indiaglobal-s12a102508.htm
As
filed with the Securities and Exchange Commission on October 29,
2008
Registration
No. 333-124942
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 2 ON FORM S-1
TO
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
INDIA
GLOBALIZATION CAPITAL, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Maryland
|
|
1600
|
|
20-2760393
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer
Identification
Number)
|
4336
Montgomery Ave.
Bethesda, Maryland
20814
(301) 983-0998
(Address,
Including Zip Code, and Telephone Number,
Including
Area Code, of Registrant’s Principal Executive Offices)
Ram
Mukunda
Chief
Executive Officer and President
India
Globalization Capital, Inc.
4336
Montgomery Ave.
Bethesda,
Maryland, 20814
(301) 983-0998
(Name,
Address, Including Zip Code, and Telephone Number,
Including
Area Code, of Agent for Service)
Copies
to:
Michael
E. Blount, Esq.
Stanley
S. Jutkowitz, Esq.
Seyfarth
Shaw LLP
131
S. Dearborn Street, Suite 2400
Chicago,
Illinois 60603-5803
Telephone:
(312) 460-5000
Facsimile:
(312) 460-7000
|
|
Arthur
S. Marcus, Esq.
Peter
J. Gennuso, Esq.
Kristin
J. Angelino, Esq.
Gersten
Savage LLP
600
Lexington Avenue
New
York, New York 10022
Telephone:
(212) 752-9700
Facsimile:
(212) 980-5192
|
Approximate date of commencement of
proposed sale to public: As soon as practicable after this
registration statement becomes effective.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box: þ
If this
form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: o
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o (Do not
check if a smaller reporting company)
|
Smaller
reporting company þ
|
CALCULATION
OF REGISTRATION FEE
|
|
|
|
|
Proposed
Maximum
|
|
|
Proposed
Maximum
|
|
|
|
|
Title
of Each Class of
|
|
Amount
to be
|
|
|
Offering
Price
|
|
|
Aggregate
Offering
|
|
|
Amount
of
|
|
Securities
to be Registered
|
|
Registered
|
|
|
per
Security
|
|
|
Price
|
|
|
Registration
Fee
|
|
Common
Stock, $0.0001 par value per share
|
|
|
3,634,953
|
|
|
$
|
2.99
|
(1)
|
|
$
|
10,270,509.47
|
(1)
|
|
$
|
403.63
|
|
Warrants
to purchase Common Stock (“Private Warrants”)
|
|
|
1,190,000
|
|
|
$
|
0.24
|
(2)
|
|
$
|
285,600
|
(2)
|
|
$
|
11.22
|
|
Shares
of Common Stock underlying Private Warrants
|
|
|
1,190,000
|
|
|
$
|
5.00
|
|
|
$
|
5,950,000
|
|
|
$
|
233.84
|
|
Representative’s
Purchase Option (“Option”)
|
|
|
1
|
|
|
$
|
100
|
|
|
$
|
100
|
|
|
|
(3
|
)
|
Units
underlying the Representative’s Option (4)
|
|
|
500,000
|
|
|
$
|
7.50
|
|
|
$
|
3,750,000
|
|
|
$
|
148.36
|
(5)
|
Shares
of Common Stock included as part of the Representative’s
Units(4)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
Warrants
included as part of the Representative’s Units(4)
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
Shares
of Common Stock underlying Warrants included in the Representative’s
Units(4)
|
|
|
1,000,000
|
|
|
$
|
6.25
|
|
|
$
|
6,250,000
|
|
|
$
|
245.63
|
(5)
|
Warrants
included as part of the Units issued by the registrant in its initial
public offering (“Public Warrants”)
|
|
|
22,609,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
Shares
of Common Stock underlying Public Warrants
|
|
|
22,609,000
|
|
|
$
|
5.00
|
|
|
$
|
113,045,000
|
|
|
$
|
4,442.67
|
(5)
|
Total
Fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,484.36
|
|
Previously Paid (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,835.67
|
|
Total
Due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
648.69
|
|
(1)
|
In
accordance with Rule 457(c) under the Securities Act of 1933, the
price for common stock is estimated solely for the purposes of
calculating the registration fee and is the average of the reported high
and low sale prices of the common stock as reported on October 27,
2008.
|
(2)
|
In
accordance with Rule 457(c) under the Securities Act of 1933, the
price is estimated solely for the purposes of calculating the registration
fee and is the average of the reported high and low sale prices of the
warrants to purchase common stock as reported on October 27,
2008.
|
(3)
|
No
fee required pursuant to Rule 457(g).
|
(4)
|
Pursuant
to Rule 416, there are also registered such indeterminable additional
securities as may be issued as a result of the anti-dilution provisions
contained in the Warrants or the Option.
|
(5)
|
The
registrant previously paid $46,884.61 in registration fees on May 13,
2005. The fee included the registration fees for the Units underlying the
Representative’s Option, the shares of Common Stock underlying Warrants
included in the Representative’s Units, and the shares of Common Stock
underlying Public Warrants.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Explanatory
Note
This
Post-Effective Amendment No. 2 on Form S-1 relates in part to (i) the
shares of common stock issuable upon exercise of warrants that were previously
issued to public investors (ii) 500,000 units issuable to the underwriter from
public offering pursuant to the purchase option that was previously granted to
the underwriter, (iii) the warrants issuable pursuant to the purchase option
that was previously issued to the underwriter and (iv) the shares of common
stock issuable upon exercise of the warrants listed in subsection (iii),
all in connection with the registrant’s initial public offering that were
(together with certain other securities of the registrant) initially registered
by the registrant on the Registration Statement on Form S-1 (File
No. 333-124942) declared effective by the Securities and Exchange
Commission on or about March 2, 2006. The Registration Statement was
subsequently converted into a Registration Statement on Form S-3 by
Post-Effective Amendment No. 1 on Form S-3 declared effective by the
Securities and Exchange Commission on or about March 17, 2008. This
Post-Effective Amendment No. 2 on Form S-1 is being filed to convert such
Registration Statement on Form S-3 into a Registration Statement on Form S-1 as
the registrant is currently not entitled to use Form S-3. All filing fees
payable in connection with the registration of these securities were previously
paid in connection with the filing of the original registration statement for
the initial public offering.
The
information in this Prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
|
SUBJECT
TO COMPLETION, DATED October 29, 2008
PROSPECTUS
India
Globalization Capital, Inc.
Common
Stock and Warrants
This
prospectus relates to the following:
(i) the
purchase of 23,609,000 shares of common stock of India Globalization Capital,
Inc. (“IGC” or “the Company”), par value $0.0001 per share, that are issuable
upon the exercise of (A) warrants originally issued in our initial public
offering pursuant to a prospectus dated March 3, 2006 and (B) warrants that are
issuable upon the exercise of a unit purchase option (the “UPO”) sold to the
underwriter for our initial public offering to purchase up to 500,000 units each
consisting of one share of common stock and 2 warrants to purchase one share of
common stock each. In order to obtain the shares, the holders of the warrants
issued in our initial public offering to purchase 22,609,000 shares of our
common stock must pay an exercise price of $5.00 per share for the shares
underlying these warrants and the holders of the warrants issued in the UPO to
purchase 1,000,000 shares of our common stock must pay an exercise price of
$6.00. In order to obtain the UPO warrants, the holders of the UPO must first
exercise the UPO at a price of $7.50 per unit. All of the warrants
expire on March 3, 2011 at 5:00 p.m., Washington, D.C. time. We may call the
warrants for redemption:
|
•
|
in
whole and not in part;
|
|
•
|
at
a price of $0.01 per warrant at any time after the warrants become
exercisable;
|
|
•
|
upon
not less than 30 days’ prior written notice of redemption to each warrant
holder; and
|
|
•
|
if,
and only if, the reported last sale price of the common stock equals or
exceeds $8.50 per share, for any 20 trading days within a 30 trading day
period ending on the third business day prior to the notice of redemption
to warrant holders.
|
(ii) the
purchase of 500,000 shares of common stock of IGC that are issuable upon the
exercise of the UPO sold to the underwriter for our initial public offering. In
order to obtain the shares, the holders of the UPO must first exercise the UPO
at a price of $7.50 per unit. The UPO expires on March 2, 2011 at
5:00 p.m., Washington, D.C. time.
(iii) the
resale of up to 4,824,953 shares of our common stock, including 3,634,953
shares of common stock currently outstanding and 1,190,000 shares of common
stock issuable upon exercise of warrants issued by the Company in
private placements (the “Private Warrants”). The shares of common stock will be
offered for resale by certain stockholders of the Company listed in this
prospectus (the “Selling Stockholders”).
(iv) the
resale of up to 1,190,000 Private Warrants, each exercisable for 1 share of
our common stock. The Private Warrants will be offered for resale by the Selling
Stockholders.
The
shares of common stock and Private Warrants offered by the Selling Stockholders
to which this prospectus relates may be sold from time to time by and for the
accounts of the Selling Stockholders named in this prospectus or in supplements
to this prospectus. The Selling Stockholders may sell all or a portion of these
shares and Private Warrants from time to time through public or private
transactions at prevailing market prices, at prices related to prevailing market
prices or at privately negotiated prices.
The
Company will not receive any of the proceeds from the sale of the shares of
common stock offered by the Selling Stockholders.
Our
units, shares of common stock and warrants are currently traded on the American
Stock Exchange under the symbols “IGC.U,” “IGC” and “IGC.WS,” respectively. As
of October 28, 2008, the closing sale price of our units was $3.25 (the last
trade having been made on October 17, 2008), the closing sale price of our
common stock was $3.00 and the closing sale price of our warrants was
$0.20.
In
reviewing this prospectus, you should carefully consider the matters described
under the heading “Risk Factors” beginning on page _.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is October 29, 2008.
|
|
|
7
|
|
10
|
|
16
|
|
17
|
|
17
|
|
17
|
|
17
|
|
18
|
|
19
|
|
20
|
|
24
|
|
33
|
|
39
|
|
44
|
|
46
|
|
47
|
|
50
|
|
53
|
|
54
|
|
54
|
|
54
|
|
55
|
All
references to “IGC,” “we,” “our,” “us,” and similar terms in this prospectus
refer to India Globalization Capital, Inc.
Some of
the industry data contained in this prospectus are derived from data from
various third-party sources. We have not independently verified any of this
information and cannot assure you of its accuracy or completeness. While we are
not aware of any misstatements regarding any industry data presented herein,
such data is subject to change based on various factors, including those
discussed under the heading “Risk Factors” in this prospectus.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we have filed with the
Securities and Exchange Commission (the “SEC” or the “Commission”) utilizing a
shelf registration process. Under this shelf registration process, the Selling
Stockholders may, from time to time, offer and sell shares of the common stock
of the Company pursuant to this prospectus. It is important for you to read and
consider all of the information contained in this prospectus and any applicable
prospectus supplement before making a decision whether to invest in the common
stock. You should also read and consider the information contained in the
documents that we have incorporated by reference as described in “Where You Can
Find More Information” and “Incorporation of Certain Documents by Reference” in
this prospectus.
You
should rely only on the information contained in this prospectus and any
applicable prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering to sell or soliciting offers to buy, and will
not sell, any securities in any jurisdiction where it is unlawful. You should
assume that the information contained in this prospectus or any prospectus
supplement, as well as information contained in a document that we have
previously filed or in the future will file with the SEC and incorporate by
reference into this prospectus or any prospectus supplement, is accurate only as
of the date of this prospectus, the applicable prospectus supplement or the
document containing that information, as the case may be.
The
following is a summary of some of the information contained in this prospectus.
In addition to this summary, we urge you to read the entire prospectus
carefully, especially the risks relating to our business and common stock
discussed under the heading “Risk Factors” and our financial
statements.
India
Globalization Capital, Inc.
Our
Business
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 37% of Sricon
and the founders and management of TBL own 23% of TBL.
In
connection with the acquisitions, IGC borrowed approximately $23,000,000 from
Sricon and TBL, approximately $17,000,000 from Sricon and $6,000,000 from
TBL Principal and interest on the loans is due and payable upon
the earlier of March 7, 2009 and the consummation of the sale of all or
substantially all of the assets or stock of IGC. The loans are
unsecured and may be prepaid at any time without penalty.
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. The financial statements
provided here and going forward are the consolidated statements of IGC, which
include IGC-M, Sricon, TBL and their subsidiaries. However,
historical description of our business for periods and dates prior to March 7,
2008 include information on Sricon and TBL.
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, and its direct and indirect subsidiaries
(Sricon and TBL).
Background
of Sricon and TBL
Sricon
Infrastructure Private Limited (“Sricon”) was incorporated as a private limited
company on March 3, 1997 in Nagpur, India. Sricon is an engineering
and construction company that is engaged in three business areas: 12) civil
construction of highways and other heavy construction, 2) mining and quarrying
and 3) the construction and maintenance of high temperature cement and steel
plants. Sricon has a pan-India focus and is accredited with ISO
9001:2000 certification and its present and past clients include various Indian
government organizations. Sricon employs approximately 250 skilled
employees and over 800 unskilled labor contractors. It currently has
the capacity and prior experience to bid on contracts that are priced at a
maximum of about $116 million. Sricon recently won, as disclosed in a press
release, a contract to build 150 miles of rural roads including one major and 33
minor bridges.
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.
Core
Business Areas
Our core
business areas include the following:
Highway and heavy
construction:
The
Indian government has articulated a plan to build and modernize Indian
infrastructure. The government’s plan, which calls for spending over
$475 billion over the next five years, includes the construction of rural roads,
major highways and townships among other infrastructure. We have
approximately $ 226 million worth of contracts in our order book
including a $103 million contract to build 150 miles of rural roads including 33
bridges in the state of Madhya Pradesh, and contracts for the building of
highways in Assam, Maharashtra and Madhya Pradesh totaling around $108
million. In addition, we have smaller construction contracts
amounting for $15 million, including a construction contract in a
township in Nagpur.
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. Sricon has five
site licenses with two installed crushers and produces approximately 600,000
metric tons of aggregate annually. The aggregate reserves in Sricon’s
five quarries have a projected value of around $50
million. India is the third largest producer of coal and fourth
largest producer of ore. Ten percent of the world’s coal reserves are
in India. We have a multiyear contract valued around $62 million for
the removal of overburden from open pit coal
mines. Overburden is the layers and rock covering the coal
seam, These types of excavation projects are necessary before mining
can began.
Construction
and maintenance of high temperature plants
Sricon
has an expertise in the civil engineering, construction and maintenance of high
temperature plants. For example, we construct cement and steel
plants. This requires specialized skills to build and maintain the
high temperature chimneys and kilns. We have a multiyear contract
valued around $60 million for civil engineering and maintenance of high
temperature cement plants.
Our
Growth Strategy and Business Model
Our
business model is simple. We bid on construction, mining 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 three bid
teams. Historically, we bid on multi-year contracts
up to $70 million, but more recently, we began bidding on contracts up to $110
million. Our growth strategy is six pronged: 1) increase the backlog
of orders in the three areas of business to over $500 million, 2) recruit
executives, business managers, and specifically three leads for the three lines
of business, 3) recruit world class technical partners from the United States
for each of our business lines, 4) eliminate or hedge risks associated with the
volatility of commodity prices by, for example, ownership of aggregate quarries,
mines, control over suppliers, or pass through contracts, 5) adapt a strategic
and quantitative approach to building the business rather than one that is
generic and short-sighted, and 6) install systems better
enabling corporate governance, USGAAP reporting and contract
monitoring.
Indian
companies have historically reported in Indian GAAP. However we have
increased the number of USGAAP accountants and continue to
strengthen USGAAP reporting capability within our
companies. Currently, we have chief financial officers located in
India at of Sricon and TBL. In addition, we have a Chief Accounting
Officer in the US. Also, we have augmented the in-house teams with a
Delhi based consulting firm that specializes in both USGAAP and Sarbanes-Oxley
(SOX) compliance. Adapting best practices for reporting, governance,
and monitoring is of immediate strategic value as it leads to a quantitative
approach and, therefore, part of our growth strategy and business
model.
Please
see the “Risk Factors” section commencing on page 10 for more information
concerning the risks of investing in our company.
WHERE
YOU CAN FIND MORE INFORMATION
We have
three securities listed on the American Stock Exchange: (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).
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. The registration statement and its exhibits, as
well as our other reports filed with the SEC, can be inspected and copied at the
SEC’s public reference room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information about the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site at http://www.sec.gov which contains
the Form S-1 and other reports, proxy and information statements and
information regarding issuers that file electronically with the
SEC.
We have
filed a registration statement on Form S-1 with the SEC registering under
the Securities Act the common stock that may be distributed under this
prospectus. This prospectus, which is a part of such registration statement,
does not include all of the information contained in the registration statement
and its exhibits. For further information regarding us and our common stock, you
should consult the registration statement and its exhibits.
Statements
contained in this prospectus concerning the provisions of any documents are
summaries of those documents, and we refer you to the documents filed with the
SEC for more information. The registration statement and any of its amendments,
including exhibits filed as a part of the registration statement or an amendment
to the registration statement, are available for inspection and copying as
described above.
The
Offering
We have
agreed to register (i) 4,824,953 shares owned by the Selling Stockholders
or issuable to the Selling Stockholders by exercise of warrants they own
(including the warrants registered hereunder) and (ii) 1,190,000 warrants owned
by the Selling Stockholders for resale pursuant to this prospectus, which
comprise all of our shares and warrants owned by certain of the Selling
Stockholders.
|
|
|
Issuer
|
|
India
Globalization Capital, Inc., a Maryland corporation
|
Shares
Offered
|
|
4,824,953 shares
|
Warrants
Offered
|
|
1,190,000 warrants
|
Shares
Outstanding
|
|
8,780,107 shares
|
Warrants
Outstanding
|
|
23,799,000 warrants
|
Use
of Proceeds
|
|
We
will not receive any proceeds from the resale of shares of common stock or
warrants by the Selling Stockholders.
|
Warrant
Terms:
|
|
|
Exercisability
|
|
Each
warrant is exercisable for one share of common stock.
|
Exercise
Price
|
|
$5.00
|
Exercise
Period
|
|
The
warrants are currently exercisable.
|
|
|
The
warrants will expire at 5:00 p.m., Washington, DC time, on March 3,
2011
or
earlier upon redemption.
|
Redemption
|
|
We
may redeem the outstanding warrants (including warrants held by our
Underwriters as a result of the exercise of the unit purchase option) and
the warrants issued to Selling Stockholders:
• in
whole and not in part;
• at
a price of $.01 per warrant at any time after the warrants become
exercisable;
• upon
a minimum of 30 days’ prior written notice of redemption;
and
• if,
and only if, the last sales price of our common stock equals or exceeds
$8.50 per share for any 20 trading days within a 30 trading day period
ending three business days before we send the notice
of redemption.
|
|
|
|
American
Stock Exchange Symbols:
|
|
|
Common
Stock:
|
|
IGC
|
Warrants
|
|
IGC.WS
|
Units
|
|
IGC.U
|
Risk
Factors
|
|
You
should carefully consider the matters discussed under the heading “Risk
Factors”
|
You
should carefully consider the following risk factors, together with all of the
other information included in this prospectus in evaluating us and our common
stock and other securities. If any of the following risks and uncertainties
develop into actual events, they could have a material adverse effect on our
business, financial condition or results of operations. In that case, the
trading price of our common stock and other securities also could be
adversely affected. We make various
statements in this section, which constitute “ forward-looking statements.” See
“Forward-Looking Statements. We refer to Sricon Infrastructure Private Limited
as Sricon and Techni Bharathi Limited as TBL.
