india10qsb-6302007.htm
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
R
|
Quarterly
report under Section 13 or 15(d) of the
SecuritiesExchange Act of
1934.
|
|
For
the quarterly period ended June 30, 2007 |
|
|
OR
|
|
£
|
Transition
report under Section 13 or 15(d) of the Exchange
Act.
|
|
For
the transition period
from
to
|
Commission
file number: 0001326205
INDIA
GLOBALIZATION CAPITAL, INC.
(Exact
name of small business issuer as specified in its charter)
Maryland
|
20-2760393
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
4336
Montgomery Ave., Bethesda, Maryland 20814
(Address
of principal executive offices)
(301)
983-0998
(Issuer’s
telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
R
Yes £
No
Indicate
by check mark whether the registrant is a large accelerated filer, or a
non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated Filer £ Accelerated
Filer £ Non-Accelerated
Filer R
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). R Yes
£
No
Indicate
the number of shares outstanding for each of the issuer’s classes of common
equity as of the latest practicable date: As of August 16, 2007, the
company had 13,974,500 shares outstanding.
Transitional
Small Business Disclosure Format (Check one): £
Yes R
No
|
Page
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
1
|
|
8
|
|
11
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
12
|
|
12
|
|
12
|
|
13
|
|
13
|
|
13
|
|
13
|
|
|
|
14
|
Certification
|
|
Certification
|
|
Certification
|
|
Certification
|
|
PART
I.
FINANCIAL INFORMATION
Item
1.
Financial Statements
India
Globalization Capital, Inc.
(a
development stage company)
CONDENSED
BALANCE SHEET
|
|
June
30, 2007
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
422,035
|
|
|
$ |
1,169,422
|
|
Investments
held in Trust Fund
|
|
|
66,471,351
|
|
|
|
66,104,275
|
|
Interest
Receivable—Convertible Debenture
|
|
|
97,479
|
|
|
|
37,479
|
|
Convertible
debenture in MBL
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Prepaid
expenses and other current assets
|
|
|
35,857
|
|
|
|
74,197
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
70,026,722
|
|
|
|
70,385,373
|
|
|
|
|
|
|
|
|
|
|
Deposit
to CWEL
|
|
|
250,000
|
|
|
|
-
|
|
Deferred
acquisition costs
|
|
|
211,072
|
|
|
|
158,739
|
|
Deferred
tax assets—Federal and State, net of valuation allowance
|
|
|
490,888
|
|
|
|
142,652
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
70,978,682
|
|
|
$ |
70,686,764
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accrued
expenses
|
|
$ |
323,654
|
|
|
$ |
237,286
|
|
Notes
payable to stockholders
|
|
|
545,000
|
|
|
|
870,000
|
|
Taxes
payable
|
|
|
308,991
|
|
|
|
296,842
|
|
Deferred
trust interest
|
|
|
127,794
|
|
|
|
32,526
|
|
Note
Payable to Oliveira Capital, LLC
|
|
|
2,181,076
|
|
|
|
1,794,226
|
|
Due
to Underwriters
|
|
|
1,769,400
|
|
|
|
1,769,400
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$ |
5,255,915
|
|
|
$ |
5,000,280
|
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible conversion, 2,259,770 at conversion value
(Note
A)
|
|
|
12,762,785
|
|
|
|
12,762,785
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock $.0001 par value; 1,000,000 shares authorized; none issued
and
outstanding
|
|
|
- |
|
|
|
-
|
|
Common
stock — $.0001 par value; 75,000,000 shares authorized; issued and
outstanding 13,974,500 (including 2,259,770 shares subject to possible
conversion)
|
|
|
1,397
|
|
|
|
1,397
|
|
Additional
paid-in capital
|
|
|
51,848,145
|
|
|
|
51,848,145
|
|
Income
accumulated during the development stage
|
|
|
1,110,440
|
|
|
|
1,074,157
|
|
Total
stockholders’ equity
|
|
$ |
52,959,982
|
|
|
$ |
52,923,699
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
70,978,682
|
|
|
$ |
70,686,764
|
|
See
notes
to unaudited condensed financial statements.
India
Globalization Capital, Inc.
(a
development stage company)
UNAUDITED
CONDENSED STATEMENT OF OPERATIONS
|
|
Three
Months
|
|
|
Three
Months
|
|
|
April
29, 2005
|
|
|
|
Ended
|
|
|
Ended
|
|
|
(Date
of Inception)
|
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
|
|
|
Legal
and formation, travel and other start up costs
|
|
$ |
(179,844 |
) |
|
$ |
(120,313 |
) |
|
$ |
(1,013,074 |
) |
Compensation
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
(535,741 |
) |
Interest
expense
|
|
|
(459,878 |
) |
|
|
(8,300 |
) |
|
|
(569,294 |
) |
Interest
income
|
|
|
694,918
|
|
|
|
783,801
|
|
|
|
4,077,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
55,196
|
|
|
|
655,188
|
|
|
|
1,959,211
|
|
Provision
for income taxes, net
|
|
|
18,913
|
|
|
|
222,800
|
|
|
|
848,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
36,283
|
|
|
$ |
432,388
|
|
|
$ |
1,110,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share: basic and diluted
|
|
$ |
0.00
|
|
|
$ |
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding-basic
and diluted
|
|
|
13,974,500
|
|
|
|
13,974,500
|
|
|
|
|
|
See
notes to unaudited condensed financial
statements.
India
Globalization Capital, Inc.
(a
development stage company)
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
during
the
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Development
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity
|
|
Issuance
of common stock to founders at $.01 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,750,000
shares on May 5, 2005 and 750,000 shares on June 20, 2005)
|
|
|
2,500,000
|
|
|
$ |
250
|
|
|
$ |
24,750
|
|
|
$ |
-
|
|
|
$ |
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrendered
shares (on September 7, 2005 and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
5, 2006 of 62,500 and 137,500, respectively)
|
|
|
(200,000 |
) |
|
|
(20 |
) |
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to founders at $.01 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
February 5, 2006
|
|
|
200,000
|
|
|
|
20
|
|
|
|
537,721
|
|
|
|
-
|
|
|
|
537,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
of 170,000 units in a private placement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
placement
|
|
|
170,000
|
|
|
|
17
|
|
|
|
1,019,983
|
|
|
|
-
|
|
|
|
1,020,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
of 11,304,500 units, net of underwriters’ discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
offering expenses (including 2,259,770 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject
to possible conversion) and $100 from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
underwriters
option
|
|
|
11,304,500
|
|
|
|
1,130
|
|
|
|
61,793,456
|
|
|
|
-
|
|
|
|
61,794,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
subject to possible conversion of shares
|
|
|
|
|
|
|
|
|
|
|
(12,762,785
|
)
|
|
|
-
|
|
|
|
(12,762,785 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(443,840 |
) |
|
|
(443,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2006
|
|
|
13,974,500
|
|
|
|
1,397
|
|
|
|
50,613,145
|
|
|
|
(443,840 |
) |
|
|
50,170,702
|
|
Fair
value of 425,000 warrants issued to Oliveira Capital, LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
1,235,000
|
|
|
|
-
|
|
|
|
1,235,000
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,517,997
|
|
|
|
1,517,997
|
|
Balance
at March 31,2007
|
|
|
13,974,500
|
|
|
|
1,397
|
|
|
|
51,848,145
|
|
|
|
1,074,157
|
|
|
$ |
52,923,699
|
|
Unaudited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the three months ended June 30, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,283
|
|
|
|
36,283
|
|
Balance
at June 30, 2007
|
|
|
13,974,500
|
|
|
$ |
1,397
|
|
|
$ |
51,848,145
|
|
|
$ |
1,110,440
|
|
|
$ |
52,959,982
|
|
See
notes to unaudited condensed financial
statements.
