Selling,
General and Administrative - Selling, general and administrative expenses
were $3.0 million for the quarter ended December 31, 2009 compared to $2.1
million for the quarter ended December 31, 2008. The December
2009 SG&A has a total of $2.44 million of one time charges, about $1.85
million relating to the deconsolidation of Sricon, and $587 thousand relating to
the extinguishment of the debt. Adjusting for the one-time
charges the SG&A for the quarter ended December 31, 2009 would be around
$600 thousand, or around 10% of revenue, compared to $2.1 million, or around 55%
of revenue, incurred in the quarter ended December 31, 2008. The
SG&A for the quarter ended December 31, 2009 also had increased legal fees
from the capital raise as well as the
deconsolidation.
Operating Income (loss) - In
the quarter ended December 31, 2009, operating loss was $2.6 million compared to
an operating loss of $1.4 million for the quarter ended December 31,
2008. The operating loss in the quarter ended December 2009, stem
partly from a large one-time charge of $2.44 M in SG&A reflecting
the de consolidation of Sricon and the extinguishment of debt. With
an adjustment for one-time charges the operating loss for the quarter is around
$127 thousand. We expect operating income to increase as our revenue
ramps up and our quarries become operational.
Early
extinguishment of debt, interest expense, and amortization of debt discount –
the early extinguishment of debt resulted in a one-time charge of about
$586,785 thousand, that is included in the SG&A. The interest
expense and amortization of debt discount for the quarter ended December 31,
2009 was $430,837 compared to $442,265 for the quarter ended December 31,
2008. The interest expense and amortization of debt discount are for
$5.11 million of short and long term debt. The annual effective rate
of interest is 34%, albeit much of it non-cash. If the Company raises
equity and pays of some of the loans, it can potentially save around $400,000
per quarter, or $1.6 million a year, which would increase our bottom line
substantially.
AOCI & Loss on dilution of
Sricon – AOCI stands for Accumulated Other Comprehensive
Income. As a result of the deconsolidation of Sricon, we have taken a
one-time charge for about $2.1 million, which represents a portion of the Other
Comprehensive Income of Sricon that accumulated from the time that IGC acquired
63% of Sricon. We recorded a one-time loss of $1.1 million, as a result of
decreasing our ownership from 63% to 22.3% in Sricon and extinguishing the loan
of $17.9 million due to Sricon.
Inter Company
Loans- IGC borrowed $17.9 million from Sricon. As a result of
the decrease in ownership, this loan is
eliminated.
Consolidated
Net Income (loss) – Consolidated Net loss for the quarter ended December
31, 2009 was ($6.2) million compared to a consolidated net loss
of ($2.3) million for the quarter ended December 31,
2008. The net loss in the 2009 December quarter includes one-time and
non-cash charges of $6.0 million.
Cash, cash
equivalents, restricted cash and working capital – As on December 31,
2009 the company had $3.9 million of cash, cash equivalents and restricted
cash. Restricted cash is cash in a fixed deposit used to secure a
bank guarantee. For the quarter ended December 31, 2009 the Company
had about $4.9 million in working capital.
Stock holders
equity and Total Assets: Compared to March 31, 2009 our stock holders
equity decreased from $23.6 million to $21.9 million and our total assets
decreased from $51.8 million to $35.9 million, mostly based on the de
consolidation of Sricon. The decrease in the balance sheet ($15.9)
million is primarily due to elimination of debt ($17.9) million that was owed to
Sricon, along with accounting adjustments.
Nine
Months Ended December 31, 2009 Compared to Nine Months Ended December 31,
2008
Revenue -
Total revenue was $13.99 million for the nine months ended December
31, 2009, as compared to $32.3 million for the nine months ended December 31,
2008. The lower revenue for the nine months ended December 31, 2009
is from decreasing our contracts and backlog of work as a result of the
financial turmoil.
Cost of Revenue - Cost of
revenue consists primarily of compensation and related fringe benefits for
project-related personnel, department management and all other dedicated project
related costs and indirect costs. Cost of Revenue decreased by $12.1
million, compared to the nine-month period ended December 31,
2008. The decrease was caused by declining revenue and associated
costs.
Selling, General and Administrative
- Consists primarily of employee-related expenses, professional fees,
other corporate expenses and allocated overhead. Selling, general and
administrative expenses were $4.4 million for the nine-month period ended
December 31, 2009 compared to $4.2 million for the nine-month period ended
December 31, 2008, or 13.1% of revenue. The nine-month period ended
December 31, 2009 included $2.44 million of one time charges related to the
deconsolidation of Sricon. Net of deconsolidation charges the
SG&A was about $2.0 million or about 14.3% of the revenue for the nine month
period ended December 31, 2009.
Operating Income (loss) - In
the nine-month period ended December 31, 2009, operating loss was ($2.8)
million, compared to operating income of $3.4 million for the nine-month period
ending December 31, 2008.
Net Interest Income (Expense)
– Net interest expense decreased by $47 thousand compared to the nine-month
period ending December 31, 2008.
Consolidated Net Income (loss) –
Net loss for the nine months ended December 31, 2009 was ($7.2) million
compared to consolidated net income of $562 thousand for the nine months ended
December 31, 2008. As explained in the quarterly comparisons,
one-time charges were taken in the quarter ended December 31, 2009 for the
deconsolidation of Sricon as well as for the extinguishment of
debt.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements as defined in Regulation S-K promulgated
under the Securities Exchange Act of 1934.
Liquidity
and Capital Resources
This
liquidity and capital resources discussion compares the consolidated company
results for nine months period ended December 31, 2009 and 2008.
Cash used
for operating activities from continuing operations is our net loss adjusted for
certain non-cash items and changes in operating assets and liabilities. During
the first nine months of 2009, cash used for operating activities was ($2.8)
million compared to cash used for operating activities of ($6.3) million during
the first nine months of 2008. The uses of cash in the first nine months of 2009
relate primarily to the payment of general operating expenses of our subsidiary
companies. The large change is due to less business
volume.
During
the first nine months of 2009, investing activities from continuing operations
used ($985) thousand of cash as compared to $2.6 million provided during the
comparable period in 2008.
Financing
cash flows from continuing operations consist primarily of transactions related
to our debt and equity structure. In the first nine months of 2009 there was
financing cash provided of approximately $3.7 million, compared to cash used of
approximately ($2.3) million for the first nine months of 2008. The
increase of cash from financing was due to the issuance of 1,599,000 shares of
stock.
Our
future liquidity needs will depend on, among other factors, stability of
construction costs, interest rates, and a continued increase in infrastructure
contracts in India. We believe that our current cash balances and anticipated
operating cash flow will be sufficient to fund our normal operating requirements
for at least the next 12 months. However, we may seek to secure additional
capital to fund further growth of our business, or the repayment of debt, in the
near term.
Annual Pro Forma and Adjusted Pro Forma Financial
Information
In prior
annual filings, we compared annual consolidated results of operations and cash
flows to the preceding year. Since we acquired both TBL and
Sricon at the close of year ending March 31, 2008, we believe a comparison of
the December 31, 2009 consolidated results of operations and cash flows to March
31, 2008 is not an adequate comparison. Only the operating results
for March 8, 2008 to March 31, 2008 are included in our 2008 consolidated
results of operations and cash flows. To reflect a better comparison
of operating results, we are presenting in this Management’s Discussion and
Analysis section, the Pro Forma results of operations for the
Company as if the acquisitions occurred on April 1, 2007 and April 1,
2008, respectively. We are basing our Pro Forma results of operations
from (1) the audited financial statements of Sricon for the period ended March
7, 2008, (2) the unaudited financial statements of Sricon for the period March
8, 2008 to March 31, 2008, (3) the audited financial statements of TBL for the
period ended March 7, 2008, (4) the unaudited financial statements of TBL for
the period March 8, 2008 to March 31, 2008, and (5) the audited consolidated
financial statements of the Company for the year ended March 31, 2009 and
2008.
We
believe that the presented Pro Forma financial statements and analysis is a more
meaningful comparison of our operating results.
The
following tables represent our Pro Forma Consolidated Financial
Statements.
India
Globalization Capital, Inc.
Adjusted
Pro Forma Consolidated Statements of Operations
(unaudited)
|
|
Year
Ended
March
31, 2009
|
|
|
Year
Ended
March
31, 2008
|
|
|
Percentage
Increase (Decrease)
|
|
Revenue
|
|
$
|
35,338,725
|
|
|
$
|
30,123,348
|
|
|
$
|
17.3
|
%
|
Cost
of revenue
|
|
|
(27,179,494
|
)
|
|
|
(22,462,592
|
)
|
|
|
21.0
|
%
|
Gross
profit
|
|
|
8,159,231
|
|
|
|
7,660,756
|
|
|
|
6.5
|
%
|
Selling,
general and administrative expenses
|
|
|
(4,977,815
|
)
|
|
|
(2,997,983
|
)
|
|
|
66.0
|
%
|
Depreciation
|
|
|
(873,022
|
)
|
|
|
(921,382
|
)
|
|
|
(5.2
|
%)
|
Operating
income
|
|
|
2,308,394
|
|
|
|
3,741,392
|
|
|
|
(38.3
|
%)
|
Legal
and formation, travel and other start up costs
|
|
|
|
|
|
|
(5,765,620
|
)
|
|
|
(100.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,753,952
|
)
|
|
|
(3,411,357
|
)
|
|
|
48.6
|
%
|
Interest
income
|
|
|
1,176,018
|
|
|
|
319,984
|
|
|
|
267.5
|
%
|
Other
Income
|
|
|
|
|
|
|
2,997,495
|
|
|
|
(100.0
|
%)
|
Income
/ (loss) before income taxes
|
|
|
1,730,461
|
|
|
|
(2,118,106
|
)
|
|
|
(181.7
|
%)
|
Provision
for income taxes, net
|
|
|
(1,535,087
|
)
|
|
|
(946,939
|
)
|
|
|
(62.1
|
%)
|
Income
after Income Taxes
|
|
|
195,373
|
|
|
|
(3,065,046
|
)
|
|
|
106.4
|
%
|
Provision
for Dividend on Preference Stock and its Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
(716,950
|
)
|
|
|
(1,343,845
|
)
|
|
|
46.6
|
%
|
Net
income / (loss)
|
|
$
|
(521,576
|
)
|
|
$
|
(4,408,891
|
)
|
|
$
|
88.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income / (loss) per share: basic and diluted
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding-basic and diluted
|
|
|
10,091,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
Adjustments
The
Consolidated Pro Forma Statement of Operations contains US GAAP to Pro Forma
adjustments consisting of the elimination of interest income held in trust and
provision for income taxes. Had the merger occurred during April 1,
2007, interest income in the amount of $2,192,402 would not have been earned
because funds as reported in US GAAP results would have not been held in
trust. Therefore, we eliminate the applicable interest earned from
the Pro Forma statement of operations for the year ended March 31,
2008. Accordingly, the provision for income taxes is reduced by
$16,955.
Year
Ended March 31, 2009 and March 31, 2008
The
following discussion relates to IGC for the years ended March 31, 2009 and March
31, 2008:
Revenues
Total pro
forma revenue increased 17.1% from $35.3 million for the year ended March
31, 2009, as compared to $30.1 million for the year ended March 31,
2008. Due to increased liquidity requirements in maintaining a high
level of growth, we have curtailed the number of contracts we are working on by
sub-contracting some and cancelling others.
Cost
of Revenues
Costs of
revenue consists primarily of compensation and related fringe benefits for
project-related personnel, department management and all other dedicated project
related costs and indirect costs. Cost of revenue increased by 4.7 million
or 21.0%, compared to the year ended March 31, 2008. The increase was
due to the increase of construction material.
Selling,
General and Administrative Expenses
Consist
primarily of employee-related expenses, professional fees, other corporate
expenses and allocated overhead. Selling, general and administrative expenses
increased by $2 million or 67.5% for the year ended March 31, 2009,
compared to the year ended March 31, 2008. The increase in SG&A
stem partly from overheads related to US compliance, USGAAP filings with the
SEC, and legal costs associated with the warrant tender offer and general fund
raising activity.
Net Interest Income (Expense)
– Net interest expense increased by $484 thousand for the year ended March
31, 2009 compared to the year ended March 31, 2008. The main reason
is that the interest income from money in trust is not included in the pro forma
statements.
Net
Income (loss)
Net loss
for the years ended March 31, 2009 and March 31, 2008 was $522 thousand and $4.4
million, respectively. The 2008 net loss included compensation
expense, legal, interest expense, formation, travel, other and start-up
costs net of interest income related to the cash held in our trust
account. The 2009 loss includes approximately $1.5 million of one
time expenses related to fund raising and non cash expenses related to warrants,
as well as approximately $300,000 of losses due to a strengthening US dollar
against the Indian Rupee.
Impairment
of Goodwill
As a
result of our annual impairment tests which occurred during the fourth quarter,
we have not recorded an impairment adjustment to goodwill. Factors
that influence the analysis include, contracts, potential contracts, ability to
grow the quarry and ore business, among others. While there is
an overall liquidity constraint and we require more cash to grow, the market
potential for the infrastructure business in India remains
unabated.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements as defined in Item 303(a) (4) (ii) of
Regulation S-K promulgated under the Securities Exchange Act of
1934.
Liquidity
and Capital Resources
Cash used
for operating activities from continuing operations is our net loss adjusted for
certain non-cash items and changes in operating assets and liabilities. During
the first three months of 2009, cash used for operating activities was $470
thousand compared to cash used for operating activities of $5.5 million during
the first three months of 2008. The uses of cash in the first three months of
2009 relates primarily to the payment of general operating expenses of our
subsidiary companies. The large change is due to less business
volume.
During
the first three months of 2009, investing activities from continuing operations
used $242 thousand of cash as compared to $5.3 million used during the
comparable period in 2008.