RISKS
ASSOCIATED WITH OUR INDUSTRY AND DOING BUSINESS IN INDIA
Any
downgrading of India’s debt rating by an international rating agency, or an
increase in interest rates in India, could have a negative impact on our ability
to borrow in India.
Our road
building business is a leveraged business. Any adverse revisions to India’s
credit ratings for domestic and international debt by international rating
agencies as well as an increase in Indian interest rates may adversely impact
our ability to finance growth through debt and could lead to a tightening of our
margins, adversely effecting our business.
A
change in government policy, a down turn in the Indian economy or a natural
disaster could adversely affect our business, financial condition, results of
operations and future prospects.
Our
business is road building in India. Sricon and TBL, our road builders, presently
conduct all their operations in India. Sricon and TBL are dependent on the
government of India as well as the state governments for contracts to maintain
and build roads. Their operations and financial results may be affected by
changes in the government’s policy towards road maintenance and road building.
In addition, a slow down in the Indian economy or its growth rate, social
unrest, natural disasters, or a change in government could cause the government
to slow down the pace of road building which could adversely affect our future
performance.
Political,
economic, social and other factors in India may adversely affect
business.
Our
ability to grow our business may be adversely affected by political, economic,
social and religious factors, changes in Indian law or regulations and the
status of India’s relations with other countries. In addition, the economy of
India may differ favorably or unfavorably from the U.S. economy in such respects
as the rate of growth of gross domestic product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
According to the World Factbook published by the United States Central
Intelligence Agency, the Indian government has exercised and continues to
exercise significant influence over many aspects of the economy, and
privatization of government-owned industries proceeds at a slow pace.
Accordingly, Indian government actions in the future could have a significant
effect on the Indian economy, which could have a material adverse affect on our
ability to achieve our business objective.
Since
mid-1991, the Indian government has committed itself to implementing an economic
structural reform program with the objective of liberalizing India’s exchange
and trade policies, reducing the fiscal deficit, controlling inflation,
promoting a sound monetary policy, reforming the financial sector, and placing
greater reliance on market mechanisms to direct economic activity. A significant
component of the program is the promotion of foreign investment in key areas of
the economy and the further development of, and the relaxation of restrictions
in, the private sector. These policies have been coupled with the express
intention to redirect the government’s central planning function away from the
allocation of resources and toward the issuance of indicative guidelines. While
the government’s policies have resulted in improved economic performance, there
can be no assurance that the economic improvement will be sustained. Moreover,
there can be no assurance that these economic reforms will persist, and that any
newly elected government will continue the program of economic liberalization of
previous governments. Any change may adversely affect Indian laws and policies
with respect to foreign investment and currency exchange. Such changes in
economic policies could negatively affect the general business and economic
conditions in India, which could in turn adversely affect our
business.
Terrorist
attacks and other acts of violence or war involving India and other countries
could adversely affect the financial markets and our business.
Terrorist
attacks and other acts of violence could have the direct effect of destroying
our plant and property causing a loss and interruption of business. According to
the World Factbook, religious and border disputes persist in India and remain
pressing problems. For example, India has from time to time experienced civil
unrest and hostilities with neighboring countries such as Pakistan. The
longstanding dispute with Pakistan over the border Indian state of Jammu and
Kashmir, a majority of whose population is Muslim, remains unresolved. If the
Indian government is unable to control the violence and disruption associated
with these tensions, the results could destabilize the economy and,
consequently, adversely affect our business.
Since
early 2003, there have also been military hostilities and civil unrest in
Afghanistan, Iraq and other Asian countries. These events could adversely
influence the Indian economy and, as a result, negatively affect our
business.
While we
will have insurance to cover these risks there can be no guarantee that we will
be able to collect in a timely manner. Terrorist attacks, or the threat of
violence could slow down road building activity adversely affecting our road
building business.
Exchange
controls that exist in India may limit our ability to utilize our cash flow
effectively following a business combination.
We are
subject to India’s rules and regulations on currency conversion. In India, the
Foreign Exchange Regulation Act or FERA, regulates the conversion of the Indian
rupee into foreign currencies. FERA provisions previously imposed restrictions
on locally incorporated companies with foreign equity holdings in excess of 40%,
known as FERA companies. However, comprehensive amendments have been made to
FERA to support the economic liberalization. Such companies are now permitted to
operate in India without any special restrictions, effectively placing them on
par with wholly Indian owned companies. In addition, foreign exchange controls
have been substantially relaxed. Notwithstanding these changes, the Indian
foreign exchange market is not yet fully developed and we cannot assure you that
the Indian authorities will not revert back to regulating FERA companies and
impose new restrictions on the convertibility of the Indian rupee. Any future
restrictions on currency exchanges may limit our ability to use our cash flow
for the distribution of dividends to our stockholders or to fund operations we
may have outside of India.
Changes
in the exchange rate of the Indian rupee may negatively impact our revenues and
expenses.
Our
operations are primarily located in India and we receive payment in Indian
rupees. As the results of operations are reported in US dollars, to
the extent that there is a decrease in the exchange rate of Indian rupees into
US dollars, such a decreae could have a material impact on our operating results
or financial condition.
Returns
on investment in Indian companies may be decreased by withholding and other
taxes.
Our
investments in India will incur tax risk unique to investment in India and in
developing economies in general. Income that might otherwise not be subject to
withholding of local income tax under normal international conventions may be
subject to withholding of Indian income tax. Under treaties with India and under
local Indian income tax law, income is generally sourced in India and subject to
Indian tax if paid from India. This is true whether or not the services or the
earning of the income would normally be considered as from sources outside India
in other contexts. Additionally, proof of payment of withholding taxes may be
required as part of the remittance procedure. Any withholding taxes paid by us
on income from our investments in India may or may not be creditable on our
income tax returns.
We intend
to avail ourselves of income tax treaties with India and minimize any Indian
withholding tax or local taxes. However, there is no assurance that the Indian
tax authorities will always recognize such treaties and its applications. We
have also created a foreign subsidiary in Mauritius, in order to limit the
potential tax exposure.
Our
industry depends on the stability of policies and the political situation in
India and a change in policy could adversely affect our business.
The role
of the Indian central and state governments in the Indian economy on producers,
consumers and regulators has remained significant over the years. Since 1991,
the Government of India has pursued policies of economic liberalization,
including significantly relaxing restrictions on the private sector. We cannot
assure you that these liberalization policies will continue under the present or
under newly elected governments. Protests against privatization could slowdown
the pace of liberalization and deregulation. The rate of economic liberalization
could change, and specific laws and policies affecting companies in the
infrastructure sector in India, foreign investment, currency exchange rates and
other matters affecting our business could change as well. A significant change
in India’s economic liberalization and deregulation policies could disrupt
business and economic conditions in India and thereby affect our
business.
Because
the Indian judiciary will determine the scope and enforcement under Indian law
of almost all of Sricon and TBL’s material agreements, we may be unable to
enforce our rights inside and outside of India.
Sricon
and TBL operate under the laws of India. Substantially all of the assets of
Sricon and TBL are located in India and the majority of its officers and
directors and the experts named in this prospectus are outside the United
States. Although India and the United States are signatories to the 1965 Hague
Convention on the Service Abroad of Judicial and Extra Judicial Documents in
Civil and Commercial Matters, service under this treaty is cumbersome and time
consuming, and may result in inadequate notice so that any judgment based on
that service may be reopened, re-litigated and overturned. It is therefore
unlikely that service of process on Sricon and TBL or their officers and
directors can be obtained within the United States. Further, it may be difficult
to enforce in India a judgment obtained in the United States. These difficulties
stem from the lack of official judicial arrangements between the United States
and India, which means that judgments of United States courts will not be
enforced in India without review and re-litigation of the merits of their
claims.
There is
doubt as to the enforceability in India of actions to enforce judgments of
United States courts arising out of or based on ownership of the securities of
Sricon and TBL, including judgments arising out of or based on civil liability
provisions of United States federal or state securities laws. There is also
doubt whether the Indian courts would enforce, in original actions, judgments
against Sricon, TBL or the persons mentioned above predicated solely based upon
United States securities laws.
Original
actions may be brought in India against these parties only if the actions are
not required to be arbitrated by Indian law and only if the facts alleged in the
complaint give rise to a cause of action under Indian law, in which event, an
Indian court may award monetary damages.
RISKS
ASSOCIATED WITH OUR BUSINESS
The
cost of obtaining bank financing may reduce TBL’s income.
TBL has
restructured some of its bank debt and may, in the future, face higher interest
rates or will require higher collateral with the banks. This increases the cost
of money for TBL and could decrease its margins. While IGC expects to provide
collateral support for two to three years, by which time we expect the credit
worthiness of TBL to increase to adequate levels, there can be no assurance that
TBL will not have to pay higher interest rates in the future, which could reduce
its income.
We
may not be able to obtain necessary raw materials at competitive
prices.
Construction
contracts are primarily dependent on adequate and timely supply of raw
materials, such as cement, steel and aggregates, at competitive prices. As
competition from larger and well-established players increases for procuring raw
materials, we could face an increase in the price of raw materials that
negatively impacts our profitability.
Our
business is dependent on contracts awarded by the Government and its
agencies.
The
businesses of Sricon and TBL are dependent on the implementation of the central
and state budget allocations to the infrastructure sector. Sricon and TBL derive
the bulk of their revenue from contracts awarded by the central and state
governments of India and their agencies. If there are delays in the payment of
invoices by the government, our working capital requirements could increase. The
Build, Operate and Transfer (BOT) industry is a competitive one, and Sricon and
TBL may be outbid for government contracts. In addition, to the extent that
Sricon and TBL fail to perform in accordance with the criteria of existing
contracts, the governments may be more inclined to seek alternative sources of
BOT services.
We
may face penalties for time overruns.
Sricon
and TBL execute construction contracts primarily in the roads and infrastructure
development sectors. Sricon and TBL typically enter into high value contracts
for these activities, which provide for penalties if contracts are not executed
in a timely manner. If Sricon and TBL are unable to meet the performance
criteria as prescribed by the respective contracts and if penalties are levied,
the financial performance of these companies could be adversely
affected.
Our
business is dependent on continuing relationships with clients and strategic
partners.
Our
business is dependent on developing and maintaining strategic alliances with
contractors that undertake turnkey contracts for infrastructure development
projects as well as government organizations.
The
business and our results could be adversely affected if we are unable to
maintain a continuing relationship and pre-qualified status with key clients and
strategic partners.
Our
business relies heavily on our management team and any unexpected loss of key
officers may adversely affect our operations.
The
continued success of our business is largely dependent on the continued services
of key employees in IGC, Sricon, and TBL as well as all our subsidiaries. The
loss of the services of certain key personnel, without adequate replacement,
could have an adverse effect on our performance. Our senior management as well
as the senior management of our subsidiaries have played a significant role in
developing and executing the overall business plan, maintaining client
relationships, proprietary processes and technology. While none is
irreplaceable, the loss of the services of any would be disruptive to our
business.
Our
quarterly revenue, operating results and profitability will vary.
Factors
that may contribute to the variability of quarterly revenue, operating results
or profitability include:
·
|
Fluctuations
in revenue due to seasonality: For example, during the monsoon season, the
heavy rains slow down road building and during the summer months the
winds are not strong enough to power the wind turbines. This results
in uneven revenue and operating results over the
year.
|
·
|
Commencement,
completion and termination of contracts during any particular
quarter.
|
·
|
Additions
and departures of key personnel.
|
·
|
Claims
filed against the contractee for delays and changes in scope, among
others, can sometimes enter arbitration and take time to settle. This
could result in a tightening of working
capital.
|
·
|
Strategic
decisions made by us and our competitors, such as acquisitions,
divestitures, spin-offs, joint ventures, strategic investments and
changes in business strategy.
|
The
revenue recognition policy records contract revenue for those stages of a
project that we complete, after we receive certification from the client that
such stage has been successfully completed. Since revenue is not recognized
until we receive a certification from our clients, revenue recognition can be
uneven.
Our
subsidiaries may become involved in litigation in the future.
Our
subsidiaries are fairly large companies and may have to initiate actions in the
Indian Courts to enforce their rights and may also be drawn into legal
litigation. The expenses of litigation and any judgments against us could have a
material adverse effect on us.
We
face intense competition in the Indian infrastructure industry.
The
Indian real estate and infrastructure industries are increasingly attracting
foreign capital. We currently have competition from international as well as
domestic companies that operate at the national level. Smaller localized
contractors / companies are also competing in their respective regions. If we
are unable to offer competitive prices and obtain contracts, there could be a
significant reduction in our revenue.
Our
operations are sensitive to weather conditions.
Our
business activities in India could be materially and adversely affected by
severe weather conditions. Severe weather conditions may require Sricon and TBL
to evacuate personnel or curtail services and may result in damage to a portion
of Sricon and TBL’s fleet of equipment or to our facilities, resulting in the
suspension of operations, and may further prevent Sricon and TBL from delivering
materials to project sites in accordance with contract schedules or generally
reduce our productivity. Difficult working conditions and extremely high
temperatures also adversely affect the operations of Sricon and TBL during
summer months and during monsoon season, which restrict our ability to carry on
construction activities and fully utilize our resources.
The
revenue recorded in the first half of our fiscal year between April and
September is traditionally lower than revenue recorded during the second half of
our fiscal year due to the weather conditions. During periods of curtailed
activity due to adverse weather conditions, Sricon and TBL may continue to incur
operating expenses, reducing profitability.
Compliance
with Foreign Corrupt Practices Act could adversely impact our competitive
position. Failure to comply could subject us to penalties and other adverse
consequences.
We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States public companies from engaging in bribery of or other
prohibited payments to foreign officials to obtain or retain business. While we
will take precautions to educate the employees of our subsidiaries of the
Foreign Corrupt Practices Act, there can be no assurance that we or the
employees or agents of our subsidiaries will not engage in such conduct, for
which we might be held responsible. We could suffer penalties that may have a
material adverse effect on our business, financial condition and results of
operations.
We may issue
shares of our capital stock, including through convertible debt securities,
which would reduce the equity interest of our stockholders and likely cause a
change in control of our
ownership.
Our
certificate of incorporation authorizes the issuance of up to
75,000,000 shares of common stock, par value $.0001 per share and
1,000,000 shares of preferred stock, par value $.0001 per share. There
are currently approximately 40,000,000 authorized but unissued shares of our
common stock available for issuance (after appropriate reservation for the
issuance of shares upon full exercise of our outstanding warrants and the
purchase option granted to Ferris, Baker Watts, Inc. and shares authorized for
issuance under our 2008 Omnibus Incentive Plan) and all of the
1,000,000 shares of preferred stock available for issuance. We have
recently issued 200,000 shares of our common stock in connection with a private
placement of debt securities and may engage in similar private placements in the
future. The issuance of additional shares of our common stock
including upon conversion of any debt securities:
|
|
|
|
•
|
may
significantly reduce the equity interest of our existing shareholders;
and
|
|
|
|
|
•
|
may
adversely affect prevailing market prices for our common stock, warrants
or units.
|
We
may issue notes or other debt securities, which may adversely affect
our leverage and financial condition.
We
recently sold $2,000,000 in a private placement of debt securities and may
engage in similar private placements in the future. The incurrence of this
debt:
|
|
|
|
•
|
may
lead to default and foreclosure on our assets if our operating
revenues are insufficient to pay our debt
obligations;
|
|
|
|
|
•
|
may
cause an acceleration of our obligations to repay the debt even if we make
all principal and interest payments when due if we breach the covenants
contained in the terms of the debt documents;
|
|
|
|
|
•
|
may
create an obligation to immediately repay all principal and accrued
interest, if any, upon demand to the extent any debt securities are
payable on demand; and
|
|
|
|
|
•
|
may
hinder our ability to obtain additional financing, if necessary, to the
extent any debt securities contain covenants restricting our ability to
obtain additional financing while such security is outstanding, or to the
extent our existing leverage discourages other potential
investors.
|
Additional
capital maybe costly or difficult to obtain.
Additional
capital, whether through the offering of equity or debt securities,may not be
available on reasonable terms or at all, especially in light of the recent
downturn in the economy and dislocations in the credit and capital markets. If
we are unable to obtain required additional capital, we may have to curtail our
growth plans or cut back on existing business and, further, we may not be able
to continue operating if we do not generate sufficient revenues from operations
needed to stay in business. We may incur substantial costs in
pursuing future capital financing, including investment banking fees, legal
fees, accounting fees, securities law compliance fees, printing and distribution
expenses and other costs. We may also be required to recognize non-cash expenses
in connection with certain securities we issue, such as convertible notes and
warrants, which may adversely impact our financial condition.
We
believe that Sricon and TBL will ultimately require the amounts they loaned to
us in order to expand their operations and the scope of contracts on which they
can bid. If we are unable to repay the loans made to us by Sricon and TBL on
time, Sricon and TBL may be required to find alternative sources of funding for
such expansion, and the costs and timing of obtaining such funding may make it
more difficult for these companies to expand the scope of contracts for
which they can compete. To the extent Sricon or TBL obtain additional
funding, it may result in the issuance by Sricon or TBL of
additional shares of capital stock, resulting in the dilution of our
interest in Sricon and TBL.
RISKS
RELATED TO OUR SECURITIES
If
the benefits of our acquisition of TBL and Sricon do not meet the expectations
of financial or industry analysts, the market price of our common stock may
decline.
The
market price of our common stock may decline if:
·
|
we
do not achieve the perceived benefits of our acquisition of TBL and Sricon
as rapidly as, or to the extent anticipated by, financial or industry
analysts; or
|
·
|
the
effect of the Acquisition on our financial statements is not consistent
with the expectations of financial or industry
analysts.
|
Accordingly,
investors may experience a loss as a result of a decreasing stock
price.
Although
we are required to use our best efforts to have an effective registration
statement covering the issuance of the shares underlying the public warrants at
the time that our warrant holders exercise their public warrants, we cannot
guarantee that a registration statement will be effective, in which case our
warrant holders may not be able to exercise our public warrants and such
warrants may expire worthless.