India
Globalization Capital, Inc.
(a
development stage company)
UNAUDITED
CONDENSED STATEMENT OF CASH FLOWS
|
Three
months ended
|
|
|
|
|
|
June
30, 2007
|
|
|
June
30, 2006
|
|
|
April
29, 2005
(Date
of Inception) Through June 30,
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
$ |
36,283
|
|
|
$ |
432,388
|
|
|
$ |
1,110,440
|
|
Adjustment
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
earned on Treasury Bills
|
|
(721,805 |
) |
|
|
(774,739 |
) |
|
|
(4,023,596 |
) |
Non-cash
compensation expense
|
|
-
|
|
|
|
-
|
|
|
|
535,741
|
|
Deferred
taxes
|
|
(348,236 |
) |
|
|
(10,200 |
) |
|
|
(490,888 |
) |
Amortization
of debt discount on Oliveira debt
|
|
386,850
|
|
|
|
-
|
|
|
|
416,076
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
38,340
|
|
|
|
20,016
|
|
|
|
(35,857 |
) |
Interest
receivable - convertible debenture
|
|
(60,000 |
) |
|
|
-
|
|
|
|
(97,479 |
) |
Deferred
interest liability
|
|
95,268
|
|
|
|
-
|
|
|
|
127,794
|
|
Accrued
expenses
|
|
111,367
|
|
|
|
13,822
|
|
|
|
283,653
|
|
Taxes
payable
|
|
12,149
|
|
|
|
233,000
|
|
|
|
308,991
|
|
Net
cash used in operating activities
|
|
(449,784 |
) |
|
|
(85,713 |
) |
|
|
(1,865,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of treasury bills
|
|
(132,811,913 |
) |
|
|
(196,843,092 |
) |
|
|
(986,581,927 |
) |
Maturity
of treasury bills
|
|
133,166,157
|
|
|
|
197,542,851
|
|
|
|
924,135,488
|
|
Decrease
(increase) in cash held in trust
|
|
486
|
|
|
|
186,026
|
|
|
|
(1,315 |
) |
Purchase
of convertible debenture
|
|
-
|
|
|
|
-
|
|
|
|
(3,000,000 |
) |
Deposit
to CWEL
|
|
(250,000 |
) |
|
|
|
|
|
|
(250,000 |
) |
Payment
of deferred acquisition costs
|
|
(77,333 |
) |
|
|
-
|
|
|
|
(171,072 |
) |
Net
cash provided used in investing activities
|
|
27,397
|
|
|
|
885,785
|
|
|
|
(65,868,826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to founders
|
|
-
|
|
|
|
-
|
|
|
|
27,000
|
|
Payments
of offering costs
|
|
-
|
|
|
|
(238,426 |
) |
|
|
(4,263,114 |
) |
Proceeds
from notes payable to stockholders
|
|
275,000
|
|
|
|
-
|
|
|
|
1,145,000
|
|
Repayment
of notes payabble to stockholder
|
|
(600,000 |
) |
|
|
|
|
|
|
(600,000 |
) |
Proceeds
from issuance of underwriters option
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
Gross
proceeds from initial public offering
|
|
-
|
|
|
|
-
|
|
|
|
67,827,000
|
|
Proceeds
from private placement
|
|
-
|
|
|
|
-
|
|
|
|
1,020,000
|
|
Proceeds
from note payable to Oliveira Capital, LLC
|
|
-
|
|
|
|
-
|
|
|
|
3,000,000
|
|
Net
cash provided by financing activities
|
|
(325,000 |
) |
|
|
(238,426 |
) |
|
|
68,155,986
|
|
Net
increase in cash and cash equivalent
|
|
(747,387 |
) |
|
|
561,646
|
|
|
|
422,035
|
|
Cash
and cash equivalent at the beginning of the period
|
|
1,169,422
|
|
|
|
2,210
|
|
|
|
-
|
|
Cash
and cash equivalent at the end of the period
|
$ |
422,035
|
|
|
$ |
563,856
|
|
|
$ |
422,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of deferred underwriters’ fees
|
|
-
|
|
|
|
-
|
|
|
$ |
1,769,400
|
|
Accrual
of deferred acquisition costs
|
$ |
40,000
|
|
|
|
-
|
|
|
$ |
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants in connection with Oliviera Debt
|
|
-
|
|
|
|
-
|
|
|
$ |
1,235,000
|
|
See
notes to unaudited condensed financial
statements.
INDIA
GLOBALIZATION CAPITAL, INC.
(a
development stage company)
NOTES
TO CONDENSED FINANCIAL STATEMENTS
NOTE
A — BASIS OF PRESENTATION
The
financial statements at June 30, 2007 and for the three months ended June
30, 2007 and 2006, and the period from April 29, 2005 (date of inception) to
June 30, 2007 are unaudited and include the accounts of India Globalization
Capital, Inc. (a corporation in the development stage) (the
“Company”).
In
the
opinion of management, all adjustments (consisting of normal accruals) have
been
made that are necessary to present fairly the financial position of the Company
as of June 30, 2007 and the results of its operation and cash flows for the
three months ended June 30, 2007 and 2006 and the period from April 29, 2005
(date of inception) to June 30, 2007. Operating results for the interim periods
presented are not necessarily indicative of the results to be expected for
a
full year.
The
statements and related notes have been prepared pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission applicable to interim
financial statements. Accordingly, certain information and footnotes disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations.
These
financial statements should be read in conjunction with the financial statements
that were included in the Company’s Annual Report on Form 10-KSB for the year
ended March 31, 2007. The March 31, 2007 balance sheet and the
statement of stockholders’ equity through March 31, 2007 has been derived from
these audited financial statements.
The
Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes”, an interpretation of FASB Statement No. 109 (“FIN 48”) on
April 1, 2007. FIN 48 clarifies the criteria for the recognition,
measurement, presentation and disclosure of uncertain tax positions. A tax
benefit from an uncertain position may be recognized only if it is “more likely
than not” that the position is sustainable based on its technical merits. FIN 48
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. In May
2007, the FASB issued Staff Position, FIN 48-1, “Definition of Settlement in
FASB Interpretation No. 48” (FSP FIN 48-1) which provides guidance on how
an enterprise should determine whether a tax position is effectively settled
for
the purpose of recognizing previously unrecognized tax
benefits. FSP FIN 48-1 was effective with the initial adoption
of FIN 48. The adoption of FIN 48 or FSP FIN 48-1 did not have a material
effect on the Company’s financial condition or results of
operations.
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.
NOTE
B — ORGANIZATION AND BUSINESS OPERATIONS
The
Company was incorporated in Maryland on April 29, 2005. The Company was formed
to serve as a vehicle for the acquisition of an operating business in an
unspecified industry located in India through a merger, capital stock exchange,
asset acquisition or other similar business combination. The Company has neither
engaged in any operations nor generated significant revenue to date. The Company
is considered to be in the development stage and is subject to the risks
associated with activities of development stage companies.