Financing
cash flows from continuing operations consist primarily of transactions related
to our debt and equity structure. In the first three months of 2009 there was
financing cash used of approximately $332 thousand, compared to cash provided of
approximately $4.1 million for the first three months of 2008. The cash
provided in 2009 was primarily due to use of bank credit lines. The
cash used in 2008 was primarily due to repayment of long-term
notes.
Our
future liquidity needs will depend on, among other factors, stability of
construction costs, interest rates, and a continued increase in infrastructure
contracts in India. We believe that our current cash balances and anticipated
operating cash flow, will be sufficient to fund our normal operating
requirements for at least the next 12 months. However, we may seek to secure
additional capital to fund further growth of our business, or the repayment of
debt, in the near term.
Quantitative
and Qualitative Disclosure about Market Risks
The
primary objective of the following information is to provide forward-looking
quantitative and qualitative information about our potential exposure to market
risks. Market risk is the sensitivity of income to changes in
interest rates, foreign exchanges, commodity prices, equity prices, and other
market-driven rates or prices. The disclosures are not meant to be
precise indicators of expected future losses, but rather, indicators of
reasonably possible losses. This forward-looking information provides
indicators of how we view and manage our ongoing market risk
exposures.
Customer
Risk
The
Company’s customers are the Indian government, state government, private
companies and Indian government owned companies. Therefore, our
business requires that we continue to maintain a pre-qualified status with our
clients so we are not disqualified from bidding on future
work. The loss of a significant client, like the National Highway
Authority of India (NHAI), may have an adverse effect on
Company. Disqualification can occur if, for example, we run out of
capital to finish contracts that we have undertaken.
Commodity
Prices and Vendor Risk
The
Company is affected by the availability, cost and quality of raw materials
including cement, asphalt, steel, rock aggregate and
fuel. The prices and supply of raw materials and fuel
depend on factors beyond the control of the Company, including general economic
conditions, competition, production levels, transportation costs and import
duties. The Company typically builds contingencies into the
contracts, including indexing key commodity prices into escalation
clauses. However, drastic changes in the global markets for raw
material and fuel could affect our vendors, which may create disruptions in
delivery schedules that could affect our ability to execute contracts in a
timely manner. We are taking steps to mitigate some of this risk by
attempting to control the supply of raw materials. We do
not currently hedge commodity prices on capital markets.
Labor
Risk
The
building boom in India and the Middle East (India, Pakistan, and Bangladesh
export labor to the Middle East) had created pressure on the availability of
skilled labor like welders, equipment operators, etc. While this has
recently changed with the shortage of financial liquidity and falling oil
prices, we expect a construction boom and although manageable, some regional
shortage of skilled labor.
Compliance,
Legal and Operational Risks
We
operate under regulatory and legal obligations imposed by the Indian
governments and U.S. securities regulators. Those obligations
relate, among other things, to the company’s financial reporting, trading
activities, capital requirements and the supervision of its
employees. For example, we file our financial statements in
three countries under three different Generally Accepted Accounting Standards,
(GAAP). Failure to fulfill legal or regulatory obligations can lead
to fines, censure or disqualification of management and/or staff and other
measures that could have negative consequences for our
subsidiaries’ activities and financial performance. We are mitigating
this risk by hiring local consultants and staff who can manage the compliance in
the various jurisdictions in which we operate. However, the cost of
compliance in various jurisdictions could have an impact on our future
earnings.
Interest
Rate Risk
The
infrastructure development industry is one in which leverage plays a large
role. A typical contract requires that we furnish an earnest money
deposit and a performance guaranty. Furthermore, most contracts
demand that we reserve between 7 and 11 percent of contract value in the form of
bank guaranties and/or deposits. Finally, as interest rates rise, our
cost of capital increases thus impacting our margins.
Exchange
Rate Sensitivity
Our
Indian subsidiaries conduct all business in Indian Rupees with the exception of
foreign equipment that is purchased from the U.S. or Europe. Exchange
rates have an insignificant impact on our financial results. However,
as we convert from Indian Rupees to USD and subsequently report in U.S. dollars,
we may see an impact on translated revenue and
earnings. Essentially, a stronger USD decreases our reported earnings
and a weakening USD increases our reported earnings.
Accounting
Developments and their impact
In
December 2007, the FASB issued 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”). ASC 810-10 establishes accounting and
reporting standards for a non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. ASC 810-10-65 establishes accounting and
reporting standards that require (i) the ownership interest in subsidiaries
held by parties other than the parent to be clearly identified and presented in
the consolidated balance sheet within equity, but separate from the parent’s
equity, (ii) the amount of consolidated net income attributable to the
parent and the non-controlling interest to be clearly identified and presented
on the face of the consolidated statements of income, and (iii) changes in
a parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary to be accounted for consistently. Effective
April 1, 2009, the Company adopted ASC 810-10-65. See “Consolidated Balance
Sheets”, “Consolidated Statements of Income”, “Consolidated Statements of
Shareholders’ Equity and Comprehensive Income (Loss)”, and note 2 for
information and related disclosures regarding non-controlling
interest.
In
December 2007, the FASB issued ASC 805 “Business Combinations” (previously
referred to as SFAS No. 141 (revised 2007), “Business Combinations”, which
was a revision of SFAS No. 141, “Business Combinations”). This Statement
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in an acquiree; recognizes
and measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. Effective April 1, 2009, the Company adopted ASC 805
and the adoption did not have a material impact on the Company’s consolidated
results of operations, cash flows or financial position.
In
February 2008, the FASB approved ASC 820-10 “Fair Value Measurements and
Disclosures” (previously referred to as FASB Staff Position FAS No.157-2,
“Effective Date of FASB statement No. 157” (FSP FAS 157-2), which grants a
one-year deferral of SFAS No. 157’s fair-value measurement requirements for
non-financial assets and liabilities, except for items that are measured or
disclosed at fair value in the financial statements on a recurring basis).
Effective April 1, 2009, the Company has adopted ASC 820-10 for
non-financial assets and liabilities. The adoption of ASC 820-10 for
non-financial assets and liabilities did not have a material impact on the
Company’s consolidated results of operations, cash flows or financial
position.
In
November 2008, the FASB’s Emerging Issues Task Force reached a consensus on
ASC 323-10 “Investments-Equity Method and Joint Ventures” (previously referred
to as EITF Issue No. 08-6, “Equity Method Investment Accounting
Considerations”). ASC 323-10 continues to account for the initial carrying value
of equity method investments on a cost accumulation model, which generally
excludes contingent consideration. ASC 323-10 also specifies that
other-than-temporary impairment testing by the investor should be performed at
the investment level and that a separate impairment assessment of the underlying
assets is not required. An impairment charge by the investee should result in an
adjustment of the investor’s basis of the impaired asset for the investor’s
pro-rata share of such impairment. In addition, ASC 323-10 reached a consensus
on how to account for an issuance of shares by an investee that reduces the
investor’s ownership share of the investee. An investor should account for such
transactions as if it had sold a proportionate share of its investment with any
gains or losses recorded through earnings. ASC 323-10 also addresses the
accounting for a change in an investment from the equity method to the cost
method after adoption of ASC 810-10 (previously referred to as SFAS
No. 160). ASC 323-10 affirms existing guidance which requires cessation of
the equity method of accounting and application of ASC 320-10 (previously
referred to as FASB Statement No. 115, “Accounting for Certain Investments
in Debt and Equity Securities”), or the cost method under ASC 323-10-35, as
appropriate. Effective April 1, 2009, the Company adopted ASC 323-10 and
the adoption did not have a material impact on the Company’s consolidated
results of operations, cash flows or financial position.
In
April 2009, the FASB issued ASC 805-20 “Business Combinations —
Identifiable Assets and Liabilities, and Any Non-controlling Interest”
(previously referred to as FASB Staff Position FAS No. 141R-1, “Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies” (FSP FAS No. 141R-1). ASC 805-20 eliminates the
distinction between contractual and non-contractual contingencies, including the
initial recognition and measurement criteria, in ASC 805 and instead carries
forward most of the provisions in FASB Statement No. 141, Business
Combinations, for acquired contingencies. ASC 805-20 is effective for contingent
assets or contingent liabilities acquired in business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Effective April 1,
2009, the Company adopted ASC 805-20 and the adoption did not have a material
impact on the Company’s consolidated results of operations, cash flows or
financial position.
In
April 2009, the FASB issued the following three ASCs intended to provide
additional application guidance and enhance disclosures regarding fair value
measurements and impairments of securities:
ASC
820-10-65 “Fair Value Measurements and Disclosures — Transition and Open
Effective Date Information” (previously referred to as FASB Staff Positions FAS
157-4 “ Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly”) provides additional guidance for estimating fair value in
accordance with ASC 820-10 “Fair Value Measurements and Disclosures” (previously
referred to as SFAS No. 157) when the volume and level of activity
for the asset or liability have decreased significantly. ASC 820-10-65 also
provides guidance on identifying circumstances that indicate a transaction is
not orderly. The provisions of ASC 820-10-65 are effective for the Company’s
interim period ending on June 30, 2009. Effective April 1, 2009, the
Company adopted ASC 820-10-65 and the adoption did not have a material impact on
the Company’s consolidated results of operations, cash flows or financial
position.
ASC
825-10-65 “Financial Instruments - Transition and Open Effective Date
Information” (previously referred to as FASB Staff Positions FAS 107-1 and APB
28-1, “Interim Disclosures about Fair Value of Financial Instruments”), requires
disclosures about the fair value of financial instruments in interim reporting
periods of publicly traded companies that were previously only required to be
disclosed in annual financial statements. The provisions of ASC 825-10-65 are
effective for the Company’s interim period ending on June 30, 2009.
Effective April 1, 2009, the Company adopted ASC 825-10-65 and the adoption
did not have a material impact on the Company’s consolidated results of
operations, cash flows or financial position.
ASC
320-10-65 “Investments-Debt and Equity Securities - Transition and Open
Effective Date Information” (previously referred to as FASB Staff Positions FAS
115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary
Impairments”) amends current other-than-temporary impairment guidance in U.S.
GAAP for debt securities to make the guidance more operational and to improve
the presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. This ASC does not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity securities. The provisions of ASC 320-10-65 are effective for the
Company’s interim period ending on June 30, 2009. Effective April 1,
2009, the Company adopted ASC 320-10-65 and the adoption did not have a material
impact on the Company’s consolidated results of operations, cash flows or
financial position.
In
May 2009, the FASB issued ASC 855-10 “Subsequent events” (previously
referred to as SFAS No. 165, “Subsequent Events” (“SFAS 165”)), which
provides guidance to establish general standards of accounting for and
disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. ASC 855-10 also
requires entities to disclose the date through which subsequent events were
evaluated as well as the rationale for why that date was selected. ASC 855-10 is
effective for interim and annual periods ending after June 15, 2009.
Effective April 1, 2009, the Company adopted ASC 855-10 which only requires
additional disclosures and the adoption did not have any impact on its
consolidated financial position, results of operations or cash flows. The
Company evaluated all events or transactions that occurred after
December 31, 2009 up through February 6, 2010. Based on this
evaluation, the Company is not aware of any events or transactions that would
require recognition or disclosure in the consolidated financial
statements.
In
June 2009, the FASB issued ASC 105-10 “Generally Accepted Accounting
Principles” (previously referred to as SFAS No. 168 “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles—a replacement of FASB Statement No. 162”). The FASB Accounting
Standards Codification (“Codification”) will be the single source of
authoritative nongovernmental U.S. generally accepted accounting principles.
Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. ASC
105-10 is effective for interim and annual periods ending after
September 15, 2009. All existing accounting standards are superseded as
described in ASC 105-10. Effective October 1, 2009, the Company adopted ASC
105-10 and the adoption did not have any material impact on its consolidated
financial position, results of operations or cash flows.
Recently
issued accounting pronouncements
In
October 2009, the FASB issued ASU 2009-13 (EITF No. 08-1) which amends
ASC 605-25 “Revenue Recognition—Multiple-Element Arrangements”. ASU 2009-13
amends ASC 605-25 to eliminate the requirement that all undelivered elements
have Vendor Specific Objective Evidence (VSOE) or Third Party Evidence (TPE)
before an entity can recognize the portion of an overall arrangement fee that is
attributable to items that already have been delivered. In the absence of VSOE
or TPE of the standalone selling price for one or more delivered or undelivered
elements in a multiple-element arrangement, the overall arrangement fee will be
allocated to each element (both delivered and undelivered items) based on their
relative estimated selling prices. Application of the “residual method” of
allocating an overall arrangement fee between delivered and undelivered elements
will no longer be permitted upon adoption of ASU 2009-13. The provisions of ASU
2009-13 will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption will be permitted. The Company is currently evaluating the effect
of adoption of the provisions of the ASU 2009-13 on the Company’s consolidated
financial Statements.
In
August 2009, the FASB issued ASU 2009-05 which amends Subtopic 820-10 “Fair
Value Measurements and Disclosures” for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available,
an entity is required to measure fair value utilizing one or more of the
following techniques (1) a valuation technique that uses the quoted market
price of an identical liability or similar liabilities when traded as assets; or
(2) another valuation technique that is consistent with the principles of
Topic 820, such as a present value technique or a market approach. The
provisions of ASU No. 2009-05 are effective for the first reporting period
(including the interim periods) beginning after issuance. The provisions of ASU
No. 2009-05 will be effective for interim and annual periods beginning
after August 27, 2009. The Company is currently evaluating the effect of
the provisions of the ASU 2009-05 on the Company’s consolidated financial
statements.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Background of India Globalization
Capital, Inc. (IGC)
IGC, a
Maryland corporation, was 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. 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 63% of the equity of Sricon
Infrastructure Private Limited (Sricon) and 77% of the equity of Techni Bharathi
Limited (TBL). The shares of the two Indian companies, Sricon and TBL, are held
by IGC-M. Most of the shares of Sricon and TBL acquired by IGC were
purchased directly from the companies. IGC purchased a portion of the shares
from the existing owners of the companies. The founders and
management of Sricon own 78% of Sricon (after giving effect to the deconsolidation described
below) and the founders and management of TBL own 23% of
TBL.