Holders
of our public warrants will be able to exercise the warrants only if a current
registration statement under the Securities Act of 1933 relating to the shares
of our common stock underlying the warrants is then effective. Although we have
undertaken in the warrant agreement, and therefore have a contractual
obligation, to use our best efforts to maintain a current registration statement
covering the shares underlying the public warrants following completion of this
offering, to the extent required by federal securities laws, and we intend to
comply with such undertaking, with this registration statement satisfying that
requirement, we cannot assure you that we will be able to do so. In no event
shall we be liable for, or any registered holder of any warrant be entitled to
receive, (a) physical settlement in securities unless the conditions and
requirements set forth in the warrant agreement have been satisfied or (b) any
net-cash settlement or other consideration in lieu of physical settlement in
securities. The value of the public warrants may be greatly reduced if a
registration statement covering the shares issuable upon the exercise of the
warrants is not kept current. Such warrants may expire worthless.
Because
the warrants sold in the private placements were originally issued pursuant to
an exemption from registration requirements under the federal securities laws,
the holders of the warrants sold in the private placement will be able to
exercise their warrants even if, at the time of exercise, a prospectus relating
to the common stock issuable upon exercise of such warrants is not current. As a
result, the holders of the warrants purchased in the private placements will not
have any restrictions with respect to the exercise of their warrants. As
described above, the holders of the public warrants will not be able to exercise
them unless we have a current registration statement covering the shares
issuable upon their exercise.
If
equity research analysts do not publish research or reports about our business
or if they issue unfavorable commentary or downgrade our common stock, the price
of our common stock could decline.
The
trading market for our common stock will rely in part on the research and
reports that equity research analysts publish about us and our business. We do
not control these analysts. The price of our stock could decline if one or more
equity analysts downgrade our stock or if those analysts issue other unfavorable
commentary or cease publishing reports about us or our business.
We
do not currently intend to pay dividends, which may limit the return on your
investment in us.
We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
We
believe that some of the information in this prospectus constitutes
forward-looking statements within the definition of the Private Securities
Litigation Reform Act of 1995. You can identify these statements by
forward-looking words such as “may,” will,” “should,” “believes,” “expects,”
“intends,” “anticipates,” “thinks,” “plans,” “estimates,” “seeks,” “predicts,”
“potential” or similar words or the negative of these words or other variations
on these words or comparable terminology. You should read statements that
contain these words carefully because they discuss future expectations, contain
projections of future results of operations or financial conditions or state or
other forward looking information.
While we
believe it is important to communicate our expectations to our stockholders,
there may be events in the future that we are not able to accurately predict or
over which we have no control. The risk factors and cautionary language
discussed in this prospectus provide examples of risks, uncertainties and events
that may cause actual results to differ materially from the expectations
described by us in our forward-looking statements, including among other
things:
·
|
Competition
in the road building sector.
|
·
|
Legislation
by the government of India.
|
·
|
General
economic conditions and the Indian growth
rates.
|
·
|
Our
ability to win licenses, contracts and
execute.
|
You
should be aware that the occurrence of the events described in these risk
factors and elsewhere in this prospectus could have a material adverse effect on
our business, financial condition and results of operations.
You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this prospectus.
All
forward-looking statements included herein attributable to us or any person
acting on either party’s behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. Except to the
extent required by applicable laws and regulations, we undertake no obligation
to update these forward-looking statements to reflect events or circumstances
after the date of this prospectus or to reflect the occurrence of unanticipated
events.
Before
you decide to invest in our securities, you should be aware that the occurrence
of the events described in the “Risk Factors” section and elsewhere in this
prospectus could have a material adverse effect on us.
Assuming
the exercise for cash of (i) all the warrants issued in our initial public
offering, (ii) the underwriter’s purchase option in full and (iii) all the
warrants included as part of the units issuable upon exercise of the
underwriter’s purchase option, we will receive gross proceeds of
$123,045,000. Assuming the exercise for cash of all the
warrants issued in private placements we will receive gross proceeds
of $5,950,000. We intend to use the proceeds for working capital,
operating expenses and other general corporate purposes. If at the time the
warrants are exercised we have incurred indebtedness, we may also use the
proceeds to repay indebtedness. There is no assurance that the holders of the
warrants will elect to exercise any or all of the warrants.
We will
not receive any proceeds from the sale of common stock or warrants by the
Selling Stockholders. The Selling Stockholders will pay any underwriting
discounts and commissions and expenses incurred by them in disposing of the
shares. We will bear all other costs, fees and expenses incurred in effecting
the issuance and registration of the shares covered by this prospectus,
including, without limitation, all registration and filing fees, American Stock
Exchange fees and fees and expenses of our counsel and our
accountants.
We have
not paid any cash dividends on its common stock to date. It is the
present intention of the board of directors to retain all earnings, if any, for
use in the business operations, and consequently, the board does not anticipate
declaring any dividends in the foreseeable future. The payment of any
dividends will be with the discretion of the board of directors and will be
contingent upon our financial condition, results of operations, capital
requirements and other factors our board deems relevant.
The
following table shows, for the last eight fiscal quarters, the high and low
closing prices per share of the Common Stock, Warrants and Units as quoted on
the American Stock Exchange:
|
|
Common
Stock
|
|
|
Warrants
|
|
|
Units
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
December
31, 2006
|
|
$ |
5.86 |
|
|
$ |
5.43 |
|
|
$ |
0.87 |
|
|
$ |
0.39 |
|
|
$ |
7.74 |
|
|
$ |
6.22 |
March
31, 2007
|
|
$ |
5.86 |
|
|
$ |
5.56 |
|
|
$ |
0.99 |
|
|
$ |
0.64 |
|
|
$ |
7.79 |
|
|
$ |
6.85 |
June
30, 2007
|
|
$ |
5.77 |
|
|
$ |
5.57 |
|
|
$ |
0.79 |
|
|
$ |
0.59 |
|
|
$ |
7.32 |
|
|
$ |
6.85 |
September
30, 2007
|
|
$ |
5.85 |
|
|
$ |
5.64 |
|
|
$ |
0.63 |
|
|
$ |
0.36 |
|
|
$ |
7.10 |
|
|
$ |
6.40 |
December
31, 2007
|
|
$ |
5.94 |
|
|
$ |
5.69 |
|
|
$ |
0.59 |
|
|
$ |
0.34 |
|
|
$ |
6.90 |
|
|
$ |
6.35 |
March
31, 2008
|
|
$ |
5.90 |
|
|
$ |
3.60 |
|
|
$ |
0.73 |
|
|
$ |
0.25 |
|
|
$ |
7.45 |
|
|
$ |
4.15 |
June
30, 2008
|
|
$ |
5.90 |
|
|
$ |
3.81 |
|
|
$ |
1.30 |
|
|
$ |
0.58 |
|
|
$ |
8.80 |
|
|
$ |
5.28 |
September
30, 2008
|
|
$ |
4.99 |
|
|
$ |
4.50 |
|
|
$ |
1.00 |
|
|
$ |
0.55 |
|
|
$ |
6.86 |
|
|
$ |
5.65 |
A recent
reported closing price for our common stock, warrants and units is
set forth on the cover page of this prospectus. Continental Stock Transfer &
Trust Company is the transfer agent and registrar for our common stock. As of
March 31, 2008, we had 1,009 holders of record
of our common stock, 187 holders of record of our units and 1,076
holders of record of our warrants.
DETERMINATION OF OFFERING PRICE
The
prices at which the shares of common stock covered by this prospectus may
actually be disposed may be at fixed prices, at prevailing market prices at the
time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale, or at negotiated prices.
The
following tables set forth information with respect to the beneficial ownership
of our common stock by the Selling Stockholders as of October 9, 2008.
Beneficial ownership is determined in accordance with SEC rules, and generally
includes voting or investment power with respect to securities. For a discussion
of material relationships with the Selling Stockholders, see “Certain
Relationships and Related Transactions” below.
The
Selling Stockholders, if they desire, may dispose of the shares and warrants
covered by this prospectus from time to time at such prices as they may choose.
Before a stockholder not named below may use this prospectus in connection with
an offering of shares, this prospectus must be amended or supplemented to
include the name and number of shares beneficially owned by the selling
stockholder and the number of shares to be offered. Any amended or supplemented
prospectus also will disclose whether any selling stockholder named in that
amended or supplemented prospectus has held any position, office or other
material relationship with us or any of our predecessors or affiliates during
the three years prior to the date of the amended or supplemented
prospectus.
|
|
Beneficial
Ownership of Selling Stockholders Before this Offering
|
|
|
Number
of
Securities
|
|
|
Beneficial
Ownership Upon Completion of this Offering (Assuming all Securities
Offered hereby are Sold)(1)
|
|
|
|
Number
of
|
|
|
|
|
|
Being
|
|
|
Number
of
|
|
|
|
|
Name
|
|
Shares
|
|
|
Percent
|
|
|
Offered
(1)
|
|
|
Shares
|
|
|
Percent
|
|
Steven
Michael Oliveira (2)
|
|
|
3,972,793 |
|
|
|
37.5
|
% |
|
|
3,972,793 |
|
|
|
0 |
|
|
|
*
|
% |
Ranga
Krishna (2)
|
|
|
2,199,289 |
|
|
|
24.3
|
% |
|
|
2,199,289 |
|
|
|
0 |
|
|
|
*
|
% |
Ram
Mukunda (2)(3)
|
|
|
618,182 |
|
|
|
7.0
|
% |
|
|
618,182 |
|
|
|
0 |
|
|
|
* |
|
John
Cherin (2)
|
|
|
24,999 |
|
|
|
* |
|
|
|
24,999 |
|
|
|
0 |
|
|
|
* |
|
Patricia
Cherin(2)
|
|
|
24,999 |
|
|
|
* |
|
|
|
24,999 |
|
|
|
0 |
|
|
|
* |
|
Sudhakar
Shenoy
|
|
|
50,000 |
|
|
|
* |
|
|
|
50,000 |
|
|
|
0 |
|
|
|
* |
|
Suhail
Nathani
|
|
|
50,000 |
|
|
|
* |
|
|
|
50,000 |
|
|
|
0 |
|
|
|
* |
|
Larry
Pressler
|
|
|
25,000 |
|
|
|
* |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
* |
|
P.G.
Kakodkar
|
|
|
12,500 |
|
|
|
* |
|
|
|
12,500 |
|
|
|
0 |
|
|
|
* |
|
Shakti
Sinha
|
|
|
12,500 |
|
|
|
* |
|
|
|
12,500 |
|
|
|
0 |
|
|
|
* |
|
Dr.
Prabuddha Ganguli
|
|
|
12,500 |
|
|
|
|
|
|
|
12,500 |
|
|
|
0 |
|
|
|
* |
|
Dr.
Anil K. Gupta
|
|
|
25,000 |
|
|
|
* |
|
|
|
25,000 |
|
|
|
0 |
|
|
|
* |
|
Parveen
Mukunda
|
|
|
425,000 |
|
|
|
5.0
|
% |
|
|
425,000 |
|
|
|
0 |
|
|
|
* |
|
Funcorp
Associates
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Trufima
NV
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Funcorp
Associates
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Geri
Investments NV
|
|
|
10,377 |
|
|
|
* |
|
|
|
10,377 |
|
|
|
0 |
|
|
|
* |
|
Harmon
Corp NV
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
La
Legetaz
|
|
|
10,377 |
|
|
|
* |
|
|
|
10,377 |
|
|
|
0 |
|
|
|
* |
|
Arterio,
Inc.
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Domanco
Venture Capital Find
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Anthony
Polak
|
|
|
7,783 |
|
|
|
* |
|
|
|
7,783 |
|
|
|
0 |
|
|
|
* |
|
Anthony
Polak “S”
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
Jamie
Polak
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
RL
Capital Partners LP
|
|
|
25,943 |
|
|
|
* |
|
|
|
25,943 |
|
|
|
0 |
|
|
|
* |
|
Ronald
M. Lazar, IRA
|
|
|
5,189 |
|
|
|
* |
|
|
|
5,189 |
|
|
|
0 |
|
|
|
* |
|
White
Sand Investor Group
|
|
|
51,887 |
|
|
|
* |
|
|
|
51,887 |
|
|
|
0 |
|
|
|
* |
|
MLR
Capital Offshore Master Fund, Ltd
|
|
|
157,075 |
|
|
|
* |
|
|
|
157,075 |
|
|
|
0 |
|
|
|
* |
|
RedChip
Companies, Inc.
|
|
|
10,000 |
|
|
|
* |
|
|
|
10,000 |
|
|
|
0 |
|
|
|
* |
|
Full
Value Partners L.P.
|
|
|
19,198 |
|
|
|
* |
|
|
|
19,198 |
|
|
|
0 |
|
|
|
* |
|
Opportunity
Partners L.P.
|
|
|
14,338 |
|
|
|
* |
|
|
|
14,338 |
|
|
|
0 |
|
|
|
* |
|
Full
Value Special Situations Fund L.P.
|
|
|
2,187 |
|
|
|
* |
|
|
|
2,187 |
|
|
|
0 |
|
|
|
* |
|
Opportunity
Income Plus L.P.
|
|
|
2,187 |
|
|
|
* |
|
|
|
2,187 |
|
|
|
0 |
|
|
|
* |
|
Calapasas
Investment Partnership L.P.
|
|
|
4,192 |
|
|
|
* |
|
|
|
4,192 |
|
|
|
0 |
|
|
|
* |
|
Steady
Gain Partners L.P.
|
|
|
3,706 |
|
|
|
* |
|
|
|
3,706 |
|
|
|
0 |
|
|
|
* |
|
Mercury
Partners L.P.
|
|
|
4,192 |
|
|
|
* |
|
|
|
4,192 |
|
|
|
0 |
|
|
|
* |
|
APG
Capital L.P.
|
|
|
200,000 |
|
|
|
* |
|
|
|
200,000 |
|
|
|
0 |
|
|
|
* |
|
Dekko
Foundation
|
|
|
11,400 |
|
|
|
* |
|
|
|
11,400 |
|
|
|
0 |
|
|
|
* |
|
Schlumberger
LTD Group Trust
|
|
|
138,600 |
|
|
|
* |
|
|
|
138,600 |
|
|
|
0 |
|
|
|
* |
|
Chestnut
Ridge Partners L.P.
|
|
|
84,175 |
|
|
|
* |
|
|
|
84,175 |
|
|
|
0 |
|
|
|
* |
|
Brioclear
Partners L.P.
|
|
|
225,000 |
|
|
|
* |
|
|
|
225,000 |
|
|
|
0 |
|
|
|
* |
|
Brioclear
Offshore LTD
|
|
|
175,000 |
|
|
|
* |
|
|
|
175,000 |
|
|
|
0 |
|
|
|
* |
|
Brioclear
Enhanced L.P.
|
|
|
100,000 |
|
|
|
* |
|
|
|
100,000 |
|
|
|
0 |
|
|
|
* |
|
*
|
|
Represents
less than 1% of the outstanding shares of our common
stock.
|
(1)
|
|
Securities
being sold are shares of Common Stock except as set forth
herein. Steven Michael Oliveira is selling 2,157,973
shares of our common stock and warrants to purchase 1,814,820 shares of
common stock (which includes warrants to purchase 425,000 shares that have
not been issued to the reporting person but are due pursuant to that
certain Note and Warrant Purchase Agreement dated February 5, 2007, by and
between the Issuer and Oliveira Capital, LLC) and/or the shares underlying
such warrants. Ranga Krishna is selling 1,909,289 shares of our
common stock and warrants to purchase 290,000 shares of common stock
and/or the shares underlying such warrants. Ram Mukunda is
selling 551,514 shares of our common stock and warrants to purchase 66,668
shares of common stock and/or the shares underlying such
warrants. John Cherin is selling 8,333 shares of our
common stock and warrants to purchase 16,666 shares of common stock and/or
the shares underlying such warrants. Patricia Cherin is
selling 8,333 shares of our common stock and warrants to purchase 16,666
shares of common stock and/or the shares underlying such
warrants.
|
(2)
|
|
For
detailed information regarding such Selling Stockholders’ beneficial
ownership, see “Beneficial Ownership of Certain Owners and Management”
below.
|
(3)
|
|
The
securities remaining total for Ram Mukunda assumes the sale of 425,000
shares of common stock beneficially owned by him which are owned by his
wife Parveen Mukunda who is selling the shares pursuant to this
prospectus.
|
Pursuant
to the terms of the warrants issued in our initial public offering, the shares
of common stock will be distributed to those warrant holders who surrender the
certificates representing the warrants and provide payment of the exercise price
through their brokers to our warrant agent, Continental Stock
Transfer & Trust Company. Pursuant to the terms of the unit purchase
option, the units will be distributed to the option holder delivering a duly
executed and completed exercise form to us together with payment for the
exercise price.
The
Selling Stockholders may, from time to time, sell any or all of their shares of
common stock or warrants on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares or warrants:
|
•
|
Ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
|
|
•
|
Block
trades in which the broker dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
|
|
|
•
|
Purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
|
|
|
•
|
An
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
|
|
•
|
Privately
negotiated transactions;
|
|
|
|
|
•
|
Short
sales;
|
|
|
|
|
•
|
Broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares or warrants at a stipulated price per share or
warrant;
|
|
|
|
|
•
|
A
combination of any such methods of sale; and
|
|
|
|
|
•
|
Any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares or warrants under Rule 144 under
the Securities Act, if available, rather than under this
prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares or warrants, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a Selling
Stockholder. The Selling Stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of shares if
liabilities are imposed on that person under the Securities
Act.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them or warrants and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock or warrants from
time to time under this prospectus after we have filed a supplement to this
prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act supplementing or amending the list of Selling Stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.
The
Selling Stockholders also may transfer the shares of common stock or warrants in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus and may sell the shares of common stock or warrants from time to time
under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act
supplementing or amending the list of Selling Stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock or warrants purchased by them may be deemed
to be underwriting commissions or discounts under the Securities
Act.
We are
required to pay all fees and expenses incident to the registration of the shares
of common stock or warrants. We have agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
The
Selling Stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock or warrants ,
nor is there an underwriter or coordinating broker acting in connection with a
proposed sale of shares of common stock or warrants by any Selling Stockholder.
If we are notified by any Selling Stockholder that any material arrangement has
been entered into with a broker-dealer for the sale of shares of common stock or
warrants, if required, we will file a supplement to this prospectus. If the
Selling Stockholders use this prospectus for any sale of the shares of common
stock or warrants, they will be subject to the prospectus delivery requirements
of the Securities Act.
The
anti-manipulation rules of Regulation M under the Exchange Act of
1934 may apply to sales of our common stock and activities of the Selling
Stockholders.