The
registration statement for the Company’s initial public offering (the “Public
Offering”) (as described in Note C) was declared effective March 2, 2006. The
Company consummated the Public Offering including the over allotment option
on
March 8, 2006, and preceding the consummation of the Public Offering on March
2,
2006 certain of the officers and directors of the Company purchased an aggregate
of 170,000 (the “Units”) units from the Company in a private placement (the
“Private Placement”). The Units sold in the Private Placement were identical to
the 11,304,500 Units sold in the Public Offering, but the purchasers in the
Private Placement have waived their rights to conversion and receipt of the
distribution on liquidation in the event the Company does not complete a
business combination (as described below). The Company received net proceeds
from the Private Placement and the Public Offering of approximately $62,815,000
(Note C).
The
Company’s management has broad discretion with respect to the specific
application of the net proceeds of the Private Placement and the Public Offering
(together, the “Offering”) although substantially all of the net proceeds of the
Offering are intended to be generally applied toward acquiring one or more
operating businesses in an unspecified industry located in India (“Business
Combination”), which may not constitute a business combination for accounting
purposes. Furthermore, there is no assurance that the Company will be able
to
successfully effect a Business Combination. Upon the closing of the Public
Offering, approximately ninety-seven percent (97%) of the gross proceeds of
the
Public Offering are being held in a trust account (“Trust Fund”) and invested in
government securities until the earlier of (i) the consummation of its first
Business Combination or (ii) the distribution of the Trust Fund as described
below. The remaining proceeds, along with interest earned on the Trust Fund,
may
be used to pay for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses. The Company,
after signing a definitive agreement for the acquisition of a target business,
will submit such transaction for stockholder approval. In the event that holders
of 50% or more of the shares of common stock issued in the Offering vote against
the Business Combination or the holders of 20% or more of the shares of common
stock issued in the Public Offering elect to exercise their conversion rights,
the Business Combination will not be consummated. However, the persons who
were
stockholders prior to the Public Offering (the “Founding Stockholders”) will not
participate in any liquidation distribution with respect to any shares of the
common stock acquired in connection with or following the Public Offering (Note
C).
In
the
event that the Company does not consummate a Business Combination within 18
months from the date of the consummation of the Public Offering, or 24 months
from the consummation of the Public Offering if certain extension criteria
have
been satisfied (the “Acquisition Period”), the proceeds held in the Trust Fund
will be distributed to the Company’s public stockholders, excluding the Founding
Stockholders to the extent of their initial stock holdings. In the event of
such
distribution, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Fund assets) will be
less
than the initial public offering price per share in the Public Offering
(assuming no value is attributed to the warrants contained in the Units offered
in the Public Offering discussed in Note C). There is no assurance that the
Company will be able to successfully effect a Business Combination during this
period. This factor raises substantial doubt about the Company’s ability to
continue as a going concern. The accompanying financial statements are prepared
assuming the Company will continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
In
the
event of such distribution, it is likely that the per share value of the
residual assets remaining available for distribution (including Trust Fund
assets) will be less than the initial public offering price per share in the
Public Offering (assuming no value is attributed to the warrants contained
in
the Units offered in the Public Offering discussed in Note C).
NOTE
C — INITIAL PUBLIC OFFERING
On
March
8, 2006, the Company sold 11,304,500 Units in the Public Offering. Each Unit
consists of one share of the Company’s common stock, $.0001 par value, and two
redeemable common stock purchase warrants (“Warrants”). Each Warrant entitles
the holder to purchase from the Company one share of common stock at an exercise
price of $5.00 commencing the later of the completion of a Business Combination
or one year from the effective date of the Public Offering and expiring five
years from the effective date of the Public Offering. The Warrants become
redeemable, at a price of $6.25 per Warrant, only in the event that the last
sale price of the common stock is at least $8.50 per share for any 20
trading-days within a 30 trading day period ending on the third day prior to
the
date on which notice of redemption is given.
In
connection with the Public Offering, the Company paid the underwriters in the
Public Offering (collectively, the “Underwriter”) an underwriting discount of
approximately 5% of the gross proceeds of the Public Offering ($3,391,350).
In
addition, a non-accountable expense allowance of 3% of the gross proceeds of
the
Public Offering, excluding the over-allotment option, is due to the Underwriter,
who has agreed to deposit the non-accountable expense allowance ($1,769,400)
into the Trust Fund until the earlier of the completion of a Business
Combination or the liquidation of the Trust Fund. The Underwriter has further
agreed to forfeit any rights to or claims against such proceeds unless the
Company successfully completes a Business Combination.
The
Warrants separated from the Units and began to trade on April 13, 2006. After
separation, each Warrant entitles the holder to purchase from the Company one
share of common stock at an exercise price of $5.00 commencing on the later
of
(a) one year from the effective date of the Public Offering or (b) the earlier
of the completion of a Business Combination with a target business or the
liquidation of the Trust Fund and expiring five years from the date of the
Public Offering. The Company has a right to redeem 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 the Company redeems
the Warrants, the holder will either have to exercise the Warrants by purchasing
the common stock from the Company for $5.00 or the Warrants will
expire.
The
Underwriter’s over-allotment option of 1,474,500 Units was exercised, and the
11,304,500 Units sold at the closing of the Public Offering include the
over-allotment.
In
connection with the Public Offering, the Company issued an option, for $100,
to
the Underwriter to purchase 500,000 Units at an exercise price of $7.50 per
Unit, exercisable the later of March 2, 2007 or the consummation of a Business
Combination. The Company has accounted for the fair value of the option,
inclusive of the receipt of the $100 cash payment, as an expense of the Public
Offering resulting in a charge directly to stockholders’ equity. The Company
estimated, using the Black-Scholes method, the fair value of the option granted
to the Underwriter as of the date of grant was approximately $756,200 using
the
following assumptions: (1) expected volatility of 30.1%, (2) risk-free interest
rate of 3.9% and (3) expected life of five years. The estimated volatility
was
based on a basket of Indian companies that trade in the United States or the
United Kingdom. The option may be exercised for cash or on a
“cashless” basis, at the holder’s option, such that the holder may use the
appreciated value of the option (the difference between the exercise prices
of
the option and the underlying Warrants and the market price of the Units and
underlying securities) to exercise the option without the payment of any cash.
The Warrants underlying such Units are exercisable at $6.25 per
share.
NOTE
D — INVESTMENTS HELD IN TRUST FUND
Investments
held in the Trust Fund consist of Treasury Bills and money market funds. The
Treasury Bills have been accounted for as trading securities and recorded at
their fair market value. The excess of market value over cost is included in
interest income in the accompanying statement of
operations. Investments held in the Trust Fund as of June
30 and March 31, 2007 include the following:
|
|
June
30, 2007
(Unaudited)
|
|
|
March
31, 2007(Audited)
|
|
Investment
held for the benefit of the Company
|
|
$ |
63,845,850
|
|
|
$ |
63,845,850
|
|
Investment
held for the benefit of the Underwriter
|
|
|
1,769,400
|
|
|
|
1,769,400
|
|
Investment
earnings (available to fund Company expenses up to a maximum of
$2,150,000, net of taxes)(1)
|
|
|
856,101
|
|
|
|
489,025
|
|
|
|
$ |
66,471,351
|
|
|
$ |
66,104,275
|
|
(1)
|
Through
March 31, 2007, the Company has transferred approximately $2,150,000
of
Investment Earnings from the Trust Fund into its operating
account.
|
NOTE
E — NOTES PAYABLE TO STOCKHOLDERS
The
founding shareholders (the “Founders”) made three unsecured loans to the Company
totaling $870,000 that came due on March 31, 2007. The notes all bore interest
at 4% per annum. On April 6, 2007, $100,000, of the $870,000 in loans was
repaid. One of the Founders made available a line of credit for $100,000 by
personally guaranteeing the line
Also
on
April 6, 2007, the loan of $720,000 made by one of the Founders was
partially repaid. The Company paid the founding stockholder $500,000 plus
some accrued interest, cancelled the note for $720,000 and issued the
Founder a new note for $220,000. The remaining $50,000 not yet paid will be
repaid. On May 8, 2007, the same Founder loaned the Company an additional
$275,000. We issued him a new note for $275,000.