The
acquisitions were accounted for under the purchase method of
accounting. Under this method of accounting, for accounting and
financial purposes, IGC-M, Limited was treated as the acquiring entity and
Sricon and TBL as the acquired entities.
On
February 19, 2009 IGC-M beneficially purchased 100% of IGC Mining and Trading,
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 a shipping
hub and export iron ore to China. On July 4, 2009, IGC-M beneficially
purchased 100% of IGC Materials, Private Limited (IGC-MPL based in Nagpur,
India), which will conduct IGC’s quarrying business, and 100% of IGC Logistics,
Private Limited (IGC-LPL based in Nagpur, India), which will be involved in the
transport and delivery of ore, cement, aggregate and other
material. 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, and 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. No officer or director of IGC had a
financial interest in the subsidiaries at the time of their acquisition by
IGC-M. India Globalization Capital, Inc. (the Registrant, the
Company, or we) and its subsidiaries are significantly engaged in one segment,
infrastructure construction.
Effective
October 1, 2009 we decreased our ownership in Sricon Infrastructure from 63% to
22.3%. On March 7, 2008 we consummated the Sricon Acquisition by
purchasing a 63% interest for about $29 million (based on an exchange rate of 40
INR for $1 USD). We subsequently borrowed around $17.9 million (based
on 40 INR for 1 USD) from Sricon. Through 2008 and 2009 we expanded
our business offerings beyond construction to include a rapidly growing
materials business. We have successfully repositioned the company as a materials
and construction company; with construction activity in our TBL subsidiary and
materials activity in our other subsidiaries. Rather than continue to
owe Sricon $17.9 million, and more importantly, continue to fund two
construction companies, we decreased our ownership in Sricon by an amount
proportionate to the loan. The impact of this is that we no longer
owe Sricon $17.9 million and our corresponding ownership is a non-controlling
interest. The deconsolidation of Sricon from the balance sheet of
IGC, results in shrinking the IGC balance sheet and a one-time charge on the
P&L. Post deconsolidation, earnings and losses from Sricon are
accounted for using the equity method of accounting.
IGC’s
organizational structure is as follows:
Unless
the context requires otherwise, all references in this report to the “Company”,
“IGC”, “we”, “our”, and “us” refer to India Globalization Capital, Inc, together
with its wholly owned subsidiary IGC-M, its direct and indirect subsidiaries
(TBL, IGC-IMT, IGC-MPL and IGC-LPL) and Sricon, in which we hold a
non-controlling interest.
Overview
Techni
Bharathi Limited (“TBL”) was incorporated as a public (but not listed on the
stock market) limited company on June 19, 1982 in Cochin, India. TBL
is an engineering and construction company engaged in the execution of civil
construction and structural engineering projects. TBL has a focus in
the Indian states of Andhra Pradesh, Karnataka, Assam and Tamil Nadu. Its
present and past clients include various Indian government
organizations. The overall lack of liquidity led TBL to curtail its
construction contracts and cut its costs through layoffs. TBL is
re-focused on smaller construction contracts and the settlement of
claims.
IGC-Mauritius
(IGC-M), through its wholly owned Indian subsidiaries (IGC India Mining and
Trading (IGC-IMT), IGC Materials, Private Limited (IGC-MPL)
and IGC Logistics, Private Limited (IGC-LPL), is also involved in the
building of rock quarries, the export of iron ore and the transport of
materials. IGC-M operates a shipping hub in the Krishnapatnam port on
the west coast of India and one at Goa on the east coast of
India. We aggregate ore from smaller mines before shipping to
China. We are also engaged in the production of rock aggregate and
the development of rock quarries. Rock aggregate is used in the
construction of roads, railways, dams, and other infrastructure
development. We are in the process of developing several quarries
through partnerships with landowners. Iron ore is rock and minerals from which
metallic iron can be extracted. The primary form used in industry
today is hematite and is often the principle raw material used to make “pig
iron”, a material critical to the production of industrial steel.
Industry
Overview
The
Indian GDP surpassed $1 Trillion in fiscal 2007. According to the
World Bank, only nine economies at the close of 2005 generated more than $1
Trillion in GDP. According to the CIA World Fact Book, India’s growth
rates have been ranging from 6.2% to 9.6% since 2003. The GDP growth
rate for fiscal year ending March 31, 2008 was 7.4% (estimated). The
Indian stock markets experienced significant growth with the SENSEX peaking at
21,000 (January 8, 2008). The current global financial crisis
created a liquidity crunch starting in October 2008, which
continues.
India’s
GDP growth for fiscal year ended March 31, 2009 is estimated to be lower than
2008’s growth rate. The slowing of the GDP was caused by the global
financial crisis. However, it does indicate that India has withstood the global
downturn better than many nations. The factors contributing to maintaining the
relatively high growth included growth in the agriculture and service
industries, favorable demographic dynamics (India has a large youth population
that exceeds 550 Million), the savings rate and spending habits of the Indian
middle class. Other factors are attributed to changing investment patterns,
increasing consumerism, healthy business confidence, inflows of foreign
investment (India ranks #2 behind China in the A.T. Kearney “FDI Confidence
Index” for 2007) and improvements in the Indian banking system.
To
sustain India’s fast growing economy, the share of infrastructure investment in
India is expected to increase to 9 per cent of GDP by 2014, which is an
increase from 5 per cent in 2006-07. This forecast is based on The
Indian Planning Commission’s statement in its annual publication that for
the Eleventh Plan period (2007-12), a large investment of approximately
$494 Billion is required for Infrastructure build out and
modernization. This industry is one of the largest employers in the
country – the construction industry alone employs more than 30 million
people. According to the Business Monitor International (BMI), by
2012, the construction industry’s contribution to India’s GDP is forecasted to
be 16.98%.
This
ambitious infrastructure development mandate by the Indian Government will
require funding. The Government of India has already raised funds
from multi-lateral agencies such as the World Bank and the Asian Development
Bank. The India Infrastructure Company was set up to support
projects by guaranteeing up to $2 Billion annually. In addition,
the Indian Government has identified public-private partnerships (PPP) as the
cornerstone of its infrastructure development policy. The government
is also proactively seeking additional FDI and approval is not required for up
to 100% of FDI in most infrastructure areas. According to Indian
Prime Minister Dr. Manmohan Singh, addressing the Finance Ministers of ASEAN
countries, at the Indo ASEAN Summit at New Delhi, in August 2007, India
needs $150 billion at the rate of $15 billion per annum for the next 10
years.
The
Government of India is also permitting External Commercial Borrowings (ECB’s) as
a source of financing Indian Companies looking to expand existing
capacity as well as incubation for new startups. ECB’s
include commercial bank loans, buyers' credit, suppliers' credit, securitized
instruments such as Floating Rate Notes and Fixed Rate Bonds, credit from
official export credit agencies, and commercial borrowings from private sector
Multilateral Financial Institutions such as International Finance Corporation
(Washington), ADB, AFIC, CDC, etc. National credit policies seek to
keep an annual cap or ceiling on access to ECB, consistent with prudent debt
management. Also, these policies seek to encourage greater
emphasis on infrastructure projects and core sectors such as power,
oil exploration, telecom, railways, roads & bridges, ports, industrial
parks, urban infrastructure, and fosters exporting. Applicants will
be free to raise ECB from any internationally recognized source such as banks,
export credit agencies, suppliers of equipment, foreign collaborators, foreign
equity-holders, and international capital markets.
ECB can
be accessed in two methods, namely, the Automatic Route and the Approval
Route. The Automatic Route is primarily for investment in Indian
infrastructure, and will not require Reserve Bank of India (RBI)/Government
approval. The maximum amount of ECB’s under the Automatic Route raised by an
eligible borrower is limited to $500 million during any financial year. The
following are additional requirements under the Automatic route:
a) ECB up
to $20 million or equivalent with minimum average maturity of 3
years.
b) ECB
above $20 million and up to $500 million or equivalent with minimum average
maturity of 5 years.
Some of
the areas where ECB’s are utilized is the National Highway Development Project
and the National Maritime Development Program. In addition, the
following represent some of the major infrastructure projects planned for the
next five years:
1.
|
Constructing
dedicated freight corridors between Mumbai-Delhi and
Ludhiana-Kolkata.
|
2.
|
Capacity
addition of 485 million MT in Major Ports, 345 million MT in Minor
Ports.
|
3.
|
Modernization
and redevelopment of 21 railway
stations.
|
4.
|
Developing
16 million hectares through major, medium and minor irrigation
works.
|
5.
|
Modernization
and redevelopment of 4 metro and 35 non-metro
airports.
|
6.
|
Expansion
to six-lanes 6,500 km (4,038 Miles) of Golden Quadrilateral and selected
National Highways.
|
7.
|
Constructing
228,000 miles of new rural roads, while renewing and upgrading the
existing 230,000 miles covering 78,304 rural
habitations.
|
Our
operations are subject to certain risks and uncertainties, including among
others, dependency on the Indian and Asian economy and government policies,
competitively priced raw materials, dependence upon key members of the
management team and increased competition from existing and new
entrants.
Our
Securities
We have
three securities listed on the NYSE Amex: (1) common stock, $.0001 par value
(ticker symbol: IGC), (2) redeemable warrants to purchase common stock (ticker
symbol: IGC.WS) and (3) units consisting of one share of common stock and two
redeemable warrants to purchase common stock (ticker symbol:
IGC.U). On March 8, 2006, we sold 11,304,500 units in our initial
public offering. These 11,304,500 units include 9,830,000 units sold to
the public and the over-allotment option of 1,474,500 units exercised by the
underwriters of the public offering. The units may be 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 3, 2011, or earlier upon redemption. The
registration statement for initial public offering was declared effective on
March 2, 2006. The warrants are exercisable and may be exercised by
contacting the Company or the transfer agent Continental Stock Transfer &
Trust Company. We have a right to call the warrants, provided the
common stock has traded at a closing price of at least $8.50 per share for any
20 trading days within a 30 trading day period ending on the third business day
prior to the date on which notice of redemption is given. If we call the
warrants, the holder will either have to redeem the warrants by purchasing the
common stock from us for $5.00 or the warrants will expire.
On March
7, 2008, we bought and redeemed a total of 6,159,346 shares. As a
result of the redemption and the subsequent issuance of 210,000 shares of common
stock in private placements, on September 30, 2008, we had 8,780,107 shares
outstanding (including shares sold to our founders in a private placement prior
to the public offering) and 24,874,000 shares of common stock were reserved for
issuance upon exercise of redeemable warrants and underwriters’ purchase
option.
On
January 9, 2009 we completed an exchange of 11,943,878 public and private
warrants for 1,311,064 new shares of common stock.
In
September 2009 we sold 1,599,000 shares of our common stock and warrants to
purchase an aggregate of 319,800 shares of our common stock (the “New Warrants”)
in a registered direct offering. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $1.60. The
warrants expire on September 18 2012. The New Warrants are
exercisable and may be exercised by contacting the Company or the transfer agent
Continental Stock Transfer & Trust Company. We do not have a
right to call the New Warrants.
On
October 5, 2009, the Company issued 530,000 new shares of common stock as
partial consideration for the exchange of an outstanding promissory note for a
new note with an extended maturity date
On
October 16, 2009, the Company issued 530,000 new shares of common stock in a
private placement in connection with the sale of a promissory note to an
investor.
In
November 2009 we sold 3,300 shares of our common stock in a registered at the
market offering.
Following
the issuance of the shares in the preceding transactions, we have 12,898,291
shares of common stock outstanding, warrants to purchase 11,855,122 shares of
common stock outstanding and New Warrants to purchase 318,800 shares of common
stock outstanding.
Core Business
Competencies
We offer
an integrated approach in our customer service delivery based on core
competencies that we have demonstrated over the years. This
integrated approach provides us with an advantage over our
competitors.
Our core
business competencies include the following:
Highway and heavy
construction:
The
Indian government has articulated a plan to build and modernize Indian
infrastructure. The government’s plan, calls for spending over $475
billion over the next five years for the expansion and construction of rural
roads, major highways, airports, seaports, freight corridors, railroads and
townships. A significant number of our customers involve highway and
heavy construction contracts.
Mining
and Quarrying
As Indian
infrastructure modernizes, the demand for raw materials like stone aggregate,
coal, ore and similar resources is projected to increase. In 2006, according to
the Freedonia Group, India was the fourth largest stone aggregate market in the
world with demand of up to 1.1 billion metric tons. We are in the
process of teaming with landowners to build out rock quarries; in addition we
have licenses for the installation and production of rock aggregate
quarries. Our mining and trading activity centers on the export
of Iron ore to China. India is the fourth largest producer of
ore.
Construction
and maintenance of high temperature plants
We have
an expertise in the civil engineering, construction and maintenance of high
temperature plants. This requires specialized skills to build and maintain
high temperature chimneys and kilns.
Customers
Over the
past 10 years, Sricon has qualified in all states in India and has worked in
several, including Maharashtra, Gujarat, Orissa and Madhya
Pradesh. The National Highway Authority of India (NHAI) awards
interstate highway contracts on a national level, while intra-state contracts
are awarded by state agencies. The National Thermal Power Corporation (NTPC)
awards contacts for civil work associated with power plants. The National
Coal Limited (NCL) awards large mining contracts. Our customers include, or have
included, NHAI, NTPC, and various state public works departments. Sricon
is registered across India and is qualified to bid on contracts anywhere in
India. For the export of iron ore from India, we are developing
customers in Asia including China.