SELECTED HISTORICAL FINANCIAL INFORMATION
IGC’s
historical information is derived from its audited financial
statements for the period from its inception (April 29, 2005) to
March 31, 2006, for the fiscal year ended March 31, 2007 and March 31, 2008 and
its unaudited financial statements for the three months ended June 30, 2007 and
June 30, 2008. The consolidated financial statements do not
reflect the operating results of Sricon and TBL prior to the acquisition of
Sricon and TBL by IGC in March 2008. However, for comparative purposes, the
combined statement of operations for the two acquired companies are presented as
the “Combined Predecessors” for the three month period ended June 30,
2007. Predecessor cash flow statements for the three month ended
period June 30, 2007 are not available, and not included with the Consolidated
Cash Flow Report. The information is only a summary and should be
read in conjunction with each of IGC’s, Sricon’s and TBL’s historical financial
statements and related notes and IGC’s, Sricon’s and TBL’s respective
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and corresponding notes to
financial statements contained elsewhere herein. The historical results
included below and elsewhere herein are not indicative of the future financial
performance of IGC, Sricon and TBL.
India
Globalization Capital, Inc.
(Amounts
in Thousands Except Per Share Data)
Selected
Statement of Operations Data:
|
|
Three
Months Ended
June
30, 2008
|
|
|
Three
Months Ended
June
30, 2007
|
|
|
Combined
Predecessor
Three
Months Ended
June
30, 2007
|
|
Revenue
|
|
$ |
17,928,381 |
|
|
-
|
|
|
$ |
3,311,309 |
|
Cost
of revenues:
|
|
|
(13,155,698
|
) |
|
-
|
|
|
|
(2,747,235
|
) |
Gross
Profit
|
|
|
4,772,683 |
|
|
-
|
|
|
|
564,074 |
|
Total
Operating Expenses
|
|
|
(1,179,089
|
) |
|
|
(179,844
|
) |
|
|
(623,167
|
) |
Operating
income (loss)
|
|
|
3,593,594 |
|
|
|
(179,844
|
) |
|
|
(59,093
|
) |
Other
Income-Interest, net
|
|
|
(345,431
|
) |
|
|
235,040 |
|
|
|
(164,200
|
) |
Income
(loss) before provision for income taxes
|
|
|
3,248,163 |
|
|
|
55,196 |
|
|
|
(223,293
|
) |
(Provision)
benefit for income taxes
|
|
|
(1,089,090
|
) |
|
|
(18,913
|
) |
|
|
(216,721
|
) |
Provision
for Dividend on Preference Stock and its Tax
|
|
|
|
|
|
|
|
|
|
|
(25,904
|
) |
Minority
interest
|
|
|
(872,255
|
) |
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
|
1,286,818 |
|
|
|
36,283 |
|
|
|
(465,917
|
) |
Per
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share – basic
|
|
$ |
0.15 |
|
|
$ |
.00 |
|
|
|
- |
|
Earnings
per share - diluted
|
|
|
0.14 |
|
|
|
.00 |
|
|
|
- |
|
Weighted
Average Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,570,107 |
|
|
|
13,974,500 |
|
|
|
- |
|
Diluted
|
|
|
8,885,618 |
|
|
|
13,974,500 |
|
|
|
- |
|
Selected
Statement of Operations Data:
|
|
Year
Ended
March
31, 2008
|
|
|
|
Year
Ended
March
31, 2007
|
|
|
|
April
29, 2005
To
March 31, 2006
|
|
Revenue
|
|
$ |
2,188,018 |
|
|
$ |
-
|
|
|
$ |
-
|
|
Cost
of revenues:
|
|
|
(1,783,117
|
) |
|
|
-
|
|
|
|
-
|
|
Gross
Profit
|
|
|
404,901 |
|
|
|
-
|
|
|
|
-
|
|
Total
Operating Expenses
|
|
|
(6,191,642
|
) |
|
|
|
(765,047
|
) |
|
|
|
(603,924
|
) |
Operating
income (loss)
|
|
|
(5,786,741
|
) |
|
|
|
(765,047
|
) |
|
|
|
(603,924
|
) |
Interest
Income, net
|
|
|
268,839 |
|
|
|
|
3,067,902 |
|
|
|
|
205,084 |
|
Other
Income
|
|
|
202,858 |
|
|
|
|
- |
|
|
|
|
- |
|
Income
(loss) before provision for income taxes
|
|
|
(5,315,044
|
) |
|
|
|
2,302,855 |
|
|
|
|
(398,840
|
) |
(Provision)
benefit for income taxes
|
|
|
(76,089
|
) |
|
|
|
(784,858
|
) |
|
|
|
(45,000
|
) |
Provision
for Dividend on Preference Stock and its Tax
|
|
|
171,084 |
|
|
|
|
- |
|
|
|
|
|
|
Minority
Interest
|
|
|
4,780 |
|
|
|
|
- |
|
|
|
|
|
|
Net
Income (loss)
|
|
|
(5,215,270
|
) |
|
|
|
1,517,997 |
|
|
|
|
(443,840
|
) |
Per
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share – basic
|
|
$ |
(0.61 |
) |
|
$ |
|
0.11 |
|
|
$ |
|
(0.14 |
) |
Earnings
per share - diluted
|
|
|
(0.61
|
) |
|
|
|
0.11 |
|
|
|
|
(0.14
|
) |
Weighted
Average Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,570,107 |
|
|
|
|
13,974,500 |
|
|
|
|
3,191,000 |
|
Diluted
|
|
|
8,570,107 |
|
|
|
|
13,974,500 |
|
|
|
|
3,191,000 |
|
India
Globalization Capital, Inc.
Selected
Summary Balance Sheet Data
|
|
June
30, 2008
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,549,528
|
|
|
$
|
8,397,441
|
|
|
$
|
1,169,422
|
|
Accounts
Receivable
|
|
|
12,653,106
|
|
|
|
8,708,861
|
|
|
|
-
|
|
Unbilled
Receivables
|
|
|
4,883,994
|
|
|
|
5,208,722
|
|
|
|
-
|
|
Inventories
|
|
|
1,763,712
|
|
|
|
1,550,080
|
|
|
|
-
|
|
Investments
held in Trust Fund
|
|
|
-
|
|
|
|
-
|
|
|
|
66,104,275
|
|
Interest
Receivable - Convertible Debenture
|
|
|
337,479
|
|
|
|
277,479
|
|
|
|
37,479
|
|
Convertible
debenture in MBL
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Prepaid
taxes
|
|
|
50,038
|
|
|
|
49,289
|
|
|
|
-
|
|
Restricted
cash
|
|
|
625
|
|
|
|
6,257
|
|
|
|
-
|
|
Short
term investments
|
|
|
3,372,057
|
|
|
|
671
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
|
1,216,991
|
|
|
|
4,324,201
|
|
|
|
74,197
|
|
Due
from related parties
|
|
|
321,261
|
|
|
|
1,373,447
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
29,148,791
|
|
|
|
32,896,447
|
|
|
|
70,385,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
8,185,108
|
|
|
|
7,337,361
|
|
|
|
-
|
|
Build,
Operate and Transfer (BOT under Progress)
|
|
|
3,281,365
|
|
|
|
3,519,965
|
|
|
|
-
|
|
Goodwill
|
|
|
17,483,501
|
|
|
|
17,483,501
|
|
|
|
-
|
|
Investment
|
|
|
1,763,506
|
|
|
|
1,688,303
|
|
|
|
-
|
|
Deposits
towards acquisitions
|
|
|
187,500
|
|
|
|
187,500
|
|
|
|
-
|
|
Restricted
cash, non-current
|
|
|
1,974,241
|
|
|
|
2,124,160
|
|
|
|
-
|
|
Deferred
acquisition costs
|
|
|
|
|
|
|
|
|
|
|
158,739
|
|
Deferred
tax assets - Federal and State, net of valuation allowance
|
|
|
982,200
|
|
|
|
1,013,611
|
|
|
|
142,652
|
|
Other
Assets
|
|
|
2,796,767
|
|
|
|
1,376,126
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
65,802,979
|
|
|
$
|
67,626,973
|
|
|
|
70,686,764
|
|
India
Globalization Capital, Inc.
Selected
Summary Balance Sheet Data
(continued)
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
$
|
7,772,429
|
|
|
$
|
5,635,408
|
|
|
|
-
|
|
Trade
payables
|
|
|
2,627,966
|
|
|
|
1,771,151
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
594,958
|
|
|
|
931,092
|
|
|
|
-
|
|
Accrued
expenses
|
|
|
820,183
|
|
|
|
1,368,219
|
|
|
|
237,286
|
|
Notes
payable to stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
870,000
|
|
Taxes
payable
|
|
|
71,259
|
|
|
|
58,590
|
|
|
|
296,842
|
|
Deferred
trust interest
|
|
|
|
|
|
|
|
|
|
|
32,526
|
|
Notes
Payable to Oliveira Capital, LLC
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
|
|
1,794,226
|
|
Due
to Underwriters
|
|
|
|
|
|
|
|
|
|
|
1,769,400
|
|
Due
to related parties
|
|
|
2,661,171
|
|
|
|
1,330,291
|
|
|
|
-
|
|
Other
current liabilities
|
|
|
3,418,352
|
|
|
|
3,289,307
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
20,966,318
|
|
|
$
|
17,384,058
|
|
|
|
5,000,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion
|
|
|
1,456,422
|
|
|
|
1,212,841
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
-
|
|
|
|
832,717
|
|
|
|
-
|
|
Deferred
taxes on income
|
|
|
669,503
|
|
|
|
608,535
|
|
|
|
-
|
|
Other
liabilities
|
|
|
2,424,115
|
|
|
|
6,717,109
|
|
|
|
-
|
|
Total
Liabilities
|
|
|
25,516,358
|
|
|
|
26,755,261
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
14,417,912
|
|
|
|
13,545,656
|
|
|
|
-
|
|
Common
stock subject to possible conversion, 2,259,770 at conversion
value
|
|
|
-
|
|
|
|
-
|
|
|
|
12,762,785
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock — $.0001 par value; 75,000,000 shares authorized; 8,570,107 issued
and outstanding at June 30, 2008 and March 31, 2008
|
|
|
857
|
|
|
|
857
|
|
|
|
1,397
|
|
Additional
paid-in capital
|
|
|
31,470,133
|
|
|
|
31,470,134
|
|
|
|
51,848,145
|
|
(Deficit)
Income accumulated during the development stage
|
|
|
|
|
|
|
|
|
|
|
1,074,157
|
|
Retained
Earnings (Deficit)
|
|
|
(2,854,295
|
)
|
|
|
(4,141,113
|
)
|
|
|
-
|
|
Accumulated
other comprehensive (loss) income
|
|
|
(2,747,986
|
)
|
|
|
(3,822
|
)
|
|
|
-
|
|
Total
stockholders’ equity
|
|
|
25,868,709
|
|
|
|
27,326,056
|
|
|
|
52,923,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
$
|
65,802,979
|
|
|
$
|
67,626,973
|
|
|
|
70,686,764
|
|
The
following table sets forth certain selected financial data of
Sricon. The selected financial data presented below was derived from
Sricon’s audited consolidated financial statements for the period April 1, 2007
through March 7, 2008 and for the three year period ended March 31, 2007, and
from Sricon’s unaudited consolidated financial statements for the year ended
March 31, 2004. The information is only a summary and should be read in
conjunction with each of IGC’s, Sricon’s and TBL’s historical financial
statements and related notes and IGC’s, Sricon’s and TBL’s respective
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. The historical results included below and
elsewhere herein are not indicative of the future financial performance of IGC,
Sricon and TBL.
Sricon
Infrastructure
Amounts
in Thousands Except Per Share Data
|
|
April
1, 2007 to
March
7, 2008
|
|
|
Year
Ended
March
31, 2007
|
|
|
Year
Ended
March
31, 2006
|
|
|
Year
Ended
March
31, 2005
|
|
|
Unaudited
Year
Ended
March
31, 2004
|
|
Revenue
|
|
$
|
22,614
|
|
|
$
|
10,604
|
|
|
$
|
11,011
|
|
|
$
|
11,477
|
|
|
$
|
|
|
Income
Before Tax
|
|
|
3,144
|
|
|
|
778
|
|
|
|
668
|
|
|
|
907
|
|
|
|
646
|
|
Income
Taxes
|
|
|
(768
|
)
|
|
|
(368
|
)
|
|
|
(186
|
)
|
|
|
(363
|
)
|
|
|
(199
|
)
|
Net
Income (loss)
|
|
|
2,376
|
|
|
|
410
|
|
|
|
482
|
|
|
|
544
|
|
|
|
446
|
|
Per
Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share - basic
|
|
$
|
0.81
|
|
|
$
|
0.14
|
|
|
$
|
0.16
|
|
|
$
|
0.19
|
|
|
$
|
0.11
|
|
Earnings
per share - diluted
|
|
$
|
0.78
|
|
|
$
|
0.14
|
|
|
$
|
0.16
|
|
|
$
|
0.19
|
|
|
$
|
0.11
|
|
Weighted
Average Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
183,259
|
|
Diluted
|
|
|
3,058,881
|
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
183,259
|
|
Sricon
Infrastructure Private Limited
Selected
Summary Balance Sheet Data
(Amounts
in Thousand US Dollars)
|
|
March
07, 2008
|
|
|
March
31, 2007
|
|
|
March
31, 2006
|
|
|
March
31, 2005
|
|
|
Unaudited
March
31, 2004
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivables
|
|
$
|
7,764
|
|
|
$
|
2,751
|
|
|
$
|
2,083
|
|
|
$
|
2,128
|
|
|
$
|
2,223
|
|
Unbilled
receivables
|
|
|
4,527
|
|
|
|
2,866
|
|
|
|
2,980
|
|
|
|
974
|
|
|
|
984
|
|
Inventories
|
|
|
447
|
|
|
|
71
|
|
|
|
248
|
|
|
|
154
|
|
|
|
71
|
|
Property
and equipment, net
|
|
|
5,327
|
|
|
|
4,903
|
|
|
|
4,347
|
|
|
|
3,424
|
|
|
|
3,098
|
|
BOT
Project under progress
|
|
|
3,485
|
|
|
|
3,080
|
|
|
|
1,584
|
|
|
|
0
|
|
|
|
0
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
|
5,732
|
|
|
|
3,646
|
|
|
|
3,868
|
|
|
|
5,103
|
|
|
|
359
|
|
Due
to related parties
|
|
|
1,322
|
|
|
|
2,264
|
|
|
|
1,604
|
|
|
|
1,724
|
|
|
|
1,553
|
|
Long-term
debt, net of current portion
|
|
|
1,264
|
|
|
|
2,182
|
|
|
|
1,855
|
|
|
|
1,278
|
|
|
|
1,089
|
|
Other
liabilities
|
|
|
1,519
|
|
|
|
1,913
|
|
|
|
697
|
|
|
|
1,307
|
|
|
|
1,267
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
$
|
9,673
|
|
|
$
|
4,289
|
|
|
$
|
3,740
|
|
|
$
|
2,760
|
|
|
$
|
2,822
|
|
The
following table sets forth certain selected financial data of
TBL. The selected financial data presented below was derived from
TBL’s audited consolidated financial statements for the period April 1, 2007
through March 7, 2008 and for the three year period ended March 31, 2007, and
from TBL's unaudited consolidated financial statements for the year ended March
31, 2004. The information is only a summary and should be read in
conjunction with each of IGC’s, Sricon’s and TBL’s historical financial
statements and related notes and IGC’s, Sricon’s and TBL’s respective
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. The historical results included below and
elsewhere herein are not indicative of the future financial performance of IGC,
Sricon and TBL.
Techni
Bharathi Limited
Selected
Summary Statement of Income Data
(Amounts
in Thousand US Dollars, except share data and as stated
otherwise)
|
|
April
1 2007
to
March 7, 2008
|
|
|
March
31, 2007
|
|
|
March
31, 2006
|
|
|
March
31, 2005
|
|
|
Unaudited
March
31, 2004
|
|
Revenue
|
|
$
|
5,321
|
|
|
$
|
4,318
|
|
|
$
|
2,285
|
|
|
$
|
8,954
|
|
|
$
|
8,773
|
|
Income
(loss) before income taxes
|
|
|
2,245
|
|
|
|
401
|
|
|
|
(2,369
|
)
|
|
|
(3,823
|
)
|
|
|
(2,609
|
)
|
Income
taxes
|
|
|
(86
|
)
|
|
|
135
|
|
|
|
62
|
|
|
|
515
|
|
|
|
(63
|
)
|
Net
(loss)/income
|
|
|
1,988
|
|
|
|
536
|
|
|
|
(2,307
|
)
|
|
|
(3,308
|
)
|
|
|
(2,672
|
)
|
Earnings
(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.46
|
|
|
$
|
0.13
|
|
|
$
|
(0.54
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.62
|
)
|
Diluted
|
|
$
|
0.22
|
|
|
$
|
0.13
|
|
|
$
|
(0.54
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.62
|
)
|
Weighted
average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
Diluted
|
|
|
9,089,928
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
Techni
Bharathi Limited
Selected
Summary Balance Sheet Data
(Amounts
in Thousand US Dollars)
|
|
March
7, 2008
|
|
|
March
31, 2007
|
|
|
March
31, 2006
|
|
|
March
31, 2005
|
|
|
Unaudited
March
31, 2004
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
736
|
|
|
$
|
1,208
|
|
|
$
|
69
|
|
|
$
|
83
|
|
|
$
|
107
|
|
Inventories
|
|
|
1,428
|
|
|
|
1,284
|
|
|
|
4,182
|
|
|
|
4,459
|
|
|
|
4,922
|
|
Prepaid
and other assets
|
|
|
271
|
|
|
|
1,231
|
|
|
|
1,275
|
|
|
|
1,765
|
|
|
|
2,070
|
|
Property,
plant and equipment (net)
|
|
|
1,979
|
|
|
|
2,265
|
|
|
|
2,417
|
|
|
|
3,463
|
|
|
|
3,985
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
term borrowings and current portion of long-term loan
|
|
|
2,437
|
|
|
|
6,079
|
|
|
|
8,125
|
|
|
|
6,291
|
|
|
|
6,614
|
|
Trade
payable
|
|
|
2,222
|
|
|
|
1,502
|
|
|
|
987
|
|
|
|
3,341
|
|
|
|
2,738
|
|
Long
term debts, net of current portion
|
|
|
-
|
|
|
|
2,333
|
|
|
|
3,656
|
|
|
|
3,897
|
|
|
|
2,892
|
|
Advance
from customers
|
|
|
824
|
|
|
|
1,877
|
|
|
|
2,997
|
|
|
|
3,057
|
|
|
|
2,755
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
$
|
(397
|
)
|
|
$
|
(4,895
|
)
|
|
$
|
(5,438
|
)
|
|
$
|
(3,032
|
)
|
|
$
|
320
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with the financial statements
and notes thereto included in this prospectus. Except for the historical
information contained herein, the discussion in this prospectus contains certain
forward-looking statements that involve risk and uncertainties, such as
statements of the Company’s plans, objectives, expectations and intentions as of
the date of this filing. The cautionary statements made in this document should
be read as being applicable to all related forward-looking statements wherever
they appear in this document. The Company’s actual results could differ
materially from those discussed here. Factors that could cause differences
include those discussed in the “Risk Factors” section as well as discussed
elsewhere herein.