The
rights under the two new notes are similar to those set out for the original
Founder’s notes. The new notes are payable on the earlier of March 31, 2008
or the consummation of a Business Combination. The notes bear interest at
8% per annum. Due to the short-term nature of the notes, the fair value of
the
notes approximates their carrying amount. Interest expense of approximately
$8,310 and $8,300 has been included in the statement of operations for the
three
months ended June 30, 2007 and 2006, respectively in connection with these
notes.
NOTE
F — RELATED PARTY TRANSACTION
The
Company has agreed to pay SJS Associates $5,000 a month until the consummation
of a Business Combination. SJS Associates is a privately held company
wholly owned by Mr. John Selvaraj, our Treasurer. The monthly fees are
paid for services rendered by John Selvaraj to the Company. From inception
to June 30, 2007, $30,000 was paid to SJS Associates for Mr. Selvaraj’s
services.
The
Company has agreed to pay Integrated Global Network, LLC (“IGN, LLC”), an
affiliate of our Chairman and Chief Executive Officer, Mr. Mukunda,, an
administrative fee of $4,000 per month for office space and general and
administrative services from the closing of the Public Offering through the
date
of a Business Combination. From inception to June 30, 2007, approximately
$60,000 was paid to IGN, LLC.
The
Company uses the services of Economic Law Practice (ELP), a law firm in
India. A member of our Board Directors is a Partner with
ELP. Since inception to June 30, 2007, the Company has incurred $118,810
for legal services provided by ELP.
NOTE
G — COMMITMENTS AND CONTINGENCY
In
connection with the Public Offering and pursuant to an advisory agreement,
the
Company has engaged the Underwriter as its investment bankers to provide the
Company with assistance in structuring the Business Combination. As compensation
for the foregoing services, the Company will pay the Underwriter a cash fee
at
the closing of a Business Combination equal to 2% of the aggregate consideration
paid in such Business Combination, up to a maximum of $1,500,000, and pay up
to
$25,000 of expenses. In addition, a fee of $90,000 will be paid to
Ferris, Baker for facilitating the loan to the Company by Oliveira Capital,
LLC,
at the closing of a Business Combination.
Pursuant
to letter agreements with the Company and the Underwriter, the Founders have
waived their rights to participate in any liquidation distribution occurring
upon our failure to complete a Business Combination, with respect to those
shares of common stock acquired by them prior to the Offering and with respect
to the shares of common stock included in the 170,000 Units they purchased
in
the Private Placement.
The
Founder will be entitled to registration rights with respect to their shares
of
common stock acquired prior to the Public Offering and the shares of common
stock they purchased in the Private Placement pursuant to an agreement executed
on March 3, 2006. The holders of the majority of these shares are entitled
to make up to two demands that the Company register these shares at any time
after the date on which the lock-up period expires. In addition, the Founders
have certain “piggy-back” registration rights on registration statements filed
subsequent to the anniversary of the effective date of the Public
Offering.
The
Company, from time to time, may enter into oral and or written understandings
with entities (and supporting professionals for conducting due diligence) who
potentially could refer or make introductions to potential target entities
in
various industry sectors in India and to conduct industry analysis or due
diligence on potential target companies. Such arrangements typically require
nominal amounts of retainer fees and expenses for services and success fees
based upon successful completion of acquisitions resulting from such referrals.
Fees for services and expenses incurred to date with such entities have been
expensed in the accompanying financial statements.
In
connection with our proposed acquisition of a majority interest in MBL
Infrastructures Limited (“MBL”), an unaffiliated third party has claimed that it
is entitled to a finder's fee of approximately five percent of the purchase
price (or, $1.75 million) for the acquisition if the acquisition is consummated.
While we do not admit that the unaffiliated third party is a finder that is
entitled to payment, we have expressed a willingness to pay our customary
Finder's fee of 0.25%. The parties are attempting to reach agreement on the
amount of the fee to be paid if the acquisition is consummated.
In
connection with our proposed acquisition of a wind energy farm from
Chiranjjeevi Wind Energy Limited ("CWEL"), we have agreed to pay a Finders
fee
of 0.25% of the purchase price to Master Aerospace Consultants (Pvt) Ltd, a
consulting firm located in India. The fee is contingent on the consummation
of the transaction.
NOTE
H – INVESTMENT ACTIVITIES
MBL
Infrastructure Limited Purchase Agreement
On
February 2, 2007, the Company entered into a Share Subscription Cum
Purchase Agreement (the “Purchase Agreement”) with MBL and R G Maheshwari , A K
Lakhotia, Maruti Maheshwari, Aditya Maheshwari, Uma Devi Lakhotia, Shweta
Maheshwari, Gokul Sales P Ltd and Jai Art N Image P Ltd (collectively,
the
“Promoters”), pursuant to which the Company will acquire 2,212,745 equity shares
of MBL (the “Promoter Shares”) from the Promoters and an additional 9,519,949
newly-issued equity shares directly from MBL (the “New Shares”) so that at the
conclusion of the transactions contemplated by the Purchase Agreement,
the
company will own 57% of the outstanding equity shares of MBL. MBL engages
in road-building and maintenance projects in India, as well as managing
road-building projects on a contract basis for national, state and local
agencies.
The
Acquisition is expected to be consummated during the fall of 2007, after
the
required approval by the Company’s stockholders and the fulfillment of certain
other conditions.
On
February 5, 2007 the Company entered into an agreement to sell 425,000
warrants, described in Note I, and a note for $3,000,000 to Oliveira Capital,
LLC for $3,000,000. The note carries an interest of 8% and is due upon
the
earlier of February 5, 2008, or the consummation of a Business Combination.
Pursuant to the receipt of the $3,000,000 from Oliveira Capital, the Company
on
February 6, 2007 purchased $3,000,000 of convertible debentures from MBL.
The debentures carry an interest of 8% and is secured by 1,131,356 shares
of MBL common stock and is carried at cost. The note from Oliveira Capital,
LLC is secured by the convertible debentures issued to MBL.
On
February 6, 2007 the Company entered into a non-binding agreement in
principle with CWEL for the acquisition of 24 MW in wind energy assets
which includes the acquisition of land, all licenses, environmental clearances,
and equipment (the “CWEL Acquisition”). The Company has formed a wholly
owned subsidiary based in Mauritius. The name of the subsidiary is India
Globalization Capital, Mauritius, Limited (IGC-M Ltd.).
On
April
25, 2007, the Company entered into the First Amendment to the Share Subscription
Cum Purchase Agreement (the “First Amendment to Purchase Agreement” or “SSPA”)
with MBL and the Promoters.