Contract
bidding process
In order
to create transparency, the Indian government has centralized the contract
awarding process for building inter-state
roads. The new process is as follows: At the “federal” level, as an
example, NHAI publishes a Statement of Work for an interstate highway
construction project. The Statement of Work has a detailed
description of the work to be performed as well as the completion time frame.
The bidder prepares two proposals in response to the Statement of Work. The
first proposal demonstrates technical capabilities, prior work experience,
specialized machinery, and manpower required, and other criteria required to
complete the project. The second proposal includes a financial
bid. NHAI evaluates the technical bids and short lists technically
qualified companies. Next, the short list of technically qualified companies
are invited to place a detailed financial bid and show adequate
financial strength in terms of revenue, net worth, credit lines,
and balance sheets. Typically, the lowest bid wins the contract. Also,
contract bidders must demonstrate an adequate level of capital reserves such as
the following: 1) An earnest money deposit between 2% to 10%
of project costs, 2) performance guarantee of between 5% and 10%, 3)
adequate working capital and 4) additional capital for plant and
machinery. Bidding qualifications for larger NHAI projects
are set by NHAI which are imposed on each contractor. As the
contractor executes larger highway projects, the ceiling is increased by
NHAI.
Our
Growth Strategy and Business Model
Our
business model for the construction business is simple. We bid on
construction, over burden removal at mining sites and or maintenance
contracts. Successful bids increase our backlog of orders,
which favorably impacts our revenues and margins. The
contracting process typically takes approximately six months. Over the
years, we have been successful in winning one out of every seven bids on
average. We currently have one bid team. In the
next year we will focus on the following: 1) build out between two and five rock
quarries, begin production and obtain long term contracts for the sale of rock
aggregate, 2) leverage our shipping hub, develop a second shipping hub, obtain
long term contracts for the delivery and sale of iron ore, 3) execute and expand
recurring contracts for infrastructure build out, 4) aggressively pursue the
collection of accounts receivables and delay claims.
Competition
We
operate in an industry that is fairly competitive. However, there is
a large gap in the supply of well qualified and financed contractors and the
demand for contractors. Large domestic and international firms compete for
jumbo contracts over $250 million in size, while locally based contractors vie
for contracts less than $5 million. The recent capital markets crisis has made
it more difficult for smaller companies to maturate into mid-sized companies, as
their access to capital has been restrained. Therefore, we would like to be
positioned in the $5 million to $50 million contract range, above locally based
contractors and below the large firms, creating a distinct technical and
financial advantage in this market niche. Rock aggregate is supplied
to the industry through small crushing units, which supply low quality
material. Frequently, high quality aggregate is unavailable, or is
transported over large distances. We fill this gap by providing high
quality material in large quantities. We compete on price, quantity
and quality. Iron ore is produced in India where our core assets are
located, and exported to China. While this is a fairly established
business, we compete by aggregating ore from smaller suppliers who do not have
access to customers outside India. Further, at our second shipping hub we expect
to install a crusher that can grind ore pebbles into dust, again providing a
value added service to the smaller mine owners.
Seasonality
The
construction industry (road building) typically experiences recurring and
natural seasonal patterns throughout India. The North East Monsoons,
historically, arrive on June 1, followed by the South West Monsoons, which
usually lasts intermittently until September. Historically, the
monsoon months are slower than the other months because of the
rains. Activity such as engineering, maintenance of high temperature
plants, and export of iron ore are less susceptible to the rains. The
reduced paced in construction activity has historically been used to bid and win
contracts. The contract bidding activity is typically very high during the
monsoon season in preparation for work activity when the rains
abate. During the monsoon season the rock quarries operate to build
up and distribute reserves to the various construction sites.
Employees
and Consultants
As of
December 31, 2009, we employed a work force of
approximately 400 employees and contract workers worldwide. Employees
are typically skilled workers including executives, welders, drivers, and other
specialized experts. Contract workers require less specialized skills. We make
diligent efforts to comply with all employment and labor regulations, including
immigration laws in the many jurisdictions in which we operate. In
order to attract and retain skilled employees, we have implemented a performance
based incentive program, offered career development programs, improved
working conditions, and provided United States work assignments, technology
training, and other fringe benefits. We are hoping that our efforts will make
our companies more attractive. While we have not done so yet, we are
exploring adopting best practices for creating and providing vastly improved
labor camps for our labor force. We are hoping that our efforts will
make our companies “employers of choice” and best of breed. As of
March 31, 2009 our Executive Chairman, Chief Executive Officer is Ram
Mukunda and our Non Executive Chairman is Ranga Krishna. Our over all
Country Head in India is Mr. K. Parthasarathy. Our Managing Director
for Construction is Ravindra Lal Srivastava, our Managing Director for
Materials, Mining and Trading is P. M. Shivaraman. Our
Treasurer and Principal Accounting officer is John Selvaraj. Our
General Manager of Accounting based in India is Santhosh Kumar. We
also utilize the services of several consultants who provide USGAAP systems
expertise among others.
Environmental
Regulations
India has
very strict environmental, occupational, health and safety
regulations. In most instances, the contracting agency regulates and
enforces all regulatory requirements. We internally monitor and
manage regulatory issues on a continuous basis, and we believe that we are in
compliance in all material respects with the regulatory requirements of the
jurisdictions in which we operate. Furthermore, we do not believe that
compliance will have a material adverse effect on our business
activities.
Information
and timely reporting
Our
operations are located in India where the accepted accounting standards is
Indian GAAP, which in many cases, is not congruent to
USGAAP. Indian accounting standards are evolving towards adopting
IFRS (International Financial Reporting Standards). We
annually conduct PCAOB (USGAAP) audits for the company. We
acknowledge that this process is at times cumbersome and places significant
restraints on our existing staff. We believe we are still 6 to 12
months away from having processes and adequately trained personal in place to
meet the reporting timetables set out by the U.S. reporting
requirements. Until then we expect to file for extensions to meet the
reporting timetables. We will make available on our website, www.indiaglobalcap.com,
our annual reports, quarterly reports, proxy statements as well as up to- date
investor presentations. Our SEC filings are also available at
www.sec.gov.
Our
Directors, Executive Officers and Advisory Board Members
The board
of directors, executive officers, advisors and key employees of IGC, Sricon and
TBL are as follows:
Directors,
Executive Officers and Special Advisors of IGC
Name
|
Age
|
Position
|
Dr.
Ranga Krishna
|
45
|
Non Executive Chairman
|
Ram
Mukunda
|
51
|
Chief
Executive Officer, Executive Chairman, President and
Director
|
John
Selvaraj
|
65
|
Principal
Accounting Officer
|
Sudhakar
Shenoy
|
62
|
Director
|
Richard
Prins
|
52
|
Director
|
Suhail
Nathani
|
44
|
Director
|
Larry
Pressler
|
67
|
Special
Advisor
|
|
|
|
P.G.
Kakodkar
|
73
|
Special
Advisor
|
Shakti
Sinha
|
53
|
Special
Advisor
|
Dr.
Prabuddha Ganguli
|
60
|
Special
Advisor
|
Dr.
Anil K. Gupta
|
60
|
Special
Advisor
|
Directors
and Executive Officers of TBL
Name
|
Age
|
Position
|
Jortin
Antony
|
43
|
Director
|
M.
Santhosh Kumar
|
44
|
General
Manager of Accounting
|
Ram
Mukunda
|
51
|
Director
|
Ranga Krishna, has served as
our Chairman of the Board since December 15, 2005. Dr. Krishna previously served
as a Director from May 25, 2005 to December 15, 2005 and as our Special Advisor
from April 29, 2005 through June 29, 2005. In 1998, he founded Rising
Sun Holding, LLC, a $120 million construction and land banking
company. In September 1999, he co-founded Fastscribe, Inc., an
Internet-based medical and legal transcription company with its operations in
India with over 200 employees. He has served as a director of Fastscribe since
September 1999. He is currently the Managing Partner. In February
2003, Dr. Krishna founded International Pharma Trials, Inc., a company with
operations in India and over 150 employees, which assists U.S. pharmaceutical
companies performing Phase II clinical trials in India. He is currently the
Chairman and CEO of that company. In April 2004, Dr. Krishna founded
Global Medical Staffing Solutions, Inc., a company that recruits nurses and
other medical professionals from India and places them in U.S. hospitals. Dr.
Krishna is currently serving as the Chairman and CEO of that company. On
November 7, 2008 he joined the board of TransTech Service Partners, a SPAC which
initiated liquidation on May 23 rd, 2009. Dr. Krishna is a member of
several organizations, including the American Academy of Neurology and the
Medical Society of the State of New York. He is also a member of the Medical
Arbitration panel for the New York State Worker’s Compensation Board. Dr.
Krishna was trained at New York’s Mount Sinai Medical Center
(1991-1994) and New York University (1994-1996).
Ram Mukunda has served as our
Founder, Chief Executive Officer, President and a Director since our inception
on April 29, 2005 and was Chairman of the Board from April 29, 2005 through
December 15, 2005. Since September 2004 Mr. Mukunda has served as Chief
Executive Officer of Integrated Global Networks, LLC, a communications
contractor in the U.S. Government. From January 1990 to May 2004, Mr. Mukunda
served as Founder, Chairman and Chief Executive Officer of Startec Global
Communications, an international telecommunications carrier focused on providing
voice over Internet protocol (VOIP) services to the emerging economies. Startec
was among the first carriers to have a direct operating agreement with India for
the provision of telecom services. Mr. Mukunda was responsible for the
organizing, structuring, and integrating a number of companies owned by
Startec. Many of these companies provided strategic investments
in India-based operations or provided services to India-based
companies. Under Mr. Mukunda’s tenure at Startec, the company made an initial
public offering of its equity securities in 1997 and conducted a public
high-yield debt offering in 1998.
From June
1987 to January 1990, Mr. Mukunda served as Strategic Planning Advisor at
INTELSAT, a provider of satellite capacity. Mr. Mukunda serves on the Board of
Visitors at the University of Maryland School of Engineering. From 2001-2003, he
was a Council Member at Harvard’s Kennedy School of Government, Belfer Center of
Science and International Affairs. Mr. Mukunda is the recipient of several
awards, including the University of Maryland’s 2001 Distinguished Engineering
Alumnus Award and the 1998 Ernst & Young, LLP’s Entrepreneur of the Year
Award. He holds B.S. degrees in electrical engineering and mathematics and a MS
in Engineering from the University of Maryland.
John B. Selvaraj has served as our
Treasurer and Principal Accounting Officer since November 27,
2006. From November 15, 1997 to August 10, 2007, Mr. Selvaraj served
in various capacities with Startec, Inc., including from January 2001 to April
2006 as Vice President of Finance and Accounting where he was responsible for
SEC reporting and international subsidiary consolidation. Prior to
joining Startec, from July 1984 to December 1994, Mr. Selvaraj served as the
Chief Financial and Administration Officer for the US office of the European
Union. In 1969, Mr. Selvaraj received a BBA in Accounting from Spicer
Memorial College India, and an Executive MBA, in 1993, from Averette
University, Virginia. Mr. Selvaraj is a Charted Accountant (CA,
1971).
Sudhakar Shenoy, has served as
our Director since May 25, 2005. Since January 1981, Mr. Shenoy has been the
Founder, Chairman and CEO of Information Management Consulting, Inc., a business
solutions and technology provider to the government, business, health and life
science sectors. Mr. Shenoy is a member of the Non Resident Indian Advisory
Group that advises the Prime Minister of India on strategies for attracting
foreign direct investment. Mr. Shenoy was selected for the United States
Presidential Trade and Development Mission to India in 1995. From 2002 to June
2005 he served as the chairman of the Northern Virginia Technology
Council. In 1970, Mr. Shenoy received a B. Tech (Hons.) in electrical
engineering from the Indian Institute of Technology. In 1971 and 1973, he
received an M.S. in electrical engineering and an M.B.A. from the University of
Connecticut Schools of Engineering and Business Administration,
respectively.
Richard Prins, has served as our Director since May 2007 and as Lead Director since March 2010 .
Mr. Prins has 25 years of experience in all aspects of corporate
finance and has participated directly in more than 150 transactions with both
private and public companies across a number of industries in North America,
Europe, and Asia. Mr. Prins was the Director of Investment
Banking for Ferris, Baker Watts, Inc., or FBW, from 1996 until June of 2008
when FBW was acquired by Royal Bank of Canada. At FBW, he managed all of
the firm's industry groups and product offerings including public offerings,
mergers and acquisitions, private placements, restructurings, as well as other
corporate advisory services activities. He was also responsible for
executing a variety of financial and strategic transactions.
Mr. Prins served as a consultant to Royal Bank of Canada Capital
Markets through December 2008 to facilitate the post-acquisition
transition. Currently Mr. Prins is a private investor and involved in
various charitable organizations. Prior to FBW, Mr. Prins was a
Managing Director for eight years at Crestar Bank (now SunTrust Bank) in charge
of Mergers and Acquisitions. Mr. Prins began his career in 1983 as the Assistant
to the Chairman of the leverage buyout company, Tuscarora Corp. He
currently serves on the boards of directors of Amphastar Pharmaceutical,
Advancing Native Missions and The Hope Foundation. Mr. Prins received
a B.A. in liberal arts from Colgate University and an M.B.A. from Oral Roberts
University.
Suhail Nathani, has served as
our Director since May 25, 2005. Since September 2001, he has served as a
partner at the Economics Laws Practice in India, which he co-founded. The
25-person firm focuses on consulting, general corporate law, tax regulations,
foreign investments and issues relating to the World Trade Organization (WTO).
From December 1998 to September 2001, Mr. Nathani was the Proprietor of the
Strategic Law Group, also in India, where he practiced telecommunications law,
general litigation and licensing. Mr. Nathani currently serves on
the boards of the following companies based in India: BLA Industries
Pvt. Ltd, BLA Power Pvt. Ltd., Development Credit Bank Ltd., Phoenix Mills
Limited, Salaam Bombay Foundation, and Siddhesh Capital Market Services Pvt.
