts consist of the execution of contracts directly or through subcontractors.

(3) Relates to revenue from the Life Sciences segment, including the sale of wellness and lifestyle products such as hand sanitizers, bath bombs, lotions, gummies, beverages, hemp crude extract, hemp isolate, and hemp distillate.

(4) Relates to revenue from the Life Sciences segment, including income from white label services, which refers to a fully supported product or service made by us but sold by another company.

Leases

Lessor Accounting

Under the current ASU guidance, contract consideration will be allocated to its lease and non-lease components (such as maintenance). For the Company as a lessor, any non-lease components will be accounted for under ASC Topic 606, “Revenue from Contracts with Customers,” unless the Company elects a lessor practical expedi

SEC Form 10-Q filed by India Globalization Capital Inc.