Pursuant
to the First Amendment to Purchase Agreement, the conditions precedent
to the
Company’s consummation of the transactions contemplated by the SSPA were amended
to provide that: (i) MBL’s audited financial statements converted to US GAAP for
the periods ended March 31, 2006, March 31, 2005 and March 31, 2004 and
unaudited financial statements converted to US GAAP for the period commencing
April 1, 2006 and ending December 31, 2006 (collectively, the “Required
Financial Statements”) previously required to be delivered under the SSPA be
delivered to the Company by May 15, 2007 and (ii) MBL and the Promoters
deliver
audited financial statements converted to US GAAP for the period ended
March 31,
2007 by June 30, 2007. In addition, Clause 5.3 of the SSPA was amended
to extend
the deadline for the completion of the Company’s acquisition of MBL shares from
September 30, 2007 to November 30, 2007.
On
April
25, 2007, concurrently with the execution of the First Amendment to the
Purchase
Agreement, the Company entered into the First Amendment to the Debenture
Subscription Agreement (the “First Amendment to Debenture Agreement”) with MBL
and the Promoters.
Pursuant
to the First Amendment to the Debenture Agreement, Clause 14 of the Debenture
Subscription Agreement dated February 2nd, 2007
was amended
to extend the deadline by which time IGC must either obtain the requisite
shareholder approvals for the acquisition of MBL shares under the SSPA
or
purchase an additional USD $3,000,000 in MBL Convertible Debentures from
April
30, 2007 to 45 days after receiving the Required Financial
Statements.
Contract
Agreement Between IGC, CWEL, AMTL and MAIL
On
April
29, 2007, the Company entered into a Contract Agreement Dated April 29,
2007
(“CWEL Purchase Agreement”) with Chiranjjeevi Wind Energy Limited,
(CWEL), Arul Mariamman Textiles Limited (AMTL), and Marudhavel
Industries Limited (MAIL), collectively CWEL. Pursuant to the CWEL Purchase
Agreement, the Company will acquire 100% of a 24-mega watt wind energy
farm,
consisting of 96 250-kilowatt wind turbines, located in Karnataka, India
to be
manufactured by CWEL.
CWEL
is a
manufacturer and supplier of wind operated electricity generators, towers
and
turnkey implementers of wind energy farms.
On
May
22, 2007, the Company made a down payment of approximately $250,000 to
CWEL. The
Acquisition is expected to be consummated during the fall of 2007, after
the
required approval by the Company’s stockholders and the fulfillment of certain
other conditions. If IGC does not consumate the transaction with CWEL by
September 30, 2007, $187,500 will be returned to IGC.
We
have
incurred $211,072 through June 30, 2007 in connection with our two acquisitions
which is included as deferred acquisition costs in the accompanying balance
sheet.
NOTE
I – VALUATION OF WARRANTS ISSUED TO OLIVEIRA CAPITAL, LLC
The
Company sold a promissory note and 425,000 warrants to Oliveira Capital,
LLC for
$3,000,000. Each warrant will entitle the holder to purchase from the
Company one share of common stock at an exercise price of $5.00 commencing
on
the earlier of the completion of a Business Combination with a target business
or the distribution of the Trust Fund and expiring five years from the
date of
issuance. The warrants have an exercise price of $5.00. The Company
has determined, based upon a Black-Scholes model, that the fair value of
the
warrants on the date of issuance would approximately be $ 1,235,000 using
an
expected life of five years, volatility of 46% and a risk-free interest
rate of
4.8%. This amount is accounted for as a discount of the notes payable to
Oliveira Capital, LLC. The amortization of this amount for the three months
ended June 30, 2007 was $386,850.
We
computed volatility for a period of five years. For approximately the first
four years we used the trading history of two representative companies
that are
listed on the Indian Stock exchange. For approximately one year the trading
history of the Company’s common stock was used. The average volatility of the
combined data extending over five years was calculated as 46%. Management
believes that this volatility is a reasonable benchmark to use in estimating
the
value of the warrants.
ITEM
2.
MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATIONS
Forward-Looking
Statements
This
report contains forward-looking statements, including, among others, (a) our
expectations about possible business combinations, (b) our growth strategies,
(c) our future financing plans, and (d) our anticipated needs for working
capital. Forward-looking statements, which involve assumptions and describe
our
future plans, strategies, and expectations, are generally identifiable by use
of
the words “may,” “should,” “expect,” “anticipate,” “approximate,” “estimate,”
“believe,” “intend,” “plan,” or “project,” or the negative of these words or
other variations on these words or comparable terminology. This information
may
involve known and unknown risks, uncertainties, and other factors that may
cause
our actual results, performance, or achievements to be materially different
from
the future results, performance, or achievements expressed or implied by any
forward-looking statements. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under our
“Plan of Operation” and matters described in this report generally. In light of
these risks and uncertainties, the events anticipated in the forward-looking
statements may or may not occur. These statements are based on current
expectations and speak only as of the date of such statements. We undertake
no
obligation to publicly update or revise any forward-looking statement, whether
as a result of future events, new information or otherwise.
The
information contained in this report identifies important factors that could
adversely affect actual results and performance. All forward-looking statements
attributable to us are expressly qualified in their entirety by the foregoing
cautionary statements.
Description
of Business
We
were
formed on April 29, 2005, as a blank check company for the purpose of acquiring,
through a merger, capital stock exchange, asset acquisition or other similar
business combination, one or more businesses in an unspecified industry, with
operations primarily in India. We intend to use cash derived from the proceeds
of our initial Public Offering, our capital stock, debt or a combination of
cash, capital stock or debt, to effect a business combination.
For
the
three months ended June 30, 2007, we had net income of $36,283, derived
primarily from interest income related to the cash held in our trust account,
net of legal, interest expense, formation, travel, and other start-up costs.
For
the period from April 29, 2005 (inception) through June 30, 2007, we had net
income of $1,110,440, derived primarily from interest income related to the
cash
held in our trust account, net of legal, interest expense, formation, travel,
other and start-up costs and compensation expense.
For
the
three months ended June 30, 2006, we had net income of $432,388, derived
primarily from interest income related to the cash held in our Trust Account,
net of formation and other start-up costs.
Plan
of Operation
To
date,
we have entered into two definitive agreements relating to Business Combinations
as described in our current reports on Form 8-K filed on February 12, 2007
and
on May 2, 2007. As described in the referenced Form 8-Ks, we have
identified the road building sector and the alternative energy sector.
Currently, we are conducting due diligence and audits in accordance with U.S.
generally accepted accounting principles on the companies that we propose to
acquire. We have completed the audited financial statements for MBL’s
fiscal years ended March 31, 2004, 2005 and 2006. We expect to file a proxy
statement to solicit stockholder approval to the proposed acquisitions as soon
as the audit of MBL’s financial statements for the fiscal year ended March 31,
2007 is completed.
We
currently are not engaged in any business operations, and we do not expect
to
engage in, any substantive commercial business until the consummation of the
proposed transactions described in our Form 8-K referenced
above. We expect these transactions to close in the fourth
quarter. Currently, our business activities consist solely of
pursuing businesses with operations primarily in India in order to consummate
a
business combination. Our management is actively conducting due diligence on
our
two target companies and we anticipate that this will continue to be our only
business activity until the consummation of a business combination. We also
continue to review a number of other prospective target businesses.
The
net
proceeds from the sale of the Units in our initial public offering, our private
placement to officers and directors, loans from our founders and the deferred
offering costs were $63,845,850, after deducting offering expenses and
underwriting discounts. This amount is held in trust for the benefit
of investors in our public offering (the “Trust Account”). Additionally,
$1,769,400 of the proceeds attributable to the underwriters’ non-accountable
expense allowance has been deposited in the Trust Account.