Ltd.
Mr.
Nathani earned a LLM in 1991 from Duke University School of Law. In 1990 Mr.
Nathani graduated from Cambridge University, in England, with a MA (Hons)
in Law. In 1987, he graduated from Sydenham College of Commerce and Economics,
Bombay, India.
Sricon
& TBL Management
Rabindralal B. Srivastava is
Founder and Chairman of Sricon. In 1974, he started his career at Larsen and
Toubro (L&T), one of India’s premier engineering and construction
companies. In 1994, his company, Vijay Engineering,
became a civil engineering sub-contractor to L&T. He worked as a
sub-contractor for L&T in Haldia, West Bengal and Tuticorin in South India
among others. Under his leadership, Vijay Engineering expanded to
include civil engineering and construction of power plants, water treatment
plants, steel mills, sugar plants and mining. In 1996, Mr. Srivastava
founded Srivastava Construction Limited, which in 2004 changed its name to
Sricon Infrastructure to address the larger infrastructure needs in India like
highway construction. He merged Vijay Engineering and Sricon in
2004. Mr. Srivastava graduated with a BS from Banaras University
in 1974. Mr. Srivastava founded Hi-tech Pro-Oil Complex in
1996. The company is involved in the extraction of soy bean
oil. He founded Aurobindo Laminations Limited in 2003. The
company manufactures laminated particleboards.
Jortin Antony, has been
a Director of TBL since 2000. Prior to that, he held
various positions at Bhagheeratha starting as a management trainee in
1991. From 1997 to 2000, he was the Director of Projects at
Bhagheeratha. In 2003, Mr. Jortin Antony was awarded the Young Entrepreneur
Award from the Rashtra Deepika. He graduated with a B.Eng, in 1991,
from Bangalore Institute of Technology, University of Bangalore.
M Santhosh Kumar, has been
with TBL since 1991. Since 2008 he has been the General Manager of
Accounting and Finance. From 2002 to January 2008 he has
been the Deputy Manager (Finance and Accounting). From 2000 to 2002,
he was the Marketing Executive for Techni Soft (India) Limited, a subsidiary of
Techni Bharathi Limited. From 1991 to 2000, he held various positions
at TBL in the Finance and Accounting department. From 1986 to 1991,
he worked as an accountant in the Chartered Account firm of Balan and
Company. In 1986 Mr. Santhosh Kumar graduated with a BA in Commerce
from, Gandhi University, Kerala, India.
Special
Advisors
Senator Larry Pressler has
served as our Special Advisor since February 3, 2006. Since leaving the U.S.
Senate in 1997, Mr. Pressler has been a combination of businessman, lawyer,
corporate board director and lecturer at universities. From March 2002 to
present, he has been a partner in the New York firm, Brock law Partners. He was
a law partner with O’Connor & Hannan from March 1997 to March
2002.
In
November 2009 President Obama appointed Mr. Pressler as a Member for the
Commission for the Preservation of America’s Heritage Abroad. From
1979 to 1997, Mr. Pressler served as a member of the United States Senate. He
served as the Chairman of the Senate Commerce Committee on Science and
Transportation, and the Chairman of the Subcommittee on Telecommunications (1994
to 1997). From 1995 to 1997, he served as a Member of the Committee on Finance
and from 1981 to 1995 on the Committee on Foreign Relations. From 1975 to 1979,
Mr. Pressler served as a member of the United States House
of Representatives. Among other bills, Senator Pressler authored the
Telecommunications Act of 1996. As a member of the Senate Foreign Relations
Committee, he authored the “Pressler Amendment,” which became the parity for
nuclear weapons in Asia from 1980 to 1996.
In 2000,
Senator Pressler accompanied President Clinton on a visit to India. He is a
frequent traveler to India where he lectures at universities and business
forums. He serves on the board of directors for The Philadelphia Stock Exchange
and Flight Safety Technologies, Inc. (FLST). From 2002 to 2005 he served on the
board of advisors at Chrys Capital, a fund focused on investments in India. He
was on the board of directors of Spectramind from its inception in 1999 until
its sale to WIPRO, Ltd (WIT) in 2003.
In 1971,
Mr. Pressler earned a Juris Doctor from Harvard Law School and a
Masters in Public Administration from the Kennedy School of Government at
Harvard. From 1964 to 1965 he was a Rhodes Scholar at Oxford University, England
where he earned a diploma in public administration. Mr. Pressler is a Vietnam
war veteran having served in the U.S. Army in Vietnam in 1967-68. He is an
active member of the Veterans of Foreign Wars Association.
P. G. Kakodkar has served as
our Special Advisor since February 3, 2006. Mr. Kakodkar serves on the boards of
several Indian companies, many of which are public in India. Since January of
2005 he has been a member of the board of directors of State Bank of India (SBI)
Fund Management, Private Ltd., which runs one of the largest mutual funds in
India. Mr. Kakodkar’s career spans 40 years at the State Bank of India. He
served as its Chairman from October 1995 to March 1997. Prior to his
Chairmanship, he was the Managing Director of State Bank of India (SBI) Fund
Management Private Ltd., which operates the SBI Mutual Fund.
Since
July 2005, he has served on the board of directors of the Multi Commodity
Exchange of India. Since April 2000, he has been on the board of Mastek, Ltd, an
Indian software house specializing in client server applications. In June 2001,
he joined the board of Centrum Capital Ltd, a financial services company. Since
March 2000, he has been on the board of Sesa Goa Ltd., the second largest mining
company in India. In April 2000, he joined the board at Uttam Galva Steel and in
April 1999 he joined the board of Goa Carbon Ltd, a manufacturer-exporter of
petcoke. Mr. Kakodkar received a BA from Karnataka University and an MA
from Bombay University in economics, in 1954 and 1956, respectively. Mr.
Kakodkar currently is an advisor to Societe Generale, India, which is an
affiliate of SG Americas Securities, LLC and one of the underwriters of the our
IPO.
Shakti Sinha, has served as
our Special Advisor since May 25, 2005. Since July 2004, Mr. Sinha has been
working as a Visiting Senior Fellow, on economic development, with the
Government of Bihar, India. From January 2000 to June 2004, he was a Senior
Advisor to the Executive Director on the Board of the World Bank. From March
1998 to November 1999, he was the Private Secretary to the Prime Minister of
India. He was also the Chief of the Office of the Prime Minister. Prior to that
he has held high level positions in the Government of India, including from
January 1998 to March 1998 as a Board Member responsible for Administration in
the Electricity Utility Board of Delhi. From January 1996 to January 1998, he
was the Secretary to the Leader of the Opposition in the lower house of the
Indian Parliament. From December 1995 to May 1996, he was a Director in the
Ministry of Commerce. In 2002, Mr. Sinha earned a M.S. in International Commerce
and Policy from the George Mason University, USA. In 1978 he earned a M.A. in
History from the University of Delhi and in 1976 he earned a BA (Honors) in
Economics from the University of Delhi.
Prabuddha Ganguli has served
as our Special Advisor since May 25, 2005. Since September 1996, Dr. Ganguli has
been the CEO of Vision-IPR. The company offers management consulting on the
protection of intellectual property rights. His clients include companies in the
pharmaceutical, chemical and engineering industries. He is an adjunct professor
of intellectual property rights at the Indian Institute of Technology, Bombay.
Prior to 1996, from August 1991 to August 1996, he was the Head of Information
Services and Patents at the Hindustan Lever Research Center. In
1986, he was elected as a fellow to the Maharashtra Academy of Sciences. In
1966, he received the National Science Talent Scholarship (NSTS). In 1977, he
was awarded the Alexander von Humboldt Foundation Fellow (Germany). He is
Honorary Scientific Consultant to the Principal Scientific Adviser to the
Government of India. He is a Member of the National Expert Group on Issues
linked to Access to Biological materials vis-à-vis TRIPS and CBD Agreements
constituted by the Indian Ministry of Commerce and Industry. He is also a Member
of the Editorial Board of the intellectual property rights journal “World Patent
Information” published by Elsevier Science Limited, UK. He is a Consultant to
the World Intellectual Property Organization (WIPO), Geneva in intellectual
property rights capability building training programs in various parts of the
world. In 1976, Dr. Ganguli received a PhD from the Tata Institute of
Fundamental Research, Bombay in chemical physics. In 1971, he received a M.Sc.
in Chemistry from the Indian Institute of Technology (Kanpur) and in 1969 he
earned a BS from the Institute of Science (Bombay University).
Anil K. Gupta has served as
our Special Advisor since May 25, 2005. Dr. Gupta has been Professor
of Strategy and Organization at the University of Maryland since
1986. He has been Chair of the Management & Organization
Department, Ralph J. Tyser Professor of Strategy and Organization, and Research
Director of the Dingman Center for Entrepreneurship at the Robert H. Smith
School of Business, The University of Maryland at College Park, since July
2003. Dr. Gupta earned a Bachelor of Technology from the Indian
Institute of Technology in 1970, an MBA from the Indian Institute of Management
in 1972, and a Doctor of Business Administration from the
Harvard Business School in 1980. Dr. Gupta has served on
the board of directors of NeoMagic Corporation (NMGC) since October 2000 and has
previously served as a director of Omega Worldwide (OWWP) from October 1899
through August 2003 and Vitalink Pharmacy Services (VTK) from July 1992 through
July 1999.
Board
of Directors
Our board
of directors is divided into three classes (Class A, Class B and Class C) with
only one class of directors being elected in each year and each class serving a
three-year term. The term of office of the Class A directors, consisting of Mr.
Nathani and Mr. Shenoy, will expire at our fourth annual meeting of
stockholders. The term of office of the Class B directors, consisting of Mr.
Prins and Dr. Krishna, will expire at the second annual meeting of stockholders.
The term of office of the Class C director, consisting of Mr. Mukunda, will
expire at the third annual meeting of stockholders. These individuals
have played a key role in identifying and evaluating prospective acquisition
candidates, selecting the target businesses, and structuring, negotiating and
consummating the acquisition. The NYSE Amex, where we are listed, has rules
mandating that the majority of the board be independent. Our board of
directors will consult with counsel to ensure that the boards of directors’
determinations are consistent with those rules and all relevant securities laws
and regulations regarding the independence of directors. The NYSE Amex listing
standards define an “independent director” generally as a person, other than an
officer of a company, who does not have a relationship with the company that
would interfere with the director’s exercise of independent judgment. Consistent
with these standards, the board of directors has determined that Messrs.
Krishna, Shenoy and Nathani are independent directors.
Committee
of the Board of Directors
Our Board
of Directors has established an Audit Committee currently composed of two
independent directors who report to the Board of Directors. Messrs.
Krishna and Shenoy, each of whom is an independent director under the NYSE
Amex’s listing standards, serve as members of our Audit Committee. In
addition, we have determined that Messrs. Krishna and Shenoy are “audit
committee financial experts” as that term is defined under Item 407 of
Regulation S-K of the Securities Exchange Act of 1934, as
amended. The Audit Committee is responsible for meeting with our
independent accountants regarding, among other issues, audits and adequacy of
our accounting and control systems. We intend to locate and appoint
at least one additional independent director to our Audit Committee to increase
the size of the Audit Committee to three members.
The Audit
Committee will monitor our compliance on a quarterly basis with the terms of our
initial pubic offering. If any noncompliance issues are identified,
then the Audit Committee is charged with the responsibility to take immediately
all action necessary to rectify such noncompliance or otherwise cause compliance
with our initial pubic offering. The Board currently does not have a
nominating and corporate governance committee. However, the majority of the
independent directors of the Board make all nominations.
Audit
Committee Financial Expert
The Audit
Committee will at all times be composed exclusively of “independent directors”
who are “financially literate” as defined under the NYSE Amex listing
standards. The NYSE Amex listing standards define “financially
literate” as being able to read and understand fundamental financial statements,
including a company’s balance sheet, income statement and cash flow
statement.
In
addition, we must certify to the NYSE Amex that the Audit Committee has, and
will continue to have, at least one member who has past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background that results in the individual’s
financial sophistication. The Board of Directors has determined that
Messrs. Krishna and Shenoy satisfy the NYSE Amex’s definition of financial
sophistication and qualify as “audit committee financial experts,” as defined
under rules and regulations of the Securities and Exchange
Commission.
Compensation
Committee
Our Board
of Directors has established a Compensation Committee composed of two
independent directors, Messrs. Krishna and Shenoy and one non-independent
director Richard Prins. The Board determined that Richard Prins is not a
current officer or employee or an immediate family member of such
person. The Board deemed Mr. Prins to be non-independent because his
firm Ferris Baker Watts received compensation for the IPO and bridge
financing. The Board, however, determined that the best interests of
the Company and its shareholders require his membership on the compensation
committee, as Mr. Prins brings a great deal of prior experience with memberships
on public compensation committees. The Board used the exception
provided under Section 805(b) of the NYSE Amex Company Guide in appointing
Richard Prins to the Compensation Committee. The compensation
committee’s purpose will be to review and approve compensation paid to our
officers and directors and to administer the Stock Plan.
Nominating
and Corporate Governance Committee
We intend
to establish a nominating and corporate governance committee. The primary
purpose of the nominating and corporate governance committee will be to identify
individuals qualified to become directors, recommend to the board of directors
the candidates for election by stockholders or appointment by the board of
directors to fill a vacancy, recommend to the board of directors the composition
and chairs of board of directors committees, develop and recommend to the board
of directors guidelines for effective corporate governance, and lead an annual
review of the performance of the board of directors and each of its
committees.