Critical
Accounting Policies and Estimates
Our
significant accounting policies are presented within the financial statements
and notes thereto included in this prospectus. We have identified the
policies outlined below as critical to our business operations and an
understanding of our results of operations. While all accounting policies impact
the financial statements, certain policies may be viewed as critical. Critical
accounting policies are those that are both most important to the portrayal of
financial condition and results of operations and that require management’s most
subjective or complex judgments and estimates. Our management believes the
policies that fall within this category are the policies on revenue recognition,
accounting for stock-based compensation, goodwill and income taxes.
The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
significant estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. These items are regularly monitored and analyzed by management
for changes in facts and circumstances, and material changes in these estimates
could occur in the future. These estimates include, among others, our revenue
recognition policies related to the proportional performance and percentage of
completion methodologies of revenue recognition of contracts and assessing our
goodwill for impairment annually. Changes in estimates are recorded in the
period in which they become known. We base our estimates on historical
experience and various other assumptions that we believe are reasonable under
the circumstances. Actual results will differ and may differ materially from the
estimates if past experience or other assumptions do not turn out to be
substantially accurate.
Revenue
Recognition
The
majority of the revenue recognized for three month period ended June 30, 2008
was derived from the Company’s subsidiaries and as accordingly:
Revenue
is recognized based on the nature of activity when consideration can be
reasonably measured and there exists reasonable certainty of its
recovery.
Revenue
from sale of goods is recognized when substantial risks and rewards of ownership
are transferred to the buyer under the terms of the contract.
Revenue
from construction/project related activity and contracts for
supply/commissioning of complex plant and equipment is recognized as
follows:
|
a)
|
|
Cost
plus contracts: Contract revenue is determined by adding the aggregate
cost plus proportionate margin as agreed with the customer and expected to
be realized.
|
|
|
|
b)
|
|
Fixed
price contracts: Contract revenue is recognized using the percentage
completion method. Percentage of completion is determined as a proportion
of cost incurred-to-date to the total estimated contract cost. Changes in
estimates for revenues, costs to complete and profit margins are
recognized in the period in which they are reasonably
determinable
|
Full
provision is made for any loss in the period in which it is
foreseen.
Revenue
from property development activity is recognized when all significant risks and
rewards of ownership in the land and/or building are transferred to the customer
and a reasonable expectation of collection of the sale consideration from the
customer exists.
Revenue
from service related activities and miscellaneous other contracts are recognized
when the service is rendered using the proportionate completion method or
completed service contract method.
Accounting
for Stock-Based Compensation
As of
June 30, 2008, we had not granted any stock options under our Employee Stock
Plan.
Goodwill
We
account for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”). SFAS No. 142 requires the use of a
non-amortization approach to account for purchased goodwill and certain
intangibles. Under the non-amortization approach, goodwill and certain
intangibles are not amortized into results of operations, but instead are
reviewed for impairment at least annually and written down and charged to
operations only in the periods in which the recorded value of goodwill and
certain intangibles exceeds its fair value. We have elected to perform our
annual impairment test in November of each calendar year. An interim goodwill
impairment test would be performed if an event occurs or circumstances change
between annual tests that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. For purposes of performing the
goodwill impairment test, we concluded there is one reporting unit. During
November 2007, we completed the required annual test, which indicated there was
no impairment.
Accounting
for Income Taxes
In
connection with preparing our financial statements, we are required to estimate
our income taxes in each of the jurisdictions in which we operate. This process
involves the assessment of our net operating loss carry forwards and credits, as
well as estimating the actual current tax liability together with assessing
temporary differences resulting from differing treatment of items, such as
reserves and accrued liabilities, for tax and accounting purposes. We
then assess the likelihood that deferred tax assets will be recovered from
future taxable income, and to the extent we believe that recovery is not likely,
we must establish a valuation allowance. Based on historical results, we believe
that it is more likely than not that we will not realize the value of our
deferred tax assets and therefore have provided a full valuation allowance
against our net deferred tax assets.
Consolidated
Results of Operations (IGC)
Three
Months Ended June 30, 2008 Compared to Three Months Ended June 30,
2007
The
following results of operations discussion compares our consolidated company
results for the three months ended June 30, 2008 to the Combined Predecessor
Results of Operations for the three months ended June 30, 2007. We
believe this is a better measure of performance than comparing the consolidated
company results to pre-acquisition results because there were no significant
operating results before acquiring Sricon and TBL companies.
Revenue -
Total revenues increased 441% to $17.9 million for
the three months ended June 30, 2008, as compared to $3,311,309 for the three
months ended June 30, 2007. Our revenue increased due to the increase in the
number of new and active contracts in our contract
backlog.
Operating Income (loss) - In
the three month period ending June 30, 2008, operating margin is 3.7 million,
compared to a loss of $59 thousand for the combined predecessor companies for
the three month period ending June 30, 2007. Our operating margin
increased due to the increase in the number of new and active
contracts in our contract backlog.
Total Costs of Revenues and
operating expenses - Our total cost of revenues and operating expenses
principally consist of construction materials, employee compensation and
benefits, depreciation and amortization, startup costs, and general and
administrative expense. In the three month period ending June 30, 2008, total
cost of revenue and operating expenses increased by $11 million or 325%,
compared to the three month period ending June 30, 2007.
Costs of Revenues - Costs of
revenues 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 $10.4
million or 379%, compared to the three month period ending June 30,
2007. The increase was due to higher contract revenue during the
year.
Selling, General and Administrative
- Consist primarily of employee-related expenses, professional fees,
other corporate expenses and allocated overhead. We expect that in the future,
selling, general and administrative expenses will increase as we add personnel
and incur additional professional fees and insurance costs related to being a
publicly held company. Selling, general and administrative expenses increased
by $0.5 million or 121%, compared to the three month period ending June 30,
2007, due to higher scale of operations resulting from
acquisitions.
Net Interest Income (Expense)
– Net interest (expense) increased by $0.2 million or 110% compared
to the three month period ending June 30, 2007. The increase was due
to higher utilization of debt and an increase in interest rates.
Net Income (loss) – Net
income increased 246% to $1.3 million for the three months ended June 30, 2008,
as compared a loss of $0.5 million for the three months ended June 30, 2007. Our
net income increased due to the increase in the number of new and active
contracts in our contract backlog.
The
following discussion relates to IGC for the years ended March 31, 2008 and March
31, 2007 and for the period from April 29, 2005 (inception) to March 31,
2006:
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
This
liquidity and capital resources discussion compares the consolidated company
results for three months period ended June 30, 2008 and 2007. The
Predecessor cash flow statements for the three month ended period June 30, 2007
are not available.
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 2008, cash used for operating activities was $5.5
million compared to cash used for operating activities of $0.4 million during
the first three months of 2007. The uses of cash in the first three months of
2008 relates primarily to the payment of general operating expenses of our
subsidiary companies.
During
the first three months of 2008, investing activities from continuing operations
used $ 5.2 million of cash as compared to $27 thousand used during the
comparable period in 2007. In the first quarter of 2008, we paid $1.6 million
for equipment purchases and $3.5 million for short term
investments.
Financing
cash flows from continuing operations consist primarily of transactions related
to our debt and equity structure. In the first three months of 2008 there was
financing cash provided of approximately $4.2 million, compared to cash used of
approximately $325 thousand for the first three months of 2007. The cash
provided in 2008 was primarily due to use of bank credit lines. The
cash used in 2007 was primarily due to repayment of long-term notes to
stockholders.
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 in the near
term.
SHORT
TERM BORROWINGS & CURRENT PORTION OF LONG-TERM DEBT
(Amounts
in Thousand US Dollars)
Short
term debt for the consolidated companies consists of the following:
|
|
As
of
|
|
|
As
of
|
|
|
|
June
30, 2008
|
|
|
March
31, 2008
|
|
Secured
|
|
$
|
6,578
|
|
|
$
|
4,556
|
|
Unsecured
|
|
|
3,316
|
|
|
|
3,306
|
|
Total
|
|
|
9,894
|
|
|
|
7,862
|
|
Add:
|
|
|
|
|
|
|
|
|
Current
portion of long term debt
|
|
|
878
|
|
|
|
773
|
|
Total
|
|
$
|
10,772
|
|
|
$
|
8,635
|
|
The above
debt is secured by hypothecation of materials/stock of spares, Work in Progress,
receivables and property & equipment in addition to personal guarantee of
three directors & collaterally secured by mortgage of company’s land &
other immovable properties of directors and their relatives.
Long-term
debt comprises:
(Amounts
in Thousand US Dollars)
Long term
debt for the consolidated companies consists of the following:
|
|
As
of
|
|
|
As
of
|
|
|
|
June
30, 2008
|
|
|
March
31, 2008
|
|
Secured
|
|
$
|
-
|
|
|
$
|
-
|
|
Term
loans
|
|
|
-
|
|
|
|
632
|
|
Loan
for assets purchased under capital lease
|
|
|
2,335
|
|
|
|
1,354
|
|
Total
|
|
|
2,335
|
|
|
|
1,982
|
|
Less:
Current portion (Payable within 1 year)
|
|
|
878
|
|
|
|
773
|
|
Total
|
|
$
|
1,456
|
|
|
$
|
1,213
|
|
The
secured loans were collateralized by:
·
|
Unencumbered
Net Asset Block of the Company
|
·
|
Equitable
mortgage of properties owned by promoter directors/
guarantors
|
·
|
Term
Deposits
|
·
|
Hypothecation
of receivables, assignment of toll rights, machineries and vehicles and
collaterally secured by deposit of title deeds of
land
|
·
|
First
charge on Debt-Service Reserve
Account
|
Capital
Commitments and Guarantees
1)
Capital commitments
The
estimated amount of contracts remaining to be executed on capital account not
provided for as on June 30, 2008 are USD zero.
2)
Guarantees
The
Company had outstanding financial / performance bank guarantees of approximately
USD 4 million as of June 30, 2008.
|
a)
|
|
The
Sricon was awarded a contract from National Highway Authority
of India (‘NHAI’) in 2004-05, for restoring the Jaipur – Gurgaon National
Highway 8. The total contract value was USD 5.10 million to be completed
in 9 months. The entire stretch of the site was handed over on piecemeal
basis without any defined schedule in contravention with contractual
provisions and approved construction program and methodology. This has
resulted in additional costs due to additional deployment of resources for
prolonged period. Thus, Sricon invoked the escalation clause of the
contract and filed a claim of USD 8.16 million. The dispute has been
referred to arbitration. The Company has not recognized the claimed
amounts on its books.
|
|
|
|
b)
|
|
Sricon
was awarded a contract from National Highway Authority of India (‘NHAI’)
in 2001-02 for construction of a four lane highway on the Namkkal bypass
on National Highway 7, in the state of Tamilnadu. The total contract value
was USD 4 million and the construction was to have been completed by
November 30, 2002. The escalation and variation claim of USD 5.27 million
is pending with NHAI. An arbitration process was initiated on July 3,
2007. The company has not recognized the claim amounts on its
books.
|
|
|
|
|
|
c)
|
|
TBL
is contingently liable to pay four-thousand dollars towards interest
and penalty towards Provident Dues as per the orders of the competent
authorities.
|
Contractual
Obligations and Commercial Commitments
The
Founders 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. In
addition, the holders of certain shares of common stock of the Company and
warrants to purchase Common Stock of the Company purchased from the Company in
private placements are entitled to demand and “piggy back” registration
rights.
In
connection with our proposed acquisition of a wind energy farm from Chiranjjeevi
Wind Energy Limited ("CWEL"), we have agreed to pay a finder’s 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.
Business
Acquisitions
We
acquired Sricon and TBL on March 7, 2008. The consolidated statements
of IGC reflect the consolidation for the three remaining weeks in
March. For the year ended March 31, 2008 and March 31, 2007, we had
revenue of 2,188,018 and zero respectively and net loss of 5,215,270 and
earnings of 1,517,997 respectively. The loss primarily consists of and one-time
expenses related to the payment of shares to Bridge Investors and SPAC
related charges.
Management
Discussion and Analysis (Sricon)
Effects
of the Acquisition on Sricon
Sricon
will account for the acquisition as a subscription of new common
stock. There will be no tax impact on the transaction, other than
regulatory registration fees. Sricon will continue to operate as an
Indian company and will be subject to the Indian tax regime.
Results
of Operations (Sricon)
Summarized
balance sheet information for Sricon is as follows:
(Amounts
in Thousand US Dollars)
|
|
As
of
March
31, 2007
|
|
|
As
of
March
7, 2008
|
|
Total
Assets
|
|
$
|
15,358
|
|
|
$
|
25,790
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
15,358
|
|
|
$
|
25,790
|
|
Major
items of Sricon’s assets and liabilities are as follows:
(Amounts
in Thousand US Dollars)
|
|
As
of
March
31, 2007
|
|
|
As
of
March
7, 2008
|
|
ASSETS
|
|
|
|
|
|
|
Accounts
receivables
|
|
$
|
2,751
|
|
|
$
|
7,764
|
|
Unbilled
receivables
|
|
|
2,866
|
|
|
|
4,527
|
|
Inventories
|
|
|
71
|
|
|
|
447
|
|
BOT
Project under progress
|
|
|
3,080
|
|
|
|
3,485
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
|
3,646
|
|
|
|
5,732
|
|
Due
to related parties
|
|
|
2,264
|
|
|
|
1,322
|
|
Long-term
debt, net of current portion
|
|
|
2,182
|
|
|
|
1,264
|
|
Other
liabilities
|
|
|
1,913
|
|
|
|
1,519
|
|
Total
stockholders’ equity
|
|
$
|
4,289
|
|
|
$
|
9,673
|
|
The
following table sets forth an overview of Sricon’s results of operations for the
same period.
|
|
April
1, to
|
|
(Amounts
in Thousand US Dollars)
|
|
March
31, 2007
|
|
|
March
07, 2008
|
|
Revenue
|
|
$
|
10,604
|
|
|
$
|
22,614
|
|
Net
income before income taxes
|
|
|
778
|
|
|
|
3,144
|
|
Income
Taxes
|
|
|
(368
|
)
|
|
|
(768
|
)
|
Net
Income
|
|
|
410
|
|
|
|
2,376
|
|
Income
(loss) per share: basic
|
|
$
|
0.14
|
|
|
$
|
0.81
|
|
Diluted
|
|
|
0.14
|
|
|
|
0.78
|
|
Discussion
April
1, 2007 to March 7, 2008 Compared To FYE March 31, 2007 (FY 2007)
Revenues
Total
revenue increased by 113% for the period April 1, 2007 to March 7, 2008 ($22.61
million) over the prior fiscal year ($10.60 million). The company began several
large contracts including civil construction of cement
plants. The company continues to maintain large construction contracts and
is expected to resume after the monsoons end in September 2008.
Expenses
Sricon’s
expenses primarily consist of construction materials, employee compensation and
benefits, depreciation and amortization, interest expense and general and
administrative expense. For the period April 1, 2007 to March
7, 2008, total expenses increased by $9.77 million or 98%, as compared to FY
2007. Cost of revenue increased by $7.88 million or 97%, as compared
to FY 2007. The increase was due to higher construction costs associated with
increased contract revenue during the period April 1, 2007 to March 7, 2008.
Selling, general and administrative expenses increased by $1.27 million or 114%,
as compared with FYE 2007 due to the same reasons. Interest expense
increased by nearly $.50 million or 86%, as compared with FYE 2007. The increase
in interest expense was due to higher utilization of debt and an increase in
interest rates.
Liquidity
and Capital Resources
The
Company’s liquidity and funding risk management policies are designed to ensure
that we are able to access adequate financing. The principal sources of
financing Sricon’s business are stockholders’ equity and bank lines of credit.
As of March 7, 2008, Sricon’s net capital exceeded its net capital
requirements. Also, Sricon has entered into several credit agreements
with various banks.
Cash
Flows
During
the period April 1, 2007 to March 7, 2008, Sricon utilized nearly $1
million in cash in operating activities. The net cash was primarily used to
finance the increased receivables, non-current assets, advance from customers
and other non-current liabilities. Also, Sricon invested $.23 million
in the purchase of plants, machinery, and other equipment. We and we
purchased non-current investments for $ .69 million, resulting in net
cash used in investing activities of $ .76 million. These investments
were mainly financed from capital leases, reinvestment of profits and share
subscription money received from IGC. The net increase in cash and cash
equivalents was $.21 million.
Sricon
used $.91 million in operating activities during 2006-07. The net cash was
primarily used to finance increased receivables, BOT Projects under
Progress and decreased trade payables. Sricon also invested in the purchase of
plant, machinery, and other equipment for $.73 million resulting in net cash
used in investing activities of $.18 million in 2006-07. These investments were
primarily financed by bank overdrafts, term loans, reinvestment of profits, and
customer and related party balances. The net decrease in cash and cash
equivalents was $.45 million during the 2006-07 fiscal year. Sricon
is in talks with several banks in India to secure revolving lines of debt to
meet its working capital requirements and fund rapid growth.
Fiscal
Year Ended March 31, 2007 Compared To Fiscal Year Ended March 31,
2006
Revenues
Total
revenues were $10.60 million in FYE 2007, and $11.01 million for FYE
2006
Expenses
Sricon’s
expenses principally consist of construction materials, employee compensation
and benefits, depreciation and amortization, interest expense and general and
administrative expense. In FYE 2007, total expenses decreased by $.47 million or
5%, compared to FYE 2006. Cost of Revenue decreased by $.50 million or 6%,
compared to FYE 2006. The decrease was due to lower contract revenue
during the year. Selling, general and administrative expenses decreased
by $.13 million or 10%, compared to FYE 2006, due to lower scale of
operations during the year. Interest expense increased
by $.14 million or 37% compared to FYE 2006. The increase
was due to higher utilization of debt and an increase in interest
rates.
Cash
Flows
Sricon
used $.91 million in operating activities during FY
2007. Net cash was used to finance increased receivables, BOT
Projects under progress and decreased trade payables. Sricon also invested $.73
million in the purchase of plant, machinery, and other equipment, resulting
in net cash used in investing activities of $.18 million in FY
07. These investments were primarily financed by bank
overdrafts, term loans, reinvestment of profits and customer and related party
balances. The net decrease in cash and cash equivalents was $.45 million
during FY 07.
Off-Balance
Sheet Arrangements
Options
and warrants issued by the Company are equity-linked derivatives and
accordingly 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.
Management
Discussion and Analysis (TBL)
Effects
of the Acquisition on TBL
The
preparation of financial statements in conformity with U.S. GAAP requires TBL
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period. TBL has based its estimates and judgments
on historical experience and other assumptions that it finds reasonable under
the circumstances. Actual results may differ from such estimates under different
conditions and could have a material impact on the financial statements, and it
is possible that such changes could occur in the near term.