We
do not
believe we will need additional financing to supplement the proceeds of our
initial public offering, our private placement to officers and directors and
loans from our founders in order to meet the expenditures required for operating
our business. Interest earned on the Trust Account up to a maximum of
$2,150,000, may be used to pay for business, legal and accounting due diligence
on prospective acquisitions and continuing general and administrative expenses
incurred by the Company prior to consummation of a business combination. As
of
December 31, 2006, the maximum amount of $2,150,000 was transferred into our
operating account. We anticipate that the funds available to us outside of
the
Trust Account will be sufficient to sustain our business activities for
approximately 24 months, assuming that a Business Combination is not
consummated during that time. However, we may need to obtain additional
financing to the extent such financing is required to consummate a Business
Combination, in which case we may issue additional securities or incur debt
in
connection with such a Business Combination.
To
fund
our purchase of a debenture in MBL, on February 5, 2007 we entered into a
Note and Warrant Purchase Agreement dated as of February 5, 2007 (the
“Warrant Agreement”) with Oliveira Capital, LLC (“Oliveira”) pursuant to which
we sold Oliveira a Promissory Note (“Note”) in the principal amount of
$3,000,000 and a warrant (the “Warrant”) to purchase up to 425,000 shares of our
common stock (the “Warrant Shares”) at an initial exercise price of $5.00 per
share. The Note bears interest at a rate of 8% per annum and is due
and payable in full upon the earlier of February 5, 2008 and the date on
which we consummate a Business Combination. The Note is secured by the
Debentures pursuant to a Pledge Agreement. The Warrant is exercisable during
the
period commencing on the consummation of a Business Combination and ending
on
March 2, 2011.
The
proceeds held in the Trust Account are invested in government securities
(Treasury Bills and money market funds) until the earlier of (i) the
consummation of our first business combination or (ii) the distribution of
the
trust account. In the event that the Company does not consummate a business
combination within 18 months from the date of the consummation of the public
offering (March 8, 2006), or 24 months from the consummation of the public
offering if certain extension criteria have been satisfied (see “Plan of
Operations - Timing of Business Combination”
below), we will be forced to liquidate and the
proceeds held in the trust
account will be distributed to the Company’s public stockholders. However, our
founding shareholders (shareholders prior to our public offering) will not
participate in any liquidation distribution with respect to any shares of our
common stock acquired in connection with or following the public offering.
If we
are forced to liquidate, the per-share liquidation may be less than the price
at
which public stockholders purchased their shares because of the expenses related
to our initial public offering, our general and administrative expenses and
the
anticipated costs of seeking a business combination. Additionally, if third
parties make claims against us, the offering proceeds held in the trust account
could be subject to those claims, resulting in a further reduction to the
per-share liquidation price.
Sources
of target businesses
Since
our
public offering, we have been actively engaged in sourcing a suitable business
combination candidate. As described above, we have two pending
transactions that we will seek to consummate in coming months, subject to
shareholder approval and other conditions.
We
have
relied on and continue to rely on finding candidates through three possible
sources: (1) the professional community, including, without limitation,
investment bankers, attorneys and accountants; (2) quasi-governmental
associations such as the International Finance Corporation, which is a member
of
the World Bank; and (3) the industries subject to deregulation by the
Indian government. In addition, we have located acquisition
candidates through other unaffiliated sources, including private equity and
venture capital funds and public and private companies. Our officers,
directors and special advisors and their affiliates have also brought
acquisition candidates to our attention. In addition to contacting
the sources described above for potential acquisition candidates, we have been
contacted by unsolicited parties who become aware of our interest in prospective
targets through press releases, word of mouth, media coverage and our
website. We have offered to pay a one-time Finder’s Fee of .25%, of
the value of our investment to any unaffiliated party that makes an
introduction, or provides information about prospective targets to
us. All such fees have been conditioned on our consummating a
business combination with the identified target. In this regard, in
connection with our proposed acquisition of a majority interest in MBL
Infrastructures Limited, an unaffiliated third party has claimed that it is
entitled to a Finder’s Fee of approximately five percent of the purchase price
(or, $1.75 million) for the acquisition if the acquisition is consummated.
While
we do not admit that the unaffiliated third party is a finder that is entitled
to payment, we have expressed a willingness to pay our customary Finder's Fee
of
0.25%. The parties are attempting to reach agreement on the amount of the fee
to
be paid if the acquisition is consummated.
We
have
entered into a financial advisory agreement with Ferris, Baker Watts, Inc.,
the
representative of the underwriters in our public offering, and SG Americas
Securities, LLC, one of the participating underwriters in the public offering,
whereby Ferris, Baker Watts, Inc. and SG Americas Securities, LLC will serve
as
our financial advisors in connection with a business combination for a period
of
two years from the effective date of the public offering, March 2, 2006.
Ferris, Baker Watts, Inc. and SG Americas Securities, LLC will perform certain
advisory services for us, including without limitation, assisting us in
determining an appropriate acquisition strategy and tactics, evaluating the
consideration that may be offered to a target business, assisting us in the
negotiation of the financial terms and conditions of a business combination
and
preparing a due diligence package regarding a business combination for our
board
of directors. The due diligence services that have been provided, and continue
to be provided, by Ferris, Baker Watts, Inc. and SG Americas Securities, LLC
consist of gathering, preparing and organizing information to be considered
by
our board of directors, among other things. Pursuant to the terms of
this agreement, Ferris, Baker Watts, Inc., will be entitled to receive two
percent of the consideration associated with any business combination by us,
a
portion of which shall be allocated to SG Americas Securities, LLC pursuant
to a
separate agreement between the parties. The fee will be capped at $1,500,000
and
will be paid out of the trust proceeds only upon consummation of a suitable
business combination. In addition to the foregoing fee, we have agreed to
reimburse Ferris, Baker Watts, Inc. and SG Americas Securities, LLC, for all
of
the reasonable out-of-pocket expenses incurred by it, whether or not a business
combination is consummated; provided, however, that such expenses in the
aggregate will not exceed $25,000 without our prior consent.
Other
than our advisory agreement with Ferris, Baker Watts, Inc. and SG Americas
Securities, LLC, we have also engaged the services of several professional
firms
that specialize in due diligence, USGAAP audits, legal audits, and other
services that could help us in determining valuation and other
criteria. In addition on or around November 27, 2006, we engaged the
firm of SJS Associates, which provides the services of Mr. John Selvaraj an
individual with extensive experience in US GAAP, Indian GAAP and SEC
reporting. Mr. Selvaraj was also appointed as our Treasurer on
November 27, 2006, following the resignation of Mr. Cherin. SJS Associates
is a
company held by Mr. Selvaraj. Following a search for legal
firms in India that had U.S. and Indian trained attorneys that could represent
us, the Board appointed Economic Laws Practice (ELP), a legal firm located
in
India, with six partners and over fifty professionals. Mr. Suhail
Nathani, one of our board directors, is a Partner with ELP.
We
have
not and do not anticipate paying any of our existing officers, directors,
founding stockholders or any entity with which they are affiliated, any Finder’s
Fee or similar compensation for services rendered to us prior to or in
connection with the consummation of a business combination.