We do not
have any formal process for stockholders to nominate a director for election to
our board of directors. Currently, nominations are selected or recommended by a
majority of the independent directors as stated in Section 804 (a) of the NYSE
Amex Company Guide. Any stockholder wishing to recommend an
individual to be considered by our board of directors as a nominee for election
as a director should send a signed letter of recommendation to the following
address: India Globalization Capital, Inc. c/o Corporate Secretary, 4336
Montgomery Avenue, Bethesda, MD 20817. Recommendation letters must state
the reasons for the recommendation and contain the full name and address of each
proposed nominee as well as a brief biographical history setting forth past and
present directorships, employments, occupations and civic activities. Any such
recommendation should be accompanied by a written statement from the proposed
nominee consenting to be named as a candidate and, if nominated and elected,
consenting to serve as a director. We may also require a candidate to furnish
additional information regarding his or her eligibility and qualifications. The
board of directors does not intend to evaluate candidates proposed by
stockholders differently than it evaluates candidates that are suggested by our
board members, execution officers or other sources.
Code
of Conduct and Ethics
We have
adopted a code of conduct and ethics applicable to our directors, officers and
employees in accordance with applicable federal securities laws and the rules of
the NYSE Amex. We have filed the code of conduct and ethics as
Exhibit 99.1 to our Registration Statement on Form S-1/A, filed with the
Securities and Exchange Commission on March 2, 2006.
Board
Meetings
During
the fiscal year ended March 31, 2009, our board of directors held four meetings.
Although we do not have any formal policy regarding director attendance at our
annual meetings, we will attempt to schedule our annual meetings so that all of
our directors can attend. During the fiscal year ended March 31, 2009, all of
our directors attended 100% of the meetings of the board of
directors.
Compensation
of Directors
Our
directors do not currently receive any cash compensation for their service as
members of the board of directors. In 2009 all board members were awarded stock
options or restricted stock pursuant to our 2008 Omnibus Incentive
Plan. Messers. Prins, Shenoy and Nathani each received options
to purchase 125,000 shares of common stock at an exercise price of $1.00 per
share that were exercisable at the time of grant and which expire on May 13,
2014, five years from the date of grant. Mr. Mukunda and Dr. Krishna
each received grants of 39,410 shares of common stock which vest on December 31,
2009.
We pay
IGN, LLC, an affiliate of Mr. Mukunda, $4,000 per month for office space and
certain general and administrative services. Mr. Mukunda is the Chief
Executive Officer of IGN, LLC. We believe, based on rents and fees
for similar services in the Washington, DC metropolitan area that the fee
charged by IGN LLC was at least as favorable as we could have obtained from an
unaffiliated third party. The agreement is on a month-to-month basis and may be
terminated by the board with out notice.
Section
16 (a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers and persons who beneficially own more than 10% of
our common stock to file reports of their ownership of shares with the
Securities and Exchange Commission. Such executive officers,
directors and stockholders are required by SEC regulation to furnish us with
copies of all Section 16(a) reports they file. Based solely upon
review of the copies of such reports received by us, our senior management
believes that all reports required to be filed under Section 16(a) for the
fiscal year ended March 31, 2009 were filed in a timely manner.
Compensation Discussion and
Analysis
Overview
of Compensation Policy
The
Company’s Compensation Committee is empowered to review and approve, or in some
cases recommend for the approval of the full Board of Directors the annual
compensation for the executive officers of the Company. This Committee has the
responsibility for establishing, implementing, and monitoring the Company’s
compensation strategy and policy. Among its principal duties, the Committee
ensures that the total compensation of the executive officers is fair,
reasonable and competitive.
Objectives
and Philosophies of Compensation
The
primary objective of the Company’s compensation policy, including the executive
compensation policy, is to help attract and retain qualified, energetic managers
who are enthusiastic about the Company’s mission and products. The policy is
designed to reward the achievement of specific annual and long-term strategic
goals aligning executive performance with company growth and shareholder value.
In addition, the Board of Directors strives to promote an ownership mentality
among key leaders and the Board of Directors.
Setting
Executive Compensation
The
compensation policy is designed to reward performance. In measuring executive
officers’ contribution to the Company, the Compensation Committee considers
numerous factors including the Company’s growth and financial performance as
measured by revenue, gross margin and net income before taxes among other key
performance indicators.
Regarding
most compensation matters, including executive and director compensation,
management provides recommendations to the Compensation Committee; however, the
Compensation Committee does not delegate any of its functions to others in
setting compensation. The Compensation Committee does not currently engage any
consultant related to executive and/or director compensation
matters.
Stock
price performance has not been a factor in determining annual compensation
because the price of the Company’s common stock is subject to a variety of
factors outside of management’s control. The Company does not subscribe to an
exact formula for allocating cash and non-cash compensation. However, a
significant percentage of total executive compensation is performance-based.
Historically, the majority of the incentives to executives have been in the form
of non-cash incentives in order to better align the goals of executives with the
goals of stockholders.
Elements
of Company’s Compensation Plan
The
principal components of compensation for the Company’s executive officers
are:
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base
salary
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performance-based
incentive cash compensation
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right
to purchase the company’s stock at a preset price (stock
options)
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retirement
and other benefits
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Base Salary
The
Company provides named executive officers and other employees with base salary
to compensate them for services rendered during the fiscal year. Base salary
ranges for named executive officers are determined for each executive based on
his or her position and responsibility.
During
its review of base salaries for executives, the Committee primarily
considers:
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market
data;
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internal
review of the executives’ compensation, both individually and relative to
other officers; and
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individual
performance of the executive.
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Salary
levels are typically evaluated annually as part of the Company’s performance
review process as well as upon a promotion or other change in job
responsibility.
Performance-Based
Incentive Compensation
The
management incentive plan gives the Committee the latitude to design cash and
stock-based incentive compensation programs to promote high performance and
achievement of corporate goals, encourage the growth of stockholder value and
allow key employees to participate in the long-term growth and profitability of
the Company. So that stock-based compensation may continue to be a viable part
of the Company’s compensation strategy, management is currently seeking
shareholder approval of a proposal to increase the number of shares of Company
common stock reserved for issuance pursuant to the Company’s Stock
Plan.
Ownership
Guidelines
To
directly align the interests of the Board of Directors with the interests of the
stockholders, the Committee recommends that each Board member maintain a minimum
ownership interest in the Company. Currently, the Compensation Committee
recommends that each Board member own a minimum of 5,000 shares of the Company’s
common stock with such stock to be acquired within a reasonable time following
election to the Board.
Stock
Option Program
The Stock
Option Program assists the Company to:
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enhance
the link between the creation of stockholder value and long-term executive
incentive compensation;
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provide
an opportunity for increased equity ownership by executives;
and
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maintain
competitive levels of total
compensation.
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Stock
option award levels are determined based on market data and vary among
participants based on their positions within the Company and are granted at the
Committee’s regularly scheduled meeting. As of September 30, 2009, we had
granted 78,820 shares of common stock and 1,413,000 stock options under our
Stock Plan.
Perquisites
and Other Personal Benefits
The
Company provides some executive officers with perquisites and other personal
benefits that the Company and the Committee believe are reasonable and
consistent with its overall compensation program to better enable the Company to
attract and retain superior employees for key positions. The Committee
periodically reviews the levels of perquisites and other personal benefits
provided to named executive officers.
Some
executive officers are provided use of company automobiles, an
entertainment budget and assistants based in the US and in India to
alleviate the extensive overseas travel. All employees can
participate in the plans and programs described above.
Each
employee of the Company is entitled to term life insurance, premiums for which
are paid by the Company. In addition, each employee is entitled to receive
certain medical and dental benefits and part of the cost is funded by the
employee.
Accounting
and Tax Considerations
The
Company’s stock option grant policy will be impacted by the implementation of
SFAS No. 123R, which was adopted in the first quarter of fiscal year 2006. Under
this accounting pronouncement, the Company is required to value unvested stock
options granted prior to the adoption of SFAS 123 under the fair value method
and expense those amounts in the income statement over the stock option’s
remaining vesting period.
Section
162(m) of the Internal Revenue Code restricts deductibility of executive
compensation paid to the Company’s chief executive officer and each of the four
other most highly compensated executive officers holding office at the end of
any year to the extent such compensation exceeds $1,000,000 for any of such
officers in any year and does not qualify for an exception under Section 162(m)
or related regulations. The Committee’s policy is to qualify its executive
compensation for deductibility under applicable tax laws to the extent
practicable. In the future, the Committee will continue to evaluate the
advisability of qualifying its executive compensation for full
deductibility.
Compensation
for Executive Officers of the Company
Prior
March 8, 2008, we did not pay any cash compensation to our executive officers or
their affiliates except as follows. As described above in
“Directors, Executive Officers And Special Advisors of the Company – Director
Compensation”, we pay IGN, LLC, an affiliate of Mr. Mukunda, $4,000 per month
for office space and certain general and administrative services, an amount
which is not intended as compensation for Mr. Mukunda. On or
around November 27, 2006, we engaged SJS Associates, an affiliate of Mr.
Selvaraj, which provides the services of Mr. John Selvaraj as our
Treasurer. We have agreed to pay SJS Associates $5,000 per month for
these services. Mr. Selvaraj is the Chief Executive Officer of SJS
Associates. Effective November 1, 2007 the Company and SJS Associates
terminated the agreement. We subsequently entered into a new
agreement with SJS Associates on identical terms subsequent to the acquisition
of Sricon and TBL. On May 22, 2008, the
Company and its subsidiary India Globalization Capital
Mauritius (“IGC-M”) entered into an employment agreement (the
“Employment Agreement”) with Ram Mukunda, pursuant to which he will receive a
salary of $300,000 per year for services to IGC and IGC-M as Chief Executive
Officer. The Employment Agreement was approved in May 2008 and
made effective as of March 8, 2008. For fiscal year 2009, Mr. Mukunda
was paid $300,000.
The
annual executive compensation for the Chief Executive Officer and Chief
Financial Officer of the Company is set out below.
Summary
compensation
|
|
|
|
|
|
|
|
|
FY
2008
|
|
|
FY
2009
|
|
Ram
Mukunda
|
|
$
|
15,000
|
|
|
$
|
450,000
|
|
John
Selvaraj
|
|
$
|
35,000
|
|
|
$
|
63,300
|
|
Compensation
of Directors
No
compensation was paid to the Company’s Board of Directors for the one-year
period ended March 31, 2009.
Certain
Relationships and Related Transactions
As of
March 31, 2009, there were no related party transactions other than the
agreements with IGN, an affiliate of Ram Mukunda, and SJS Associates, an
affiliate of John Selvaraj, described above. We are party to indemnification
agreements with each of the executive officers and directors. Such
indemnification agreements require us to indemnify these individuals to the
fullest extent permitted by law.
Employment
Contracts
Ram
Mukunda has served as President and Chief Executive Officer of the Company since
its inception. The Company, IGC-M and Mr. Mukunda entered into an
Employment Agreement on May 22, 2008, which agreement was made effective as of
March 8, 2008, the date on which the Company completed its acquisition of Sricon
and TBL. Pursuant to the agreement, the Company pays Mr. Mukunda a base salary
of $300,000 per year. Mr. Mukunda is also entitled to receive bonuses of at
least $225,000 for meeting certain targets for net income (before one time
charges including charges for employee options, warrants and other items) for
fiscal year 2009
and $150,000 for meeting targets with respect to obtaining new
contracts. The Agreement further provides that the Board of Directors
of the Company may review and update the targets and amounts for the net revenue
and contract bonuses on an annual basis. The Agreement also provides
for benefits, including insurance, 20 days of paid vacation, a car (subject to
partial reimbursement by Mr. Mukunda of lease payments for the car) and
reimbursement of business expenses. The term of the Employment Agreement is five
years, after which employment will become at-will. The Employment Agreement is
terminable by the Company and IGC-M for death, disability and
cause. In the event of a termination without cause, the Company would
be required to pay Mr. Mukunda his full compensation for 18 months or until the
term of the Employment Agreement was set to expire, whichever is
earlier.
In
partial consideration for the equity shares in Sricon purchased by the Company,
pursuant to the terms of a Shareholders Agreement dated as of September 15, 2007
by and among IGC, Sricon and the Promoters or Sricon, the stockholders of Sricon
as of the date of the acquisition, including Ravindra Lal Srivastava, who
currently serves as the Chairman and Managing Director of Sricon, shall have the
right to receive up to an aggregate of 418,431 equity shares of Sricon over a
three-year period if Sricon achieves certain profit after tax targets for its
2008-2010 fiscal years. The maximum number of shares the Promoters
may receive in any given fiscal year is 139,477 shares. If Sricon’s
profits after taxes for a given fiscal year are less than 100% of the target for
that year but are equal to at least 85% of the target, the Promoters shall
receive a pro rated portion of the maximum share award for that fiscal
year. A copy of this agreement was filed with the SEC in the
Company’s definitive proxy statement filed February 8, 2008 and is incorporated
here by reference.
In
partial consideration for the equity shares in TBL purchased by the Company,
pursuant to the terms of a Shareholders Agreement dated as of September 16, 2007
by and among IGC, TBL and the Promoters of TBL, Jortin Anthony, who currently
serves as the Managing Director of TBL, shall have the right to
receive up to an aggregate of 1,204,000 equity shares of TBL over a
five-year period if TBL achieves certain profit after tax targets for its
2008-2012 fiscal years. The maximum number of shares Mr.
Anthony may receive is 140,800 shares for fiscal year 2008 and 265,800 shares
for each of the following fiscal years. If TBL’s profits after taxes
for a given fiscal year are less than 100% of the target for that year but are
equal to at least 85% of the target Mr. Anthony shall receive a pro rated
portion of the maximum share award for that fiscal year. A copy of
this agreement was filed with the SEC in the Company’s definitive proxy
statement filed February 8, 2008 and is incorporated here by
reference.