Significant
estimates and assumptions are used when accounting for certain items, such as
but not limited to, revenue recognition, the useful lives and the evaluation of
impairment of property and equipment, the income tax, the contingencies and the
provision for impairment of receivables and advances. Actual results could
differ from these estimates.
Summarized
balance sheet information for TBL is as follows:
|
|
As
of
March
31, 2007
|
|
|
April
1, 2007 to
March
7, 2008
|
|
Total
Assets
|
|
$
|
7,098
|
|
|
|
7,929
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
7,098
|
|
|
|
7,929
|
|
Major
items of TBL’s assets and liabilities are as follows:
(Amounts
in US Dollars ‘000)
|
|
As
of
March
31, 2007
|
|
|
April
1, 2007 to
March
7, 2008
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,208
|
|
|
|
736
|
|
Inventories
|
|
|
1,284
|
|
|
|
1,428
|
|
Prepaid
and other assets
|
|
|
1,231
|
|
|
|
271
|
|
Property,
plant and equipment (net)
|
|
|
2,265
|
|
|
|
1,979
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Short
term borrowings and current portion of long tern loan
|
|
|
6,079
|
|
|
|
2,437
|
|
Trade
payable
|
|
|
1,502
|
|
|
|
2,222
|
|
Long
term debts, net of current portion
|
|
|
2,333
|
|
|
|
|
|
Advance
from customers
|
|
|
1,877
|
|
|
|
824
|
|
Total
Stockholders' equity
|
|
$
|
(4,895
|
)
|
|
|
(397
|
)
|
Summarized
statement of income information for TBL is as follows:
|
|
|
April
1, 2007 to
|
|
(Amounts
in US Dollars ‘000)
|
FYE
March 31, 2007
|
|
March
7, 2008
|
|
Revenues
|
|
$
|
4,318
|
|
|
|
5,321
|
|
Expenses
|
|
|
(4,465
|
)
|
|
|
(5,877
|
)
|
Net
Income (Loss)
|
|
$
|
536
|
|
|
|
1,988
|
|
Recent
Accounting Developments and their impact on TBL
In May
2005, the FASB issued FAS No. 154, “Accounting Changes and Error Corrections-a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (FAS 154). This
Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement
No. 3, “Reporting Accounting Changes in Interim Financial Statements.” This
Statement requires retrospective application to prior periods’ financial
statements for changes in accounting principle, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. FAS 154 also requires that a change in depreciation, amortization, or
depletion method for long-term, non-financial assets be accounted for as a
change in accounting estimate effected by a change in accounting principle. The
Company adopted FAS 154 for accounting changes and corrections of errors made
after the adoption date. The adoption of the provisions of FAS 154 did not have
an impact on the Company’s financial statements.
In
September 2006, the Securities and Exchange Commission (“SEC”) staff issued
Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”). SAB 108 provides guidance on how prior year
misstatements should be taken into consideration when quantifying misstatements
in current year financial statements for purposes of determining whether the
current year’s financial statements are materially misstated. The provisions of
SAB 108 are required to be applied by registrants in their annual financial
statements covering fiscal years ending on or before November 15, 2007. The
adoption of the provisions of SAB 108 did not have an impact on the Company’s
financial statements.
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). FIN 48
clarifies the accounting and reporting for uncertainties in income tax law. This
Interpretation prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns. The provisions of FIN 48
will be applied beginning in the first quarter of 2008 (i.e. from April 1,
2008), with the cumulative effect of the change in accounting principle recorded
as an adjustment to retained earnings. The Company is currently assessing the
impact of the adoption of this Interpretation on its financial
statements.
Discussion
of Operations at TBL
April
1, 2007 to March 7, 2008 Compared To FYE March 31, 2007 (FY 2007)
Revenues
Total
revenue increased by 23% April 1, 2007 to March 7, 2008 ($5.32 million) over the
prior FYE 2007 ($4.32 million).
Expenses
TBL’s
expenses primarily consist of construction materials, employee compensation and
benefits, depreciation and amortization, interest expense and general and
administrative expense. For the period April 1, 2007 to March
7, 2008, total expenses increased by $1.41 million or 32%, as compared to FY
2007. Cost of revenue increased by $2.06 million or 77%, as
compared to FY 2007. The increase was due to higher contract revenue during the
period April 1, 2007 to March 7, 2008. Selling, general and administrative
expenses decreased by $.21 million or 46%, as compared with FYE 2007, due to
primarily an cost cutting initiatives by management. Interest expense
decreased by $.67 million or 59%, as compared with FYE 2007. The decrease was
due to lower utilization of debt and repayment of outstanding
debts.
Liquidity
and Capital Resources
The
Company’s liquidity and funding risk management policies are designed to ensure
that we are able to access adequate financing. The principal sources of
financing TBL’s business are stockholders’ equity and bank lines of
credit. As of March 7, 2008, TBL’s net capital exceeded its net
capital requirements.
Cash
Flows
During
the period April 1, 2007 to March 7, 2008, TBL generated $2.78 million in cash
in operating activities. The net cash was primarily generated from income
earned for the period, prepaid expenses and other current assets and other
non-current liabilities. TBL also generated cash from the
release of restricted cash for $.21 million, resulting in net cash
generated from investing activities of $.20 million. The company used cash
primarily to repay bank overdrafts, term loans and other debts
for $6.58 million. The net decrease in cash and cash equivalents was
$.47 million.
Fiscal
Year Ended March 31, 2007 compared to Fiscal Year Ended March 31,
2006
Revenues
Total
revenues were $4.32 million in the fiscal year ended March 31, 2007, an increase
of 89% over the corresponding 12-month period in 2006.
Other
Income
Other
income in FYE 2007 and FYE 2006 was $532 thousand and $516 thousand,
respectively. Other income typically includes the sale and hauling of
scrap and other waste from construction sites as well as income from rental of
idle equipment.
Expenses
TBL’s
expenses principally consist of construction materials, employee compensation
and benefits, depreciation and amortization, interest expense and general and
administrative expense. In the year ended March 31, 2007, total expenses
decreased by $.75 million or 14%, over the 2005-06 period. Cost of
Revenue decreased by $.09 million or 3%, over 2005-06. The decrease was due to
higher contract revenue during the year. Selling, general and administrative
expenses decreased by $.16 million or 26%, over 2005-06, due to high level cost
cutting measures adopted by management during the year. Interest expense
decreased by $.38 million or 25%, over 2005-06. The decrease was due to
repayment of debts.
Liquidity
and Capital Resources
TBL’s
senior management establishes the overall liquidity and capital policies of the
company. The company’s liquidity and funding risk management policies are
designed to ensure that TBL is able to access adequate financing to service its
financial obligations when they are due. The principal sources of financing
TBL’s business are shareholder’s equity and overdraft facilities from banks. TBL
has entered into credit agreements with various banks.
Cash
Flows
TBL
generated $4.95 million in operating activities during 2006-07. The
net cash was primarily generated from decreased inventory and increased trade
payables. TBL paid debts worth $4.2 million in 2006-07. The net increase in
cash and cash equivalents was $1.08 million during the 2006-07 fiscal
years.
TBL
believes that its cash profits, existing cash balances and its credit agreements
will be sufficient to meet its cash requirements for the next twelve months. In
the longer term, the company y believes future cash requirements will continue
to be met by its cash from operations, credit arrangements and future debt or
equity financings as required.
Off
Balance Sheet Arrangements
Options
and warrants issued by the Company are equity-linked derivatives and
accordingly represent off balance sheet arrangements. The options and warrants
meet the scope exception in paragraph 11(a) of FAS 133 and are not
accounted for as derivatives for purposes of FAS 133, but instead are accounted
for as equity.
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. We are
negotiating with several banks in India for working capital lines of up to $25
million in order to help mitigate this risk. There can be no
assurance that we will be successful in obtaining these lines.
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. For
example, the cost of rock aggregate has doubled in the past 24
months. 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. For example, the
Company operates five rock quarries and is able to partly sustain its needs for
rock aggregate through its mines. We do not currently hedge commodity
prices on capital markets. However, we are analyzing this option as a possible
risk mitigation strategy.
Labor
Risk
The
building boom in India and the Middle East (India, Pakistan, and Bangladesh
exported labor) is creating pressure on the availability of skilled labor like
welders, equipment operators, etc. We mitigate the financial impact
by factoring wage increases into our contract bids and
projections. However, the building boom is unpredictable and a severe
shortage of skilled labor may impact our ability to complete projects in a
timely manner.
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 Sricon’s 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 a 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.
Accounting
Developments and their impact
In
September 2006, FASB issued FAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Benefit Plans” (FAS 158). This
Statement requires companies to recognize the over-funded or under-funded status
of a defined benefit postretirement plan as an asset or liability in its
statement of financial position. The Company has applied FAS 158, and there is
no impact on the financial statements.
In May
2005, FASB issued FAS No. 154, “Accounting Changes and Error Corrections-a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (FAS 154). This
Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement
No. 3, “Reporting Accounting Changes in Interim Financial Statements.” This
Statement requires retrospective application to prior periods’ financial
statements for changes in accounting principle, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. FAS 154 also requires that a change in depreciation, amortization, or
depletion method for long, non-financial assets be accounted for as a change in
accounting estimate effected by a change in accounting principal. The Company
adopted FAS 154 for accounting changes and corrections of errors made after the
adoption date. The adoption of the provisions of FAS 154 did not have an impact
on the Company’s financial statements.
In
September 2006, the Securities and Exchange Commission (‘SEC’) staff issued
Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (‘SAB 108’). SAB 108 provides guidance on how prior year
misstatements should be taken into consideration when quantifying misstatements
in current year financial statements for purposes of determining whether the
current year’s financial statements are materially misstated. The provisions of
SAB 108 are required to be applied by registrants in their annual financial
statements covering fiscal years ending on or before November 15, 2007. The
adoption of the provisions of SAB 108 did not have an impact on the Company’s
financial statements.
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). FIN 48
clarifies the accounting and reporting for uncertainties in income tax law. This
Interpretation prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of uncertain tax positions
taken or expected to be taken in income tax returns. The provisions of FIN 48
will be applied beginning in the first quarter of 2008 (i.e. from April 1,
2008), with the cumulative effect of the change in accounting principle recorded
as an adjustment to retained earnings. The Company is currently assessing the
impact of the adoption of this Interpretation on its 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 37% of Sricon
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. The financial statements
provided here and going forward are the consolidated statements of IGC, which
include IGC-M, Sricon, TBL and their subsidiaries. However,
historical description of our business for periods and dates prior to March 7,
2008 include information on Sricon and TBL.
Sricon
Infrastructure Private Limited (“Sricon”) was incorporated as a private limited
company on March 3, 1997 in Nagpur, India. Sricon is an engineering
and construction company that is engaged in three business areas: 1) civil
construction of highways and other heavy construction, 2) mining and quarrying
and 3) the construction and maintenance of high temperature cement and steel
plants. Sricon has a pan-India focus and is accredited with ISO
9001:2000 certification and its present and past clients include various Indian
government organizations. Sricon employs approximately 250 skilled
employees and over 800 unskilled labor contractors. It currently has
the capacity and prior experience to bid on contracts that are priced at a
maximum of about $116 million. Sricon recently won, as disclosed in a press
release, a contract to build 150 miles of rural roads including one major and 33
minor bridges.
Until the
formation of Sricon, the infrastructure construction work was carried out in
Vijay Engineering Enterprises (partnership concern)
(“VEE”). Sricon was incorporated with an objective to execute large
scale infrastructure projects in sectors such as Highways, Water Management
System, Power and Cement Plants, etc. In an effort to consolidate all
infrastructure activities under one company to garner better synergy, business
profile, as well as improve cost management, VEE was merged with Sricon
effective March 31, 2004.
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. 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, and its direct and indirect subsidiaries
(Sricon and TBL).
Consolidated
Company Overview
Through
our subsidiaries, we have over $382 million of backlog of orders in the three
core areas of business. We expect to execute these contracts over the
next 30 months. The increases in labor and commodity prices
poses a margin risk, which we are diligently mitigating through the following
steps: 1) ensuring that contracts have an escalation clause, which allows us to
pass on increases in commodity prices to the contracting agency, 2) shore up
reserves of raw materials. For, for example, we use rock aggregate in all our
construction and having an adequate supply of rock aggregate mitigates the risk
of unforeseen prices increases, 3) adapting best practices to recruit and retain
skilled and unskilled labor.
The
Indian government has articulated plans to modernize the Indian
Infrastructure. It expects to spend over $475 billion in this effort.
We believe that these initiatives will continue to be favorable to our business
model. Our model is quite simple: we bid on construction, mining and
engineering contracts; the contracts we win increase our backlog of orders,
which translates into greater revenues and earnings. There is
seasonality in our business as outdoor construction activity slows down during
the Indian monsoons. The rains typically last intermittently from
June through September.
Industry
Overview
The
Indian economy reached a significant milestone when rapidly growing GDP
surpassed the $1 Trillion mark in fiscal 2007. According to the World
Bank, only nine economies at the close of 2005 generated more than $1
Trillion in GDP. In general, India’s growth rates have held
steady for the past few years ranging from 6.2% to 8.5% since 2003 and peaked at
9.2% last fiscal year ending March 31, 2007. The Indian stock markets
experienced significant growth with the SENSEX peaking at 21, 000 (January 8,
2008) during fiscal year March 31, 2008. However, due to speculative
inflationary expectations, the markets have retreated to early 2007
levels.
India’s
GDP growth for fiscal year end March 31, 2008 was 9%, a slight drop compared to
9.2% in the previous 12-month period, but the third year in a row where it has
finished at 9% or above. The factors contributing to maintaining this
high growth included stellar performances 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. Meanwhile, several economic think tanks are forecasting a
slight downward trend in India’s GDP growth rate during the current fiscal year
to approximately 8.5%, which still ranks India among the top 9 global
performers. Planning Commission Deputy Chairman was more optimistic
addressing reporters in New Delhi on June 24, 2008 stating that India can
maintain a rate of 9% growth despite challenges such as rising oil
prices.
To
sustain India’s fast growing economy, the share of infrastructure investment in
India is expected to increase to 9 per cent of GDP, which is an
increase from 5 per cent in 2006-07. This forecast is based on The
Indian Planning Commission’s annual publication that for the Eleventh Plan
period (2007-12), a large investment of approximately $494 Billion would be
required for Infrastructure build and modernization. This industry is
the largest employer 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%. The sector is riding on a
high growth wave powered by the large expenditures committed to
infrastructure programs – evidenced all over the country in the form of new
highways, dams, power plants and pipelines. The sectors contributing to the high
growth rates are power, transport, petroleum and urban
infrastructure.
This
ambitious infrastructure development mandate by the Indian Government will
require huge 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 back 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. Speaking to the
media in November of 2007, Indian commerce minister Kamal Nath
added: "Our FDI policy is perhaps one of the most liberal in the
world, India remains a favorite FDI destination despite what is going on in the
stock market."
Previously,
Minister Nath said the government had fixed an ambitious $30 billion FDI target
for the country's 2007-08 financial year (April to March) following
total inflows in 2006-07 of $19.5 billion (or $16B excluding reinvested
earnings) compared with $7.7 billion in 2005-06. Actual FDI for
2007-08 surged past $25 Billion. With the exception of Japan, the
focus and expected growth of infrastructure in India has made it a leading FDI
destination within Asia in terms of private equity. Eight of the
Lipper's world's top ten infrastructure funds in 2007 were Indian equity
funds. However, in comparison , China received $67 billion in
FDI, while India received only $16B. More than
50% of India’s FDI’s will be utilized for infrastructure, telecom, and power
among others.
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.
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
Securities
We have
three securities listed on the American Stock Exchange: (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.
Core
Business Areas
Our core
business areas include the following:
Highway and heavy
construction:
The
Indian government has articulated a plan to build and modernize Indian
infrastructure. The government’s plan, which calls for spending over
$475 billion over the next five years, includes the construction of rural roads,
major highways and townships among other infrastructure. We have
approximately $243 million worth of contracts in our order book
including a $103 million contract to build 150 miles of rural roads including 33
bridges in the state of Madhya Pradesh, and contracts for the building of
highways in Assam, Maharashtra and Madhya Pradesh totaling around $108
million. In addition, we have smaller construction contracts
amounting for $32 million, including a construction contract in a
township in Nagpur.
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. Sricon has five
site licenses with two installed crushers and produces approximately 600,000
metric tons of aggregate annually. The aggregate reserves in Sricon’s
five quarries have a projected value of around $50
million. India is the third largest producer of coal and fourth
largest producer of ore. Ten percent of the world’s coal reserves are
in India. We have a multiyear contract valued around $478 million for
the removal of overburden from open pit coal
mines. Overburden is the layers and rock covering the coal
seam, These types of excavation projects are necessary before mining
can began.
Construction
and maintenance of high temperature plants
Sricon
has an expertise in the civil engineering, construction and maintenance of high
temperature plants. For example, we construct cement and steel
plants. This requires specialized skills to build and maintain the
high temperature chimneys and kilns. We have a multiyear contract
valued around $60 million for civil engineering and maintenance of high
temperature cement plants.
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.
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. For example, Sricon’s ceiling on highway construction
projects is around $116 million for each
contract.
Our
Growth Strategy and Business Model
Our
business model is simple. We bid on construction, mining 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 three bid
teams. Historically, we bid on multi-year contracts
up to $70 million, but more recently, we began bidding on contracts up to $110
million. Our growth strategy is six pronged: 1) increase the backlog
of orders in the three areas of business to over $500 million, 2) recruit
executives, business managers, and specifically three leads for the three lines
of business, 3) recruit world class technical partners from the United States
for each of our business lines, 4) eliminate or hedge risks associated with the
volatility of commodity prices by, for example, ownership of aggregate quarries,
mines, control over suppliers, or pass through contracts, 5) adapt a strategic
and quantitative approach to building the business rather than one that is
generic and short-sighted, and 6) install systems better
enabling corporate governance, USGAAP reporting and contract
monitoring.
Indian
companies have historically reported in Indian GAAP. However we have
increased the number of USGAAP accountants and continue to
strengthen USGAAP reporting capability within our
companies. Currently, we have chief financial officers located in
India at of Sricon and TBL. In addition, we have a Chief Accounting
Officer in the US. Also, we have augmented the in-house teams with a
Delhi based consulting firm that specializes in both USGAAP and Sarbanes-Oxley
(SOX) compliance. Adapting best practices for reporting, governance,
and monitoring is of immediate strategic value as it leads to a quantitative
approach and, therefore, part of our growth strategy and business
model.
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 $20 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 have positioned ourselves in the $50 million to $125 million
contract range , above locally based contractors and below the large firms,
creating a distinct technical and financial advantage in this market
niche.
Seasonality
The
construction industry 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 second fiscal
quarter ending in September is slower than other quarters because of these
natural phenomena’s. Some projects, such as engineering or
maintenance of high temperature plants is less susceptible to seasonal
changes. This reduced paced period 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.