Evaluation
of target businesses
In
evaluating prospective target businesses, our management will likely consider,
among other factors, the following:
•
|
financial
condition, results of operation and repatriation
regulations;
|
•
|
growth
potential both in India and growth potential outside of
India;
|
•
|
experience
and skill of management and availability of additional
personnel;
|
•
|
barriers
to entry into the businesses’
industries;
|
•
|
potential
for compliance with generally accepted accounting principles (GAAP),
SEC
regulations, Sarbanes-Oxley requirements and capital
requirements;
|
•
|
domestic
and global competitive position and potential to compete in the U.S.
and
other markets;
|
•
|
position
within a sector and barriers to
entry;
|
•
|
stage
of development of the products, processes or
services;
|
•
|
degree
of current or potential market acceptance of the products, processes
or
services;
|
•
|
proprietary
features and degree of intellectual property or other protection
of the
products, processes or services;
|
•
|
regulatory
environment of the industry and the Indian government’s policy towards the
sector; and
|
•
|
costs
associated with effecting the business
combination.
|
The
above
criteria are not intended to be exhaustive. In addition, our initial business
combination must be with one or more operating businesses that, collectively,
have a fair market value of at least 80% of our net assets (excluding any
fees
and expenses held in the trust account for the benefit of Ferris, Baker Watts,
Inc.) at the time of the acquisition. Any evaluation relating to the merits
of a
particular business combination with one or more operating businesses will
be
based, to the extent relevant, on the above factors as well as other
considerations deemed relevant by our management in carrying out a business
combination consistent with our business objective. In evaluating prospective
target businesses, we intend to conduct an extensive due diligence review
that
will encompass, among other things, meetings with incumbent management and
inspection of facilities, as well as review of financial and other information
that will be made available to us. Although our management intends to evaluate
the risks inherent in a particular target business, we may not be able to
properly ascertain or assess all significant risk factors.
After
signing a definitive agreement for the acquisition of a target business, we
will
submit such transaction for stockholder approval. We may consummate our initial
business combination if (i) it is approved by a majority of the shares of common
stock voted by the public stockholders, and (ii) public stockholders owning
less
than 20% of the shares purchased by the public stockholders in the initial
public offering exercise their conversion rights. In connection with the vote
required for our initial business combination, all of our existing stockholders,
including all of our officers, directors, and our special advisors, have agreed
to vote the shares of common stock owned by them in accordance with the majority
of the shares of common stock voted by the public stockholders.
Timing
of business combination
Pursuant
to the terms of our public offering, we must complete a business combination
within 18 months after the consummation of the public offering (March 8, 2006),
or 24 months if the extension criteria described below have been satisfied.
If
we do not complete the business combination, then we will dissolve the Company
and distribute to all of our public stockholders, in proportion to their
respective equity interests, an aggregate sum equal to the amount in the trust
account, inclusive of any interest, plus any remaining net assets. We will
have
an extension period of six months for a total of 24 months from the consummation
of the public offering in which to complete the business combination, if we
enter into a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to the expiration of 18
months after the consummation of the public offering, but are unable to complete
the business combination within the 18-month period. If we are unable to do
so
by the expiration of the 24-month period from the consummation of the public
offering, we will then begin the dissolution and liquidation procedures
described above. The trustee of the trust account will immediately commence
liquidating the investments constituting the trust account and will turn over
the proceeds to our public stockholders.
Employees
We
currently have two executive officers, one of whom is a member of our
board of directors, as well as five special advisors. We also utilize the
services of advisors, consultants and legal and tax professionals, among others,
to assist in evaluating potential target industries and companies, among other
tasks. We expect to add employees to handle the additional work load brought
on
by the MBL and CWEL transactions.
Mr.
Ram
Mukunda, our President and Chief Executive Officer is dedicated full time to
conducting due diligence on the target companies that we have
identified. Our Chairman, Dr. Ranga Krishna and our Treasurer, Mr.
Selvaraj, are dedicated part time in helping with the due diligence on the
target companies. Following a business combination, or an agreement
for a business combination we may recruit additional managers to supplement
the
incumbent management of the target business or businesses, and we expect to
hire
full-time employees as well.
Off
Balance Sheet Arrangements
Options
and warrants issued in conjunction with our initial public offering are equity
linked derivatives; accordingly, they represent off balance sheet arrangements.
The options and warrants meet the scope exception in paragraph 11(a) of FAS
133
and are accordingly not accounted for as derivatives for purposes of FAS 133,
but instead are accounted for as equity. See the Notes to the March 31, 2007
financial statements for a discussion of outstanding options and
warrants.
Quantitative
and Qualitative Disclosures About Market Risk
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. We are not presently engaged in and, if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the trust
account, we may not engage in, any substantive commercial business. Accordingly,
we are not and, until such time as we consummate or, to the extent, that the
acquisition price for a business combination may be denominated in a foreign
currency, enter into an agreement to consummate, a business combination, we
will
not be exposed to risks associated with foreign exchange rates, commodity
prices, equity prices or other market-driven rates or prices. The net proceeds
of our initial public offering held in the trust account have been invested
only
government securities, such as Treasury Bills and money market funds, meeting
conditions of the Investment Company Act of 1940. Given our limited risk in
our
exposure to money market funds, we do not view the interest rate risk to be
significant.
Item
4.
Controls and Procedures
Disclosure
controls and procedures are controls and other procedures that are designed
to
ensure that information required to be disclosed in company reports filed or
submitted under Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and
forms. Disclosure controls and procedures include without limitation,
controls and procedures designed to ensure the information required to be
disclosed in company reports filed or submitted under the Exchange Act is
accumulated and communicated to management, including our chief executive
officer and treasurer, as appropriate to allow timely decisions regarding
disclosure.
Our
management, including our President and Chief Executive Officer, Ram Mukunda,
along with our Treasurer, John C. Selvaraj, have reviewed and evaluated the
effectiveness of our disclosure controls and procedures as of June 30,
2007. Based upon this review and evaluation, these officers believe
that our disclosure controls and procedures were effective as of that
date.
Our
management, consisting of our President and Chief Executive Officer and our
Treasurer, have reviewed and evaluated any changes in our internal control
over
financial reporting that occurred as of June 30, 2007 and there has been no
change that has materially affected or is reasonably likely to materially affect
our internal control over financial reporting.
PART
II. OTHER INFORMATION
None.
Item
1A. Risk Factors
There
have been no material changes from the factors discussed in Part I, Item 1A,
Risk Factors in our Annual Report on Form 10-KSB for the year ended March 31,
2007. In addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I, Item 1A. Risk Factors in
our
Annual Report which could materially affect our business, financial condition
or
future results. The risks described in our Annual Report are not the only risks
facing us. Additional risks and uncertainties not currently known to us or
that
we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.]
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Unregistered
Sales of Equity Securities
On
May 5,
2005, we issued 1,750,000 shares of common stock for an aggregate consideration
of $17,500 in cash, at an average purchase price of approximately $.01 per
share, as follows:
Name
|
|
Number
of Shares(1)
|
|
Relationship
to
Us
|
Dr.
Ranga Krishna
|
|
|
250,000
|
|
Chairman
of the Board
|
Ram
Mukunda
|
|
|
1,250,000
|
|
Chief
Executive Officer, President and Director
|
John
Cherin
|
|
|
250,000
|
|
Former
Chief Financial Officer, Treasurer and
Director
|
On
June
20, 2005, we issued 750,000 shares of common stock for an aggregate
consideration of $7,500 in cash, at a purchase price of approximately $.01
per
share, as follows:
Name
|
|
Number
of Shares(1)(2)(3)
|
|
Relationship
to Us
|
Parveen
Mukunda
|
|
|
425,000
|
|
Chief
Executive Officer’s spouse
|
Sudhakar
Shenoy
|
|
|
37,500
|
|
Director
|
Suhail
Nathani
|
|
|
37,500
|
|
Director
|
Shakti
Sinha
|
|
|
12,500
|
|
Special
Advisor
|
Dr.