Compensation
Committee Interlocks and Insider Participation
A
Compensation Committee comprised of two independent members of the Board of
Directors, Ranga Krishna and Sudhakar Shenoy, and a non-independent director
Richard Prins, administer executive compensation. No executive
officer of the Company served as a director or member of the compensation
committee of any other entity.
Review,
Approval or Ratification of Related Party Transactions
We do not
maintain a formal written procedure for the review and approval of transactions
with related persons. It is our policy for the disinterested members
of our board to review all related party transactions on a case-by-case
basis. To receive approval, a related-party transaction must have a
business purpose for IGC and be on terms that are fair and reasonable to IGC and
as favorable to IGC as would be available from non-related entities in
comparable transactions.
Pursuant
to the terms of a registration rights agreement with the Company, the holders of
the majority of these shares issued to our officers and directors prior to our
initial public offering are be entitled to make up to two demands that we
register these shares. The holders of the majority of these shares can elect to
exercise these registration rights at any time after the date on which the
lock-up period expires. The lock-up period expired on September 8,
2008. In addition, these stockholders have certain “piggy-back”
registration rights on registration statements filed subsequent to such date. We
will bear the expenses incurred in connection with the filing of any such
registration statements. We have registered these shares for resale
on a registration statement on Form S-1 that was declared effective on November
12, 2008.
The
following table sets forth information regarding the beneficial ownership of our
common stock as of November 30, 2009 by:
• each person known by us to be the
beneficial owner of more than 5% of our outstanding shares of common
stock;
• each of our executive officers,
directors and our special advisors; and
• all of our officers and directors
as a group.
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and does not necessarily indicate beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of common stock over which the stockholder has sole or shared voting or
investment power. It also includes shares of common stock that the stockholder
has a right to acquire within 60 days through the exercise of any option,
warrant or other right. The percentage ownership of the outstanding common
stock, which is based upon 12,898,291 shares of common stock outstanding as of
November 30, 2009, is based on the assumption, expressly required by the rules
of the Securities and Exchange Commission, that only the person or entity whose
ownership is being reported has converted options or warrants into shares of our
common stock.
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. Unless otherwise noted, the nature of the ownership
set forth in the table below is common stock of the Company.
The table
below sets forth as of November 30, 2009, except as noted in the footnotes to
the table, certain information with respect to the beneficial ownership of the
Company’s Common Stock by (i) all persons known by the Company to be the
beneficial owners of more than 5% of the outstanding Common Stock of the
Company, (ii) each director and director-nominee of the Company, (iii) the
executive officers named in the Summary Compensation Table, and (iv) all such
executive officers and directors of the Company as a group.
|
|
Shares
Owned
|
|
Name and Address of Beneficial
Owner(1)
|
|
Number
of Shares
|
|
|
Percentage
of Class
|
|
Wachovia
Corporation (2)
One
Wachovia Center
Charlotte,
North Carolina 28288-0137
|
|
|
1,879,289
|
|
|
|
14.6
|
%
|
Sage
Master Investments Ltd (3)
500
Fifth Avenue, Suite 930
New
York, New York 10110
|
|
|
947,300
|
|
|
|
7.3
|
%
|
Brightline
Capital Management, LLC (4)
1120
Avenue of the Americas, Suite 1505
New
York, New York 10036
|
|
|
750,000
|
|
|
|
5.8
|
%
|
Ram
Mukunda (5)
|
|
|
1,449,914
|
|
|
|
10.6
|
%
|
Ranga
Krishna (6)
|
|
|
2,215,624
|
|
|
|
16.8
|
%
|
Richard
Prins (7)
|
|
|
196,250
|
|
|
|
1.5
|
%
|
Sudhakar
Shenoy(8)
|
|
|
175,000
|
|
|
|
1.4
|
%
|
Suhail
Nathani(9)
|
|
|
150,000
|
|
|
|
1.2
|
%
|
Larry
Pressler
|
|
|
25,000
|
|
|
|
*
|
|
Dr.
Anil K. Gupta
|
|
|
25,000
|
|
|
|
*
|
|
P.G.
Kakodkar
|
|
|
12,500
|
|
|
|
*
|
|
Shakti
Sinha
|
|
|
12,500
|
|
|
|
*
|
|
Dr.
Prabuddha Ganguli
|
|
|
12,500
|
|
|
|
*
|
|
All
Executive Officers and Directors as a group (5
Persons)(10)
|
|
|
4,186,788
|
|
|
|
29.0
|
%
|
*
Represents less than 1%
(1)
|
Unless
otherwise indicated, the address of each of the individuals listed in the
table is: c/o India Globalization Capital, Inc., 4336 Montgomery Avenue,
Bethesda, MD 20814.
|
(2)
|
Based
on a Schedule 13F filed with the SEC on March 31, 2009 by Wachovia
Corporation. Dr. Ranga Krishna is entitled to 100% of the
economic benefits of the shares.
|
(3)
|
Based
on a Schedule 13G filed with the SEC on June 1, 2009 by Sage Master
Investments Ltd., a Cayman Islands exempted company (“Sage Master”), Sage
Opportunity Fund (QP), L.P., a Delaware limited partnership (“QP Fund”),
Sage Asset Management, L.P., a Delaware limited partnership (“SAM”), Sage
Asset Inc., a Delaware corporation (“Sage Inc.”), Barry G. Haimes and
Katherine R. Hensel (collectively, the “Reporting Persons”). As
disclosed in the Schedule 13G, Each of the Reporting Persons’ beneficial
ownership of 947,300 shares of Common Stock constitutes 7.4% of all of the
outstanding shares of Common Stock. The address for each of the foregoing
parties is c/o 500 Fifth Avenue, Suite 930, New York, New York
10110.
|
(4)
|
Based
on an amended Schedule 13G jointly filed with the SEC on May 28, 2008 by
Brightline Capital Management, LLC (“Management”), Brightline Capital
Partners, LP (“Partners”), Brightline GP, LLC (“GP”), Nick Khera (“Khera”)
and Edward B. Smith, III (“Smith”). As disclosed in the amended
Schedule 13G, Management and Khera are each the beneficial owners of
750,000 shares of common stock (5.8%), Smith is the beneficial owner of
1,031,500 shares of common stock (8.0%) including 281,500 shares over
which he holds sole control of their voting and disposition, and Partners
and GP are each the beneficial owners of 592,560 shares of common stock
(4.6%), respectively. The address for
each of the foregoing parties is 1120 Avenue of the Americas, Suite 1505,
New York, New York 10036.
|
(5)
|
Includes(i)
245,175 shares of common stock directly owned by Mr. Mukunda, (ii) 425,000
shares of common stock owned by Mr. Mukunda’s wife Parveen Mukunda, (iii)
options to purchase 635,000 shares of common stock which are exercisable
within sixty (60) days of November 30, 2009, all of which are currently
exercisable and (iv) warrants to purchase 144,739 shares of common stock,
of which warrants to purchase 28,571 shares of common stock are owned by
Mr. Mukunda’s wife Parveen Mukunda and all which are
exercisable within sixty (60) days of November 30, 2009, all of which are
currently exercisable.
|
(6)
|
Includes warrants to
purchase 290,000 shares of common stock which are exercisable within sixty
(60) days of November 30, 2009, all of which are currently
exercisable. Includes 1,879,279 shares beneficially owned by
Wachovia Corporation, which has sole voting and dispositive control over
the shares. Dr. Krishna is entitled to 100% of the
economic benefits of the shares.
|
(7)
|
Based
on a Form 4 filed with the SEC on May 18, 2009 by Richard
Prins. Includes options to purchase 125,000 shares of common
stock and a unit purchase option to purchase 71,250 units, each consisting
of 1 share of common stock and 2 warrants to purchase a share of common
stock and does not include the warrants underlying the units that may be
acquired upon exercise of the unit purchase option. Both
the options, and the unit purchase option are both exercisable
within sixty (60) days of November 30, 2009 and currently
exercisable.
|
(8)
|
Based
on a Form 4 filed with the SEC on May 18, 2009 by Sudhakar
Shenoy. Includes options to purchase 125,000 shares of common
stock, which are both exercisable within sixty (60) days of November 30,
2009 and currently exercisable.
|
(9)
|
Based
on a Form 4 filed with the SEC on May 18, 2009 by Suhail
Nathani. Includes options to purchase 125,000 shares of common
stock, which are both exercisable within sixty (60) days of November 30,
2009 and currently exercisable.
|
(10)
|
Does
not include shares owned by our special advisors. Includes: (i)
2,654,464 shares of common stock, (ii) warrants to purchase 1,069,739
shares of common stock, (iii) options to purchase 375,000 shares of common
stock and (iv) a unit purchase option to purchase 71,250 units, each
consisting of 1 share of common stock and 2 warrants to purchase a share
of common stock and does not include the warrants underlying the units
that may be acquired upon exercise of the unit purchase
option. The warrants, options, and the unit purchase option are
all both exercisable within sixty (60) days of November 30, 2009 and
currently exercisable. Includes 1,879,289 shares
beneficially owned by Wachovia Corporation, which has sole voting and
dispositive control over the
shares.
|
Messrs.
Mukunda and Krishna may be deemed our “parent,” “founder” and “promoter,” as
these terms are defined under the Federal securities laws.
General
We are
authorized to issue 75,000,000 shares of common stock, par value $.0001,
and 1,000,000 shares of preferred stock, par value $.0001. As of November
30, 2009, 12,898,291 shares of common stock are outstanding, held
by 946 record holders and no shares of preferred stock are
outstanding.
Units
Each unit
consists of one share of common stock and two warrants. Each warrant entitles
the holder to purchase one share of common stock. Each of the common stock and
warrants can be traded separately.
Common
stock
Our
stockholders are entitled to one vote for each share held of record on all
matters to be voted on by stockholders.
Our board
of directors is divided into three classes (Class A, Class B and
Class C), each of which will generally serve for a term of three years with
only one class of directors being elected in each year. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect all of the directors.
Our
stockholders have no conversion, preemptive or other subscription rights and
there are no sinking fund or redemption provisions applicable to the common
stock.
Preferred
stock
Our
certificate of incorporation authorizes the issuance of 1,000,000 shares of
blank check preferred stock with such designation, rights and preferences as may
be determined from time to time by our board of directors. No shares of
preferred stock are being issued or registered in this offering. Accordingly,
our board of directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
common stock. We may issue some or all of the preferred stock to
effect a business combination. In addition, the preferred stock could be
utilized as a method of discouraging, delaying or preventing a change in control
of us. Although we do not currently intend to issue any shares of preferred
stock, we cannot assure you that we will not do so in the future.
Dividends
We have
not paid any dividends on our common stock to date and do not intend to pay
dividends prior to the completion of a business combination. The payment of
dividends in the future will be contingent upon our revenues and earnings, if
any, capital requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends subsequent to
a business combination will be within the discretion of our then board of
directors. It is the present intention of our board of directors to retain all
earnings, if any, for use in our business operations and, accordingly, our board
does not anticipate declaring any dividends in the foreseeable
future.
Maryland
Anti-Takeover Provisions and Certain Anti-Takeover Effects of our Charter and
Bylaws
Business
Combinations
Under the
Maryland General Corporation Law, some business combinations, including a
merger, consolidation, share exchange or, in some circumstances, an asset
transfer or issuance or reclassification of equity securities, are prohibited
for a period of time and require an extraordinary vote. These transactions
include those between a Maryland corporation and the following persons (a
“Specified Person”):
•an interested stockholder, which is
defined as any person (other than a subsidiary) who beneficially owns 10% or
more of the corporation’s voting stock, or who is an affiliate or an associate
of the corporation who, at any time within a two-year period prior to the
transaction, was the beneficial owner of 10% or more of the voting power of the
corporation’s voting stock or
•an affiliate of an interested
stockholder.
A person
is not an interested stockholder if the board of directors approved in advance
the transaction by which the person otherwise would have become an interested
stockholder. The board of directors of a Maryland corporation also may exempt a
person from these business combination restrictions prior to the time the person
becomes a Specified Person and may provide that its exemption is subject to
compliance with any terms and conditions determined by the board of directors.
Transactions between a corporation and a Specified Person are prohibited for
five years after the most recent date on which such stockholder becomes a
Specified Person. After five years, any business combination must be recommended
by the board of directors of the corporation and approved by at least 80% of the
votes entitled to be cast by holders of voting stock of the corporation and
two-thirds of the votes entitled to be cast by holders of shares other than
voting stock held by the Specified Person with whom the business combination is
to be effected, unless the corporation’s stockholders receive a minimum price as
defined by Maryland law and other conditions under Maryland law are
satisfied.
A
Maryland corporation may elect not to be governed by these provisions by having
its board of directors exempt various Specified Persons, by including a
provision in its charter expressly electing not to be governed by the applicable
provision of Maryland law or by amending its existing charter with the approval
of at least 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation and two-thirds of the votes entitled
to be cast by holders of shares other than those held by any Specified Person.
Our Charter does not include any provision opting out of these business
combination provisions.
Control
Share Acquisitions
The
Maryland General Corporation Law also prevents, subject to exceptions, an
acquiror who acquires sufficient shares to exercise specified percentages of
voting power of a corporation from having any voting rights except to the extent
approved by two-thirds of the votes entitled to be cast on the matter not
including shares of stock owned by the acquiring person, any directors who are
employees of the corporation and any officers of the corporation. These
provisions are referred to as the control share acquisition
statute.
The
control share acquisition statute does not apply to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted prior to the acquisition by
a provision contained in the corporation’s charter or bylaws. Our Bylaws include
a provision exempting IGC from the restrictions of the control share acquisition
statute, but this provision could be amended or rescinded either before or after
a person acquired control shares. As a result, the control share acquisition
statute could discourage offers to acquire IGC stock and could increase the
difficulty of completing an offer.