Employees
and Consultants
As of
March 31, 2008, we employed a work force of approximately 1,200 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. With a projected macro increase in
construction activity, we anticipate a shortage of skilled labor. 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. 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. Our Chief Executive Officer is Ram Mukunda and our Chairman
is Ranga Krishna. Our Managing Director for Sricon is Ravindra Lal
Srivastava and our Managing Director for TBL is Jortin
Antony. Our Treasurer and Principal Accounting officer is John
Selvaraj. Our Chief Financial Officer for Sricon is Abhay Wakhare and
our Chief Financial Officer for TBL is Santhosh Kumar. We also
utilize the services of several consultants who provide USGAAP systems expertise
and SOX 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.
Facilities
We do not
own any real estate or other physical properties materially important to our
operation. Our headquarters are located at 4336 Montgomery Avenue, Bethesda,
Maryland, 20814. The cost of this space is included in the $4,000 per month
fee we pay IGN, LLC, an affiliate of our CEO Ram Mukunda, for office space and
certain general and administrative services. Sricon’s headquarters are located
at Pragati Layout, Rajeev Nagar, Nagpur 440025, India. TBL’s
headquarters are located at 34/136 A Edappally Bypass Road, Cochin 682024,
Kerala, India. In addition, we have offices in Mauritius, Delhi,
Bombay and Bangalore, India. We have temporary facilities at each of
our work centers in the states of Maharashtra, Madhya Pradesh, Karnataka, Andhra
Pradesh and Assam. We believe that our office facilities are suitable
and adequate for our business as it is presently conducted.
Employees
As of
March 31, 2008, we employed a work force of approximately 1,200 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. With a projected macro increase in
construction activity, we anticipate a shortage of skilled labor. 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. 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. Our Chief Executive Officer is Ram Mukunda and our Chairman
is Ranga Krishna. Our Managing Director for Sricon is Ravindra Lal
Srivastava and our Managing Director for TBL is Jortin
Antony. Our Treasurer and Principal Accounting officer is John
Selvaraj. Our Chief Financial Officer for Sricon is Abhay Wakhare and
our Chief Financial Officer for TBL is Santhosh Kumar. We also
utilize the services of several consultants who provide USGAAP systems expertise
and SOX expertise among others.
Legal
Proceedings
We are
not involved in nor a party to any material legal proceedings.
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). Currently, we
file financial statements in (1) India using IGAAP, (2) in Mauritius under IFRS
(International Financial Reporting Standards), and (3) with the SEC, filing
quarterly 10-Q’s and annual 10-k’s complying with USGAAP. We
annually conduct IGAAP and PCAOB (USGAAP) audits for each company. We
acknowledge that this process is at times cumbersome and places restraints on
our existing staff. Therefore, we are in the process of improving our closing
process and align our accounting operations more with U.S. reporting
requirements. This will enable timely completion of audits and SEC filings. 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. The registration statement and its exhibits, as
well as our other reports filed with the SEC, can be inspected and copied at the
SEC’s public reference room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information about the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a web site at http://www.sec.gov which contains
the Form S-1 and other reports, proxy and information statements and
information regarding issuers that file electronically with the
SEC.
Additional
investment activity - Wind farm purchase agreement
On April
29, 2007, we entered into a Contract Agreement dated April 29, 2007, as
subsequently amended (“CWEL Purchase Agreement”), with Chiranjjeevi Wind Energy
Limited, Arul Mariamman Textiles Limited, and Marudhavel Industries Limited
(collectively, “CWEL”). Pursuant to the CWEL Purchase Agreement, we 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 (the “CWEL
Acquisition”). We are contemplating pursuing this opportunity, or a
similar one if we are able to obtain adequate funding from the exercise of
warrants, debt or other means. There is no guarantee that we will
ultimately consummate the CWEL Acquisition or a similar
acquisition.
The
following description summarizes the material provisions of the CWEL Purchase
Agreement. The CWEL Purchase Agreement contains representations and warranties
that IGC, on the one hand and CWEL on the other hand, have made to one another
and are for the benefit of such parties only, and may not be relied upon by any
other person. The assertions embodied in the representations and warranties
contained in the CWEL Purchase Agreement are qualified by information in
disclosure schedules to the CWEL Purchase Agreement. Although IGC does not
believe the disclosure schedules contain information the securities laws require
IGC to publicly disclose, the disclosure schedules contain information that
modifies, qualifies and creates exceptions to the representations and warranties
set forth in the CWEL Purchase Agreement. Accordingly, you should not rely on
the representations and warranties as characterizations of the actual state of
facts, since the representations and warranties are subject in important part to
the underlying disclosure schedules. The disclosure schedules contain nonpublic
information. Information concerning the subject matter of the representations
and warranties may change following the date of the CWEL Purchase Agreement, and
subsequent information may or may not be fully reflected in IGC’s public
disclosures.
Scope
of Work Under the CWEL Purchase Agreement
CWEL will
be responsible for the design, manufacture and supply of wind turbines,
including the tower, rotor, cables, control-panel and sub-station. CWEL will be
responsible for all liaison work with government agencies in India. CWEL will
also be responsible for the operations and maintenance of the wind energy farm
once it is operational.
Purchase
Price — Payment
At
closing, the purchase price for the 24-mega watt wind energy farm is INR
1,140,000,000 (approximately $28,500,000 based on a conversion ratio of $0.025
per INR.) The price is subject to revision based on the prices of major
components at closing. The actual payments made to CWEL will be spread over nine
to twelve months.
IGC paid
a deposit of approximately $250,000 on May 22, 2007. Twenty five percent of the
deposit (approximately $62,500) was forfeited by IGC when the CWEL Purchase
Agreement was not consummated by March 31, 2008.
Security
Interest
CWEL will
grant IGC a security interest in all major goods and components purchased by
CWEL in connection with the construction of the wind energy farm. CWEL shall
further assign to IGC all its rights under any agreements between CWEL and
vendors of goods and components purchased for the purpose of the construction of
the wind energy farm.
Closing
of the CWEL Acquisition
The CWEL
Purchase Agreement contemplates that the closing of the CWEL Acquisition will
take place on a date mutually agreed upon by IGC and CWEL, following the
satisfaction of certain customary closing conditions, which date shall be no
later than March 31, 2008 unless the parties agree to a later date.
Implementation
Schedule
CWEL has
contracted to supply, install and commission all wind turbines within 12 months
from the effective date of the CWEL Purchase Agreement. The effective date is
defined as the date on which the first payment, not counting the deposit, is
made to CWEL. However, IGC shall extend the completion date by an additional 3
months provided that CWEL has made adequate progress and met certain
milestones.
Power
Purchase Agreement
As part
of the turnkey nature of the contract, CWEL undertakes to put in place a power
purchase agreement between IGC and the Bangalore Electricity Supply Company
(BESCOM), unless IGC chooses to sell the power generated by the wind farm to a
third party in accordance with prevailing Government of India
rules.
Power
Generation Guarantee
During
the time that CWEL is responsible for the operations and maintenance of the wind
energy farm, CWEL guarantees a performance of 550,000 units of power per wind
energy turbine, within a 10% variation for changes in wind patterns. If the
aggregate generation of the wind energy farm is below the amount guaranteed,
CWEL undertakes to reimburse IGC the shortfall at the prevailing power purchase
rate.
Liquidated
Damages
If CWEL
fails to complete the commissioning of all wind turbines in accordance with the
Agreement, specifically within the mandated time frame, CWEL will pay liquidated
damages equal to 5% of the total contract price up to a maximum of INR
57,000,000 (approximately $1,425,000 based on a conversion ratio of $.25 per
INR).
Operations
and Maintenance (O&M)
CWEL will
undertake the operations and maintenance of the wind energy farm at a price of
INR 10,800,000 (approximately $270,000 based on a conversion ratio of $0.25 per
INR) per year. The term of the O&M contract is for seven years and is
non-cancelable in the first three years of operations. The O&M pricing is
subject to a 5% escalation per year commencing with the third year of
operations.
Representations
and Warranties
The
Purchase Agreement contains customary representations and warranties that CWEL
has made to IGC and that IGC has made to CWEL. Several of the representations
and warranties of the parties are qualified by materiality or material adverse
effect
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
|
|
|
43
|
|
Chairman
of the Board
|
Ram
Mukunda
|
|
|
49
|
|
Chief
Executive Officer, Executive Chairman, President and
Director
|
John
Selvaraj
|
|
|
63
|
|
Treasurer
|
Sudhakar
Shenoy
|
|
|
60
|
|
Director
|
Richard
Prins
|
|
|
50
|
|
Director
|
Suhail
Nathani
|
|
|
42
|
|
Director
|
Larry
Pressler
|
|
|
65
|
|
Special
Advisor
|
Howard
Gutman
|
|
|
50
|
|
Special
Advisor
|
P.G.
Kakodkar
|
|
|
71
|
|
Special
Advisor
|
Shakti
Sinha
|
|
|
50
|
|
Special
Advisor
|
Dr.
Prabuddha Ganguli
|
|
|
58
|
|
Special
Advisor
|
Dr.
Anil K. Gupta
|
|
|
58
|
|
Special
Advisor
|
Directors
and Executive Officers of Sricon
Name
|
|
Age
|
|
Position
|
Ravindralal
Srivastava
|
|
|
54
|
|
Chairman
and Managing Director
|
Abhay
Wakhare
|
|
|
37
|
|
CFO,
GM Finance and Accounting
|
Ram
Mukunda
|
|
|
49
|
|
Director
|
Directors
and Executive Officers of TBL
Name
|
|
Age
|
|
Position
|
Jortin
Antony
|
|
|
40
|
|
Managing
Director
|
M.
Santhosh Kumar
|
|
|
41
|
|
CFO,
GM Finance and Accounting
|
Ram
Mukunda
|
|
|
49
|
|
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. 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
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. Mr. Mukunda was responsible for the restructuring of Startec
after the company filed for protection under Chapter 11 in December 2001.
Startec emerged from Chapter 11 in 2004. Ferris, Baker Watts, Incorporated, the
representative of the underwriters for the IPO, acted as the managing
underwriter in connection with the initial public offering of Startec in 1997,
and one of its executives is also a member of our board of
directors.
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 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. Since June 2008, Mr. Prins has been a
consultant to Royal Bank of Canada. From March 1996 to June 2008, Mr.
Prins was the Director of Investment Banking at Ferris, Baker Watts,
Incorporated (FBW was the lead underwriter for our IPO and was acquired by Royal
Bank of Canada on June 20, 2008). Prior to Ferris, Baker Watts, from
July 1988 to March 1996, Mr. Prins was Senior Vice President and Managing
Director for the Investment Banking Division of Crestar Financial Corporation
(SunTrust Banks). From 1993 to 1998, he was with the leveraged buy
out firm of Tuscarora Corporation. Since February 2003, he has been on the board
of Amphastar Pharma and since April 2006 he has been on the board of Advancing
Native Missions, a non-profit. Mr. Prins holds a B.A. degree from
Colgate University (1980), and an M.B.A. from
Oral Roberts University (1983).
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 earned a LLM in 1991 from Duke University School of Law. In 1990 Mr.
Nathani graduated from Cambridge University with a MA (Hons) in Law. In
1987, he graduated from Sydenham College of Commerce and Economics, Bombay,
India.
Sricon
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.
Abhay Wakhare has been the
General Manager of Finance and Accounting of Sricon since 2004, where he is
responsible for finance, accounting, human resources, and is the corporate
secretary of the company. Mr. Wakhare has broad experience having worked in
several industries. From 2002-2004, he was the General Manager Finance, for the
ammunitions manufacturing division of the Eros Group of companies. From
1999-2002, he became an entrepreneur having founded a perfume company. From
1996-1999, he was the chief executive officer of Disani Agro Limited, a $50
million pesticide and herbicide manufacturer. From 1994-1996, he was the
Assistant General Manager Finance, at Hindustan Lever. Mr. Wakhare’s
education and qualifications are as follows: BCom (Bachelor of
Commerce), 1990, M.Com, 1992, Nagpur University. IICA, 1993 (Indian
Institute of Cost Accountants). CFA, 1993 (Chartered Financial
Analyst). LLB 1993, (Bachelor of Law),
Pune University. MBA, 1994, Symbosis Institute of Management,
Pune (ranked as the 4th best business school in India in 2007,
according to a survey conducted by Indian Institute of Management, Ahemdabad )
LLM, 1996, (Masters in Law), Osmaniya University. M.Sc. Finance,
1997, Business School of Hyderabad.
TBL
Management
Jortin Antony has
been the Managing 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 CFO and 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.
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 is a member of several boards of Indian and US companies including
the board of directors for Infosys Technologies, Inc. (INFY). 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.
Howard Gutman has served as
our Special Advisor since April 5, 2007. Although he is not
serving as an attorney for the Company, Mr. Gutman has been a lawyer in
Washington D.C. for twenty-five years. Mr. Gutman rejoined
Williams & Connolly in October 1986 and became a partner in
1988. He remains a partner at the firm today (although the firm has
no role with the Company), where he is a business litigator.
From May
1985 to October 1986, he was Special Assistant to the Director William H.
Webster of the Federal Bureau of Investigation. From October 1982 to
May 1985, Mr. Gutman was an associate at the law firm of Williams &
Connolly. Mr. Gutman has been active in Democratic politics for
20 years having served as an advisor to candidates for President, Governor, and
Congress. He assisted the Gore campaign in Florida in
2000. Since 1983, Mr. Gutman has been an Associate Editor of
Litigation Magazine and an active participant in the ABA’s Litigation
Section. He has also appeared on several episodes of the HBO series
“K Street.”
Mr.
Gutman graduated from Columbia University with a B.A. Summa Cum Laude in
1977 and from the Harvard Law School, Magna Cum Laude in
1980. From September 1980-September 1981, he served as a Law Clerk to
The Honorable Irving L. Goldberg of the United States Court of Appeals for the
Fifth Circuit. From September 1981-September 1982, Mr. Gutman served
as Law Clerk to The Honorable Potter Stewart,(retd), United States Supreme
Court.
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 American Stock Exchange, 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 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 American
Stock Exchange’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-B 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 American Stock Exchange
listing standards. The American Stock Exchange 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 American Stock Exchange 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 American
Stock Exchange’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 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 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 American Stock Exchange. 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, 2008, our board of directors held five 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, 2008, 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. We anticipate that in the near future we will
pay varying levels of compensation to the current and newly elected non-employee
directors of the Company for their services as directors in the future based on
their eligibility to be members of our audit and compensation committees. We
anticipate determining director compensation in accordance with industry
practice and standards.
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 with IGN with respect to such services
initially provided that payments would cease upon the acquisition of Sricon and
TBL. However, as our independent directors have approved the
continuation of the agreement on a month-to-month basis having determined that
the space and services are of benefit to the Company and, as noted above, they
believe that the rates are at least as favorable as we could have obtained from
an unaffiliated third party.
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, 2008 were filed in a timely manner.
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 to
the acquisition of Sricon and TBL by the Company on 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 2008, Mr. Mukunda
was paid $15,000.
The
annual executive compensation for the Chief Executive Officer and Chief
Financial Officer of the Company is set out below.
Summary
compensation of executive of IGC
|
|
FY
2006
|
|
|
FY
2007
|
|
|
FY
2008
|
|
Ram
Mukunda
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
15,000
|
(1)
|
John
Selvaraj (2)
|
|
$
|
0
|
|
|
$
|
15,000
|
|
|
$
|
35,000
|
(3)
|
(1)
|
Excludes
an additional $4,355 due to Mr. Mukunda for the period ended March 31,
2008 as a result of the approval of his employment agreement in May 2008,
which amount was paid to Mr. Mukunda in fiscal year
2009.
|
|
|
(2)
|
Paid
to Mr. Selvaraj’s affiliated company SJS Associates.
|
|
|
(3)
|
Excludes
an additional $3,871 due to SJS Associates for the period ended March 31,
2008 as a result of the approval of the new agreement with SJS Associates,
which amount was paid to SJS Associates in fiscal year
2009.
|
Compensation
for Executive Officers of Sricon
The
annual executive compensation for the Chairman and Managing Director of Sricon
is set out below. The USD amounts are shown at a conversion rate of
INR 40 to USD 1.
Summary
compensation of executive of Sricon
|
FY
2006
|
FY
2007
|
FY
2008
|
Mr.
R Srivastava
|
INR
600,000
|
INR
600,000
|
INR
600,000
|
|
USD
15,000
|
USD
15,000
|
USD
15,000
|
Compensation
for Executive Officers of TBL
The
annual executive compensation for the Managing Director of TBL is set out
below. The USD amounts are shown at a conversion rate of INR 40 to
USD 1.
Summary
compensation of executive of TBL
|
FY
2006
|
FY
2007
|
FY
2008
|
Mr.
Jortin Antony
|
INR
480,000
|
INR
480,000
|
INR
480,000
|
|
USD
12,000
|
USD
12,000
|
USD
12,000
|
Compensation
of Directors
No
compensation was paid to the Company’s Board of Directors for the one-year
period ended March 31, 2008.
Certain
Relationships and Related Transactions
As of
June 30, 2008, 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 the
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. A copy of this agreement was filed with the SEC in the Company’s Report
on Form 8-K filed May 23, 2008 and is incorporated here by
reference.
Pursuant
to the agreement, the Company pays Mr. Mukunda a base salary of $300,000 per
year. Mr. Mukunda is also entitled to receive a $150,000 bonus upon filing of
the Company’s Form 10-K for the fiscal year ended March 31, 2008 and additional
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 of at least $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 was 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 administers executive compensation. No executive
officer of the Company served as a director or member of the compensation
committee of any other entity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior
Share Issuances
On May 5,
2005, we issued 1,750,000 shares 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
|
|
Chief
Financial Officer and Director (2)
|
On June
20, 2005, we issued 750,000 shares 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) (3) (4)
|
|
Relationship to Us
|
Parveen
Mukunda (5)
|
|
|
425,000
|
|
Secretary
|
Sudhakar
Shenoy
|
|
|
37,500
|
|
Director
|
Suhail
Nathani
|
|
|
37,500
|
|
Director
|
Shakti
Sinha
|
|
|
12,500
|
|
Special
Advisor
|
Prabuddha
Ganguli
|
|
|
12,500
|
|
Special
Advisor
|
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) John
Cherin resigned as our CFO, Treasurer, and Director on November 27,
2006.
(3) The
shares were issued to our officers, directors and Special Advisors in
consideration of services rendered or to be rendered to us.
(4) On
September 7, 2005, one stockholder surrendered to us 62,500 shares, and on
February 3, 2006, a stockholder surrendered to us 137,500 shares. These were
reissued as set forth below.
(5) Parveen
Mukunda is the wife of Ram Mukunda.
On
February 3, 2006, we reissued the 200,000 shares 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
|
|
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
holders of the majority of these shares will be entitled to make up to two
demands that we register these shares pursuant to an agreement to be signed
prior to or on the date of this prospectus. 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.