Prabuddha Ganguli
|
|
|
12,500
|
|
Special
Advisor
|
Dr.
Anil K. Gupta
|
|
|
25,000
|
|
Special
Advisor
|
____________
(1)
|
The
share numbers and per share purchase prices in this section reflect
the
effects of a 1-for-2 reverse split effected September 29,
2005.
|
(2)
|
Representing
shares issued to our officers, directors and Special Advisors in
consideration of services rendered or to be rendered to
us.
|
(3)
|
200,000
of the 750,000 shares issued on June 20, 2005 were issued to former
shareholders. On September 7, 2005 one former shareholder surrendered
to
the Company 62,500 shares, and on February 5, 2006 another former
shareholder surrendered to the Company 137,500 shares. These 200,000
shares were reissued as set forth
below.
|
On
February 5, 2006, we reissued the 200,000 shares of common stock for an
aggregate consideration of $2,000 in cash at a price of approximately $.01
per
share as follows:
Name
|
|
Number
of Shares
|
|
Relationship
to
Us
|
Dr.
Ranga Krishna
|
|
|
100,000
|
|
Chairman
of the Board
|
John
Cherin
|
|
|
37,500
|
|
Former
Chief Financial Officer, Treasurer and Director
|
Larry
Pressler
|
|
|
25,000
|
|
Special
Advisor
|
P.G.
Kakodkar
|
|
|
12,500
|
|
Special
Advisor
|
Sudhakar
Shenoy
|
|
|
12,500
|
|
Director
|
Suhail
Nathani
|
|
|
12,500
|
|
Director
|
The
private placement offerings described above were not registered in reliance
upon
an exemption from registration under Section 4(2) of the Securities Act of
1933
and Rule 506 of Regulation D. Registration was not required because
the shares were sold to officers and directors of the issuer, who qualify as
“accredited investors,” as defined in Rule 501(a) of Regulation D, as well as
other persons who qualify as accredited investors.
A
majority of the holders of these shares are entitled to make up to two demands
that we register these shares pursuant to an agreement between these
shareholders and the Company. 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. After the Company receives the demand for
registration, it will notify the other holders of these shares of their ability
to include their shares in the registration. In addition, these stockholders
have certain “piggy-back” registration rights on registration statements filed
subsequent to such date. Piggy-back registration rights allow these shareholders
to include their shares in a registered offering proposed by the Company. The
Company will bear the expenses incurred in connection with the filing of any
such registration statements.
These
stockholders agreed to waive their rights to participate in any liquidation
distribution occurring upon our failure to consummate a business combination,
but only with respect to those shares of common stock acquired by them prior
to
the public offering and the 170,000 shares included in the units they purchased
in the private placement. Therefore, they will participate in any liquidation
distribution with respect to any shares of common stock acquired in connection
with or following the public offering. In addition, in connection with the
vote
required for our initial business combination, all of our existing stockholders,
including all of our officers, directors and special advisors, have agreed
to
vote all of the shares of common stock owned by them, including those acquired
in the private placement or during or after the public offering, in accordance
with the majority of the shares of common stock voted by the public
stockholders.
In
addition to the foregoing private placement offerings, Ram Mukunda, John Cherin
and Dr. Ranga Krishna purchased in the aggregate 170,000 units in the
above-mentioned private placement offering immediately prior to the public
offering, at a price equal to the price of the public offering, $6.00 per unit.
This private placement offering was not registered in reliance upon an exemption
from registration under Section 4(2) of the Securities Act of 1933 and Rule
506
of Regulation D. Registration was not required because the shares were sold
to
officers and directors of the issuer, who qualify as “accredited investors”, as
defined in Rule 501(a) of Regulation D. As mentioned above, these stockholders
agreed to waive their respective rights to participate in any liquidation
distribution occurring upon our failure to consummate a business combination
with respect to the shares purchased in this private placement
offering.
The
units
purchased by the founding stockholders were identical to the units issued in
the
initial public offering, consisting of one share of common stock and two
warrants. Each warrant entitles the holder to purchase one share of common
stock
at an exercise price of $5.00 commencing the later of the completion of a
business combination or March 2, 2007 (one year from the effective date of
the
public offering), and expiring March 2, 2011 (five years from the effective
date
of the public offering). 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 June 30, 2007,
24,874,000 shares of common stock were reserved for issuance upon exercise
of
redeemable warrants, the Oliveira warrants and the underwriters’ purchase
option.
Registered
Offering Use of Proceeds
The
registration statement for the Company’s initial public offering was declared
effective March 2, 2006. On March 8, 2006, the Company sold 11,304,500 units
(“Units”) in the Public Offering, including the over-allotment option of
1,474,500 Units exercised by the underwriters of the public offering. Each
Unit
consists of one share of the Company’s common stock, $.0001 par value, and two
redeemable common stock purchase warrants.
The
following is a breakdown of Units registered and the Units sold in that
offering:
Amount
Registered*
|
|
Aggregate
price of the
amount
registered
|
|
|
Amount
Sold
|
|
|
Aggregate
price of the
amount
sold to date
|
|
11,304,500
Units
|
|
$ |
67,827,000
|
|
|
|
11,304,500
|
|
|
$ |
67,827,000
|
|
____________
*
|
Includes
the over-allotment option of 1,474,500 Units exercised by the underwriters
of the public offering
|
After
deducting offering expenses of approximately $871,800 and underwriting discounts
of approximately $5,160,750, approximately $61,794,450 of the aggregate proceeds
from the public offering were deposited into the Trust Account at SunTrust
Bank
maintained by Continental Stock Transfer & Trust Company acting as trustee.
Additionally, $1,769,400 of the proceeds attributable to the underwriters’
non-accountable expense allowance has been deposited in the Trust Account.
The
net proceeds from the 170,000 Units that were purchased in a private placement
immediately prior to the public offering by our officers and directors were
placed in the Trust Account, which they have agreed to forfeit if a business
combination is not consummated. In addition, the proceeds from the loans from
our founders in the aggregate amount of $870,000 were placed in the Trust
Account. The loans will be repaid from the interest accrued on the amount in
escrow, but will not be repaid from the principal in escrow.
As
of
March 31, 2007, the maximum amount of interest earned on the Trust Account
of
$2,150,000 was transferred to the Company’s operating account to pay for
business, legal and accounting due diligence on prospective acquisitions and
general and administrative expenses incurred by the Company prior to
consummation of a business combination.
Item
3.
Defaults Upon Senior Securities
None.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
There
have been no material changes to the rights of our security holders during
the
period covered by this quarterly report.
Item
6. Exhibits
The
following exhibits are included in this report:
31.1
|
Certificate
Pursuant to 17 CFR 240.13a-14(a).
|
31.2
|
Certificate
Pursuant to 17 CFR 240.13a-14(a).
|
32.1
|
Certificate
Pursuant to 18 U.S.C. § 1350.
|
32.2
|
Certificate
Pursuant to 18 U.S.C. § 1350.
|
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
INDIA
GLOBALIZATION CAPITAL, INC. |
|
|
|
|
|
August
20,
2007
|
By:
|
/s/ Ram
Mukunda
|
|
|
|
Ram
Mukunda |
|
|
|
Chief
Executive Officer, President and Director (Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ John
B.
Selvaraj
|
|
|
|
John
B. Selvaraj
|
|
|
|
Treasurer
|
|
|
|
(Principal
Financial and Accounting Officer) |
|