Board
of Directors
The
Maryland General Corporation Law provides that a Maryland corporation which is
subject to the Exchange Act and has at least three outside directors (who are
not affiliated with an acquirer of the company) under certain circumstances may
elect by resolution of the board of directors or by amendment of its charter or
bylaws to be subject to statutory corporate governance provisions that may be
inconsistent with the corporation’s charter and bylaws. Under these provisions,
a board of directors may divide itself into three separate classes without the
vote of stockholders such that only one-third of the directors are elected each
year. A board of directors classified in this manner cannot be altered by
amendment to the charter of the corporation. Further, the board of directors
may, by electing to be covered by the applicable statutory provisions and
notwithstanding the corporation’s charter or bylaws:
• provide that a special meeting of
stockholders will be called only at the request of stockholders entitled to cast
at least a majority of the votes entitled to be cast at the
meeting,
• reserve for itself the right to fix the
number of directors,
• provide that a director may be removed
only by the vote of at least two-thirds of the votes entitled to be cast
generally in the election of directors and
• retain for itself sole authority to
fill vacancies created by an increase in the size of the board or the death,
removal or resignation of a director.
In
addition, a director elected to fill a vacancy under these provisions serves for
the balance of the unexpired term instead of until the next annual meeting of
stockholders. A board of directors may implement all or any of these provisions
without amending the charter or bylaws and without stockholder approval.
Although a corporation may be prohibited by its charter or by resolution of its
board of directors from electing any of the provisions of the statute, we have
not adopted such a prohibition. We have adopted a staggered board of directors
with 3 separate classes in our charter and given the board the right to fix the
number of directors, but we have not prohibited the amendment of these
provisions. The adoption of the staggered board may discourage offers
to acquire IGC stock and may increase the difficulty of completing an offer to
acquire our stock. If our board chose to implement the statutory provisions, it
could further discourage offers to acquire IGC stock and could further increase
the difficulty of completing an offer to acquire our stock.
Effect
of Certain Provisions of our Charter and Bylaws
In
addition to the Charter and Bylaws provisions discussed above, certain other
provisions of our Bylaws may have the effect of impeding the acquisition of
control of IGC by means of a tender offer, proxy fight, open market purchases or
otherwise in a transaction not approved by our board of directors. These
provisions of Bylaws are intended to reduce our vulnerability to an unsolicited
proposal for the restructuring or sale of all or substantially all of our assets
or an unsolicited takeover attempt which our board believes is otherwise unfair
to our stockholders. These provisions, however, also could have the effect of
delaying, deterring or preventing a change in control of IGC.
Stockholder Meetings; Advance Notice
of Director Nominations and New Business . Our Bylaws provide that with
respect to annual meetings of stockholders, (i) nominations of individuals for
election to our board of directors and (ii) the proposal of business to be
considered by stockholders may be made only:
• pursuant to IGC’s notice of the
meeting,
• by or at the direction of our board of
directors or
• by a stockholder who is entitled to
vote at the meeting and has complied with the advance notice procedures set
forth in our Bylaws.
Special
meetings of stockholders may be called only by the chief executive officer, the
board of directors or the secretary of IGC (upon the written request of the
holders of a majority of the shares entitled to vote). At a special meeting of
stockholders, the only business that may be conducted is the business specified
in IGC’s notice of meeting. With respect to nominations of persons for election
to our board of directors, nominations may be made at a special meeting of
stockholders only:
• pursuant to IGC’s notice of
meeting,
• by or at the direction of our board of
directors or
• if our board of directors has
determined that directors will be elected at the special meeting, by a
stockholder who is entitled to vote at the meeting and has complied with the
advance notice procedures set forth in our Bylaws.
These
procedures may limit the ability of stockholders to bring business before a
stockholders meeting, including the nomination of directors and the
consideration of any transaction that could result in a change in control and
that may result in a premium to our stockholders.
Our
Transfer Agent and Warrant Agent
The
transfer agent for our securities and warrant agent for our warrants is
Continental Stock Transfer & Trust Company.
We have
an aggregate of 12,898,291 shares
of common stock outstanding. Of these shares, 9,333,191 shares
are either freely tradable without restriction or further registration under the
Securities Act of 1933, except for any shares purchased by one of our affiliates
within the meaning of Rule 144 under the Securities Act of 1933, or
registered for resale. Shares purchased by our affiliates include the
170,000 shares included in the units purchased in a private placement by
our officers and directors or their nominees, which were the subject of a
lock-up agreement with us and the representative of the underwriters until we
completed a business combination. Since we have completed a business
combination, the lock-up has terminated with respect to those
shares. All of the remaining 3,560,000 shares are restricted
securities under Rule 144, in that they were issued in private transactions
not involving a public offering. None of those will be eligible for sale under
Rule 144 until the one year holding period has elapsed with respect to each
purchase and the additional conditions described in “Restrictions on the Use of
Rule 144 by Shell Companies or Former Shell Companies” below are
satisfied.
Rule 144
In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who is deemed to be an affiliate of ours at the time of
sale, or at any time during the preceding three months, and who has beneficially
owned restricted shares of our common stock for at least six months, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of either of the following:
·
|
1%
of the number of shares of common stock then outstanding, which currently
equals
128,983 shares; and
|
·
|
the
average weekly trading volume of the common stock during the four calendar
weeks preceding the filing of a notice on Form 144 with respect to
the sale.
|
Sales
under Rule 144 are also limited by manner of sale provisions and notice
requirements and to the availability of current public information about
us.
A person
who has not been our affiliate at any time during the three months preceding a
sale, and who has beneficially owned his shares for at least six months, would
be entitled under Rule 144 to sell such shares without regard to any manner
of sale, notice provisions or volume limitations described above. Any such sales
must comply with the public information provision of Rule 144 until our
common stock has been held for one year.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Historically,
the SEC staff had taken the position that Rule 144 is not available for the
resale of securities initially issued by companies that are, or previously were,
blank check companies, like us. The SEC has codified and expanded this position
in recent amendments by prohibiting the use of Rule 144 for resale of securities
issued by any shell companies (other than business combination related shell
companies) or any issuer that has been at any time previously a shell
company. The SEC has provided an important exception to this
prohibition, however, if the following conditions are met:
·
|
the
issuer of the securities that was formerly a shell company has ceased to
be a shell company;
|
·
|
the
issuer of the securities is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange
Act;
|
·
|
the
issuer of the securities has filed all Exchange Act reports and material
required to be filed, as applicable, during the preceding 12 months (or
such shorter period that the issuer was required to file such reports and
materials), other than Form 8-K reports;
and
|
·
|
at
least one year has elapsed from the time that the issuer filed current
Form 10 type information with the SEC reflecting its status as an entity
that is not a shell company.
|
We have satisfied the preceding
requirements and as a result, pursuant to Rule 144, our initial shareholders are
able to sell their initial shares freely without
registration.
SEC
Position on Rule 144 Sales
The SEC
has taken the position that promoters or affiliates of a blank check company and
their transferees, both before and after a business combination, would act as an
“underwriter” under the Securities Act of 1933 when reselling the securities of
a blank check company. Accordingly, the SEC believes that those securities can
be resold only through a registered offering and that Rule 144 would not be
available for those resale transactions despite technical compliance with the
requirements of Rule 144.
Registration
Rights
The
officer, director and our special advisor holders of our 2,500,000 shares
of common stock that are issued and outstanding on the date of this prospectus
are entitled to registration rights pursuant to an agreement dated as of March
8, 2005. The 170,000 shares purchased by such persons in the private
placement are also be entitled to registration rights pursuant to the agreement.
Our Chairman, Dr. Ranga Krishna, also owns 446,226 shares of our common stock
that he acquired in a separate private placement in connection with his lending
money to us that are be entitled to registration rights pursuant to
the agreement The holders of the majority of these shares are entitled to
make up to two demands that we register these shares. The holders of the
majority of these shares can elect to exercise these registration rights at any
time after the date on which the lock-up period expires. In addition, these
stockholders have certain “piggy-back” registration rights on registration
statements filed subsequent to such date. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Oliveira
Capital, LLC which acquired warrants to purchase 425,000 shares of our common
stock (at an initial exercise price of $5.00 per share) and 103,774 shares of
our common stock (at an initial exercise price of $5.00 per share) in two
private placements in connection with it lending money to us is entitled
to “piggy-back” registration rights for the shares, the warrants and
the warrants underlying the shares, pursuant to an agreement dated as of
February 5, 2007, on registration statements filed subsequent to such
date.
The
holders of an aggregate of 204,953 shares of our common stock acquired in a
private placement in connection with the purchase of promissory notes from the
Company entered into a registration rights agreement providing registration
rights similar to those provided to the Company’s founders except that they are
only entitled to one demand registration.
Steven M.
Oliveira 1998 Charitable Remainder Unitrust, the holder of an aggregate of
200,000 shares of our common stock acquired in a private placement in connection
with the purchase of a promissory note from the Company entered into a
registration rights agreement requiring the Company to file a registration
statement registering the shares for resale on or before November 14, 2008 and
to have that registration statement effective by December 14, 2008 (subject to
extension if certain conditions are met) If the Company fails to meet
those deadlines, the trust will be entitled to an additional 50,000 shares of
common stock and, if the deadline is unmet for 30 days, an additional 10,000
shares and a further 10,000 shares for each subsequent 30 day period such
deadline is unmet.
We satisfied the registration
rights described in the preceding paragraphs by registering all of the shares
and warrants described in the preceding paragraphs for resale on a registration
statement on Form S-1 that was declared effective on November 12,
2008.
Bricoleur
Partners, L.P., the holder of an aggregate of 530,000 shares of our common stock
acquired in a private placement in connection with the purchase of a promissory
note from the Company entered into a registration rights agreement requiring the
Company to file a registration statement registering the shares for resale on or
before November 30, 2009 and to have that registration statement effective by
December 30, 2009 (subject to extension if certain conditions are
met) If the Company fails to meet those deadlines, Bricoleur will be
entitled to an additional 50,000 shares of common stock and, if the deadline is
unmet for 60 days, an additional 10,000 shares and a further 10,000 shares for
each subsequent 60 day period such deadline is unmet. We satisfied the registration rights described in this paragraph
by registering all of the shares for resale on a registration statement on Form
S-3 that was declared effective on February 4, 2010.
Shares
Issuable Upon Default of Notes
Pursuant
to the terms of Note and Shares Purchase Agreements entered into by the Company
with each of Steven M. Oliveira 1998 Charitable Remainder Unitrust and Bricoleur
Partners, L.P., if an event of default occurs with respect to the promissory
notes issued by the Company to the Unitrust and Bricoleur and such default is
uncured for a period of 30 days, the Company is required to issue to the
Unitrust and/or Bricoleur, as applicable, 200,000 shares of the Company’s common
stock.
Employee
Stock Options
We intend
to file a registration statement on Form S-8 under the Securities Act to
register up to 1,869,083 shares of common stock that are issuable under our
2008 Omnibus Incentive Plan. Shares issued upon the exercise of options after
the effective date of such registration statement, when filed, other than shares
issued to affiliates, generally will be freely tradable without further
registration under the Securities Act.
The
validity of the securities offered in this prospectus is being passed upon for
us by Seyfarth Shaw LLP, Chicago, Illinois.
The
consolidated financial statements of IGC for the years ending March 31, 2009 and
March 31, 2008 included herein have been audited by Yoganandh & Ram, an
independent registered public accounting firm, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and
auditing.
This
prospectus, which is part of a registration statement filed with the SEC, does
not contain all of the information set forth in the registration statement or
the exhibits filed therewith. For further information with respect to us and the
common stock offered by this prospectus, please see the registration statement
and exhibits filed with the registration statement.
You may
also read and copy any materials we have filed with the SEC at the SEC’s public
reference room, located at 100 F Street, N.E., Washington, DC 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
In addition, our SEC filings, including reports, proxy statements and other
information regarding issuers that file electronically with the SEC, are also
available to the public at no cost from the SEC’s website at http://www.sec.gov.
No person
is authorized to give any information or to make any representation other than
those contained in this prospectus, and if made such information or
representation must not be relied upon as having been given or authorized. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by anyone in
any jurisdiction in which the offer or solicitation is not authorized or is
unlawful. The delivery of this prospectus will not, under any circumstances,
create any implication that the information is correct as of any time subsequent
to the date of this prospectus.
|
Page
|
Index
to Consolidated Financial Statements and Audited Historical Financial
Statements
|
|
India
Globalization Capital, Inc.
|
|
|
F-1
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
|
|
|
|
F-19
|
|
F-20
|
|
F-21
|
|
F-22
|
|
F-23
|
|
F-24
|
To the
Board of Directors and Stockholders
India
Globalization Capital, Inc.
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and comprehensive
loss, and of cash flows present fairly, in all material respects, the financial
position of India Globalization Capital, Incorporated and its subsidiaries at
March 31, 2009 and 2008, and the results of their operations and their cash
flows for each of the two years in the period ended March 31, 2009 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/
Yoganandh &
Ram
Independent
Auditors registered with
Public
Company Accounting Oversight Board (USA)
India
Globalization Capital, Inc.
|
|
March
31, 2009
|
|
|
March
31, 2008
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,129,365
|
|
|
$
|
8,397,441
|
|
Accounts
Receivable
|
|
|
9,307,088
|
|
|
|
8,708,861
|
|
Unbilled
Receivables
|
|
|
2,759,632
|
|
|
|
5,208,722
|
|
Inventories
|
|
|
2,121,837
|
|
|
|
1,550,080
|
|
Interest
Receivable - Convertible Debenture
|
|
|
|
|
|
|
277,479
|
|
Convertible
debenture in MBL
|
|
|
|
|
|
|
3,000,000
|
|
Prepaid
taxes
|
|
|
88,683
|
|
|
|
49,289
|
|
Restricted
cash
|
|
|
|
|
|
|
6,257
|
|
Short
term investments
|
|
|
|
|
|
|