Mr.
Mukunda and certain of our other officers and directors collectively purchased
in the aggregate 170,000 units in a private placement immediately prior to the
IPO of IGC’s units at a price equal to the offering price of the IPO, $6.00 per
unit.
On
December 24, 2007 Dr. Krishna, our Chairman of the Board, entered into a Note
Purchase Agreement with us pursuant to which we agreed to issue him 446,226
shares of our common stock within 10 days of the consummation of the Acquisition
as partial consideration for a $4,300,000 loan made by Dr. Krishna to the
Company. Pursuant to the consummation of the Acquisitions, Dr. Krishna
was issued the shares. These shares are entitled to the registration
rights described above.
On March
7, 2008 Messrs. Mukunda and Krishna entered into an agreement with third parties
to transfer on or after September 8, 2008 pursuant to the terms of certain Share
Redistribution Agreements an aggregate of 1,368,031 shares, which amount was
increased to 1,418,508 by a letter agreement executed by Messrs. Mukunda and
Krishna on September 24, 2008. Specifically, as modified the letter
agreement, Mr. Mukunda agreed to transfer 1,156,820 shares and Dr. Krishna
agreed to transfer 261,688 shares. The purpose of the
agreements were to induce such third parties to acquire shares of the Company's
common stock and to cause such shares to be voted in favor of the Company’s
acquisition.
Related
Transactions
As of
June 30, 2008, 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 and the following loan
transaction: In April 2008 R.L. Srivastava, Chairman of Sricon,
made an unsecured loan of $1,953,157 to Sricon which is due in 6 months from the
date of the loan, which due date is extendable after the 6 month period by
mutual consent. The loan’s interest rate is 2%
annually.
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.
Director
Independence
We are
listed on an exchange that requires its listed companies to have independent
directors. The Board of Directors has made the determination that
Messrs. Krishna, Shenoy and Nathani are independent directors as defined by the
American Stock Exchange listing standards. The 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.
Messrs.
Mukunda and Krishna may be deemed to be our “parent,” “founder” and “promoter,”
as these terms are defined under the Federal securities laws.
BENEFICIAL OWNERSHIP OF CERTAIN OWNERS AND
MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of October 9, 2008 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 8,780,107 shares of common stock outstanding as of
October 9, 2008, 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 October 9, 2008, 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
|
|
1,650,977
|
|
|
18.80
|
%
|
|
|
|
|
|
|
|
Brightline
Capital Management, LLC (3)
1120
Avenue of the Americas, Suite 1505
New
York, New York 10036
|
|
750,000
|
|
|
8.54
|
%
|
|
|
|
|
|
|
|
Pine
River Capital Management L.P. (4)
601
Carlson Parkway, Suite 330
Minnetonka,
MN 55305
|
|
2,099,800
|
|
|
23.92
|
%
|
|
|
|
|
|
|
|
Steven
Michael Oliveira (5)
18
Fieldstone Court
New
City, NY 10956
|
|
3,972,793
|
|
|
37.50
|
%
|
|
|
|
|
|
|
|
Steven
S. Taylor, Jr. (6)
1376
N. Doheny Drive
Los
Angeles, CA 90069
|
|
815,390
|
|
|
8.52
|
%
|
|
|
|
|
|
|
|
Ranga
Krishna (7)
|
|
2,199,899
|
|
|
24.25
|
%
|
|
|
|
|
|
|
|
Ram
Mukunda (8)
|
|
618,182
|
|
|
6.99
|
%
|
|
|
|
|
|
|
|
Sudhakar
Shenoy
|
|
50,000
|
|
|
*
|
|
|
|
|
|
|
|
|
Suhail
Nathani
|
|
50,000
|
|
|
*
|
|
|
|
|
|
|
|
|
Larry
Pressler
|
|
25,000
|
|
|
*
|
|
|
|
|
|
|
|
|
P.G.
Kakodkar
|
|
12,500
|
|
|
*
|
|
|
|
|
|
|
|
|
Shakti
Sinha
|
|
12,500
|
|
|
*
|
|
|
|
|
|
|
|
|
Dr.
Prabuddha Ganguli
|
|
12,500
|
|
|
*
|
|
|
|
|
|
|
|
|
Dr.
Anil K. Gupta
|
|
25,000
|
|
|
*
|
|
|
|
|
|
|
|
|
All
Executive Officers and Directors as a group (6 persons) (9)
|
|
2,917,471
|
|
|
31.93
|
%
|
*
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 13G filed with the SEC on May 12, 2008 by Wachovia
Corporation. Wachovia Corporation is the indirect parent
of Metropolitan West Capital Management, LLC, the owner of the
shares. Dr. Ranga Krishna
is entitled to 100% of the economic benefits of the
shares.
|
|
|
(3)
|
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”) and a Form 3 filed with the
SEC on May 30, 2008 by Smith. As disclosed in the amended
Schedule 13G, Management and Khera are each the beneficial owners of
750,000 shares of common stock (8.54%), Smith is the beneficial owner of
1,031,500 shares of common stock (11.75%) 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
(6.75%), respectively. The address for
each of the foregoing parties is 1120 Avenue of the Americas, Suite 1505,
New York, New York 10036.
|
|
|
(4)
|
Based
on a Schedule 13G jointly filed with the SEC on July 8, 2008 by Pine River
Capital Management L.P. (“Pine River”), Brian Taylor (“Taylor”)
and Nisswa Master Fund Ltd. (“Nisswa”). As disclosed in the
Schedule 13G, Pine River and Taylor are each the beneficial owners of
2,099,800 shares of common stock (23.92%) and Nisswa is the
beneficial owner of 1,284,300 shares of common stock (14.63%),
respectively.
The address for each of the foregoing parties is c/o Pine
River Capital Management L.P., 601 Carlson Parkway, Suite 330,
Minnetonka, MN 55305.
|
|
|
(5)
|
Based
on an amended Schedule 13D filed with the SEC on October 9,
2008. Includes warrants to purchase 1,814,820 shares of common stock
(which includes warrants to purchase 425,000 shares that have not been
issued to the reporting person but are due pursuant to that certain Note
and Warrant Purchase Agreement dated February 5, 2007, by and between the
Issuer and Oliveira Capital, LLC) which are exercisable within sixty (60)
days of October 9, 2008, all of which are currently
exercisable. . Mr. Oliveira holds the shares and warrants
through Oliveira Capital, LLC (“Capital”), the Steven M. Oliveira 1998
Charitable Remainder Unitrust (the “Trust”) and the Steven Oliveira IRA
(the “IRA”). Mr. Oliveira is President and sole managing member
of Capital and trustee of the Trust and the IRA. The business
address of Capital is 18 Fieldstone Court, New City, NY
10956.
|
|
|
(6)
|
Based
on an amended Schedule 13D filed with the SEC on June 4, 2008 by Mr.
Taylor. Includes warrants to purchase 795,390
shares of common stock which are exercisable within sixty (60) days of
October 9, 2008, all of which are currently
exercisable. Includes 5,000 shares of common stock
and 444,431 warrants held by Mr. Taylor in an individual retirement
account for his benefit..
|
(7)
|
Includes warrants to
purchase 290,000 shares of common stock which are exercisable within sixty
(60) days of October 9, 2008, all of which are currently
exercisable. Includes 1,650,977 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.
|
|
|
(8)
|
Includes
425,000 shares owned by Mr. Mukunda’s wife, Parveen
Mukunda. Includes warrants to
purchase 66,668 shares of common stock which are exercisable within sixty
(60) days of October 9, 2008, all of which are currently
exercisable.
|
|
|
(9)
|
Does
not include shares owned by our special advisors. Includes
1,650,977 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 and 425,000 shares
owned by Mr. Mukunda’s wife, Parveen Mukunda. Includes warrants
to purchase 356,668 shares of common stock which are exercisable within
sixty (60) days of October 9, all of which are currently
exercisable.
|
Messrs.
Mukunda and Krishna may be deemed our “parent,” “founder” and “promoter,” as
these terms are defined under the Federal securities laws.
DESCRIPTION OF CAPITAL STOCK
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 September
30, 2008, 8,780,107 shares of common stock are outstanding, held by
__ 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.
Warrants
Warrants
to purchase an aggregate of 23,374,000 shares of our common stock are currently
outstanding, including warrants to purchase an aggregate of 22,609,000 shares of
our common stock which were issued in our initial public offering and warrants
to purchase an aggregate of 1,190,000 shares of our common stock which were
issued in private placements. Each warrant entitles the registered holder to
purchase one share of our common stock at a price of $5.00 per share,
subject to adjustment as discussed below, at any time. Upon exercise of
the warrants, the warrant exercise price will be paid directly to us. The
warrants will expire March 3, 2011 at 5:00 p.m., Washington, DC time.
We may call the warrants for redemption,
|
|
|
|
•
|
in
whole and not in part,
|
|
|
|
|
•
|
at
a price of $.01 per warrant at any time after the warrants become
exercisable,
|
|
|
|
|
•
|
upon
not less than 30 days’ prior written notice of redemption to each
warrant holder, and
|
|
|
|
|
•
|
if,
and only if, the reported last sale price of the common stock equals or
exceeds $8.50 per share, for any 20 trading days within a
30 trading day period ending on the third business day before we send
notice of redemption to warrant
holders.
|
The
redemption criteria for our warrants have been established at a price which is
intended to provide warrant holders with a reasonable premium to the initial
exercise price and provide sufficient liquidity to cushion the market reaction
to our redemption call.
The
warrants issued in connection with our initial public offering were issued in
registered form under a warrant agreement between Continental Stock
Transfer & Trust Company, as warrant agent, and us. You should review a
copy of the warrant agreement, which has been filed as an exhibit to the
registration statement of which this prospectus is a part, for a complete
description of the terms and conditions applicable to the
warrants. The warrants issued in private placements incorporate
certain provisions of the warrant agreement.
The
exercise price and number of shares of common stock issuable on exercise of the
warrants may be adjusted in certain circumstances including in the event of a
stock dividend, or our recapitalization, reorganization, merger or
consolidation. However, the warrants will not be adjusted for issuances of
common stock at a price below their respective exercise prices.
The
warrants may be exercised upon surrender of the warrant certificate on or prior
to the expiration date at the offices of the warrant agent, with the exercise
form on the reverse side of the warrant certificate completed and executed as
indicated, accompanied by full payment of the exercise price, by certified check
payable to us, for the number of warrants being exercised. The warrant holders
do not have the rights or privileges of holders of common stock and any voting
rights until they exercise their warrants and receive shares of common stock.
After the issuance of shares of common stock upon exercise of the warrants, each
holder will be entitled to one vote for each share held of record on all matters
to be voted on by stockholders.
None of
the warrants issued in our initial public offering will be exercisable unless at
the time of exercise a prospectus relating to common stock issuable upon
exercise of the warrants is current and the common stock has been registered or
qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. Under the terms of the warrant
agreement, we have agreed to meet these conditions and use our best efforts to
maintain a current prospectus relating to common stock issuable upon exercise of
the warrants until the expiration of the warrants. This prospectus satisfies
those conditions. However, we cannot assure you that we will be able
to continue to satisfy the conditions in the future. The warrants may be
deprived of any value and the market for the warrants may be limited if the
prospectus relating to the common stock issuable upon the exercise of the
warrants is not current or if the common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the warrants
reside.
No
fractional shares will be issued upon exercise of the warrants. If, upon
exercise of the warrants, a holder would be entitled to receive a fractional
interest in a share, we will, upon exercise, round up to the nearest whole
number the number of shares of common stock to be issued to the warrant
holder.
Purchase
Option
In
connection with the initial public offering of our securities, we sold to
Ferris, Baker Watts, Inc. an option to purchase up to a total of
500,000 units at a per-unit price of $7.50 (125% of the price of the units
sold in the offering). The units issuable upon exercise of this option consist
of one shares of our common stock and two warrants each exercisable to purchase
a share of our common stock and are otherwise identical to those offered in our
initial public offering except that the warrants included in the option have an
exercise price of $6.25 (125% of the exercise price of the warrants included in
the units sold in the offering).
Although
the purchase option and its underlying securities have been registered under the
registration statement of which this prospectus forms a part of, the purchase
option grants to holders demand and “piggy back” rights for periods of five and
seven years, respectively, from March 3, 2006 with respect to the registration
under the Securities Act of 1933 of the securities directly and indirectly
issuable upon exercise of the purchase option. We will bear all fees and
expenses attendant to registering the securities, other than underwriting
commissions which will be paid for by the holders themselves. The exercise price
and number of units issuable upon exercise of the purchase option may be
adjusted in certain circumstances including in the event of a stock dividend, or
our recapitalization, reorganization, merger or consolidation. However, the
purchase option will not be adjusted for issuances of common stock at a price
below its exercise price.
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.
SHARES ELIGIBLE FOR FUTURE SALE
We have an aggregate of 8,780,107 shares of common stock
outstanding. Of these shares, 6,100,107 shares are 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. 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 2,500,000 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 87,801 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.
|
As a
result, it is likely that pursuant to Rule 144, our initial shareholders will
not be able to sell their initial shares freely without registration until at
least March 7, 2009, one year after we completed our initial business
combination. In addition, since we filed our Form 10-KSB for
the fiscal year ended March 31, 2008 late, such shareholders will not be able to
sell their shares under Rule 144 until such time after March 7, 2009 as we have
filed all Exchange Act reports and material required to be filed, as applicable,
other than Form 8-K reports, during the 12 months prior to the date that such
shareholders attempt to sell their shares.
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 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 effexctive 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 are
registering all of the shares and warrants entitled to registration in the
registration statement of which this prospectus is a part.
Employee
Stock Options
We intend
to file a registration statement on Form S-8 under the Securities Act to
register up to 1,300,000 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 Sricon for period ending March 7, 2008 and
years ending March 31, 2007, and 2006 included herein have been
audited by Yoganandh & Ram, an independent registered public accounting
firm, as set forth in their report appearing elsewhere therein, and are included
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The
consolidated financial statements of TBL for period ending March 7, 2008 and
years ending March 31, 2007, and 2006 included herein have
been audited by Yoganandh & Ram, an independent registered public accounting
firm, as set forth in their report appearing elsewhere therein, and are included
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The
consolidated financial statements of IGC for the year ending 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 therein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The
financial statements for IGC as of March 31, 2007, for the year then ended March
31, 2007 and for the period from April 29, 2005 (inception) included
herein have been audited by Goldstein Golub Kessler LLP, an independent
registered public accounting firm, as set forth in their reports (which report
includes an explanatory paragraph as to our ability to continue as a going
concern), appearing elsewhere therein, 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.
INDEX TO FINANCIAL STATEMENTS
|
Page
|
Index
to Consolidated Financial Statements and Audited Historical Financial
Statements
|
|
India
Globalization Capital, Inc.
|
|
|
F-1
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
|
Sricon
Infrastructure Private Limited
|
|
|
F-14
|
|
F-15
|
|
F-16
|
|
F-17
|
|
F-18
|
|
F-19
|
|
|
Techni
Bharathi Limited
|
|
|
F-36
|
|
F-37
|
|
F-38
|
|
F-41
|
|
|
Financial
Statements:
|
|
|
|
Item
I: Financial Statements:
|
F-53
|
|
F-53
|
|
F-54
|
|
F-55
|
|
F-55
|
|
F-56
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Stockholders
India
Globalization Capital, Inc.
We have
audited the accompanying balance sheet of India Globalization Capital, Inc. and
its subsidiaries as of March 31, 2008 and the related consolidated statements of
operations, stockholders’ equity and cash flows for the year ended March 31,
2008.
The
balance sheet for the year ended March 31, 2007 and the related statements of
operations, stockholders’ equity and cash flows for the year ended March 31,
2007 and the period from April 29, 2005 (inception) to March 31, 2006 were
audited by other independent auditors. Those independent auditors expressed an
unqualified opinion on the financial statements audited by them.
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 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. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing
audit
procedures
that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the
Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of India Globalization Capital, Inc.
and Subsidiaries as of March 31, 2008, and the consolidated results of their
operations and their cash flows for the year ended March 31, 2008 in conformity
with accounting principles generally accepted in the United States of
America. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein for the year ended March 31, 2008.
/s/ Yoganandh &
Ram
Chartered
Accountants
Independent
Auditors registered with
Public
Company Accounting Oversight Board (USA)
Chennai,
India
July 14,
2008
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders
India
Globalization Capital, Inc.
We have
audited the accompanying balance sheet of India Globalization Capital, Inc. (a
development stage company) as of March 31, 2007 and the related statements of
operations, stockholders' equity and cash flows for the year ended March 31,
2007 and the period from April 29, 2005 (inception) to March 31, 2006. 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 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of India Globalization Capital, Inc.
as of March 31, 2007 and the results of its operations and its cash flows for
the year ended March 31, 2007 and the period from April 29, 2005 (inception) to
March 31, 2006 in conformity with United States generally accepted accounting
principles.
The
accompanying financial statements have been prepared assuming that India
Globalization Capital, Inc. will continue as a going concern. The Company may
face a mandatory liquidation by March 8, 2008 if a business combination is not
consummated, unless certain extension criteria are met, which raises substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Goldstein Golub
Kessler LLP
GOLDSTEIN
GOLUB KESSLER LLP
New York,
New York
July 10,
2007
]
India
Globalization Capital, Inc.
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
8,397,441
|
|
|
$
|
1,169,422
|
|
Accounts
Receivable
|
|
|
8,708,861
|
|
|
|
-
|
|
Unbilled
Receivables
|
|
|
5,208,722
|
|
|
|
-
|
|
Inventories
|
|
|
1,550,080
|
|
|
|
-
|
|
Investments
held in Trust Fund
|
|
|
-
|
|
|
|
66,104,275
|
|
Interest
Receivable - Convertible Debenture
|
|
|
277,479
|
|
|
|
37,479
|
|
Convertible
debenture in MBL
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Loan
acquisition costs
|
|
|
-
|
|
|
|
-
|
|
Prepaid
taxes
|
|
|
49,289
|
|
|
|
-
|
|
Restricted
cash
|
|
|
6,257
|
|
|
|
-
|
|
Short
term investments
|
|
|
671
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
4,324,201
|
|
|
|
74,197
|
|
Due
from related parties
|
|
|
1,373,446
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
32,896,447
|
|
|
|
70,385,373
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
7,337,361
|
|
|
|
-
|
|
BOT
under Progress
|
|
|
3,519,965
|
|
|
|
-
|
|
Goodwill
|
|
|
17,483,501
|
|
|
|
-
|
|
Investment
|
|
|
1,688,303
|
|
|
|
-
|
|
Deposits
towards acquisitions
|
|
|
187,500
|
|
|
|
-
|
|
Restricted
cash, non-current
|
|
|
2,124,160
|
|
|
|
|
|
Deferred
acquisition costs
|
|
|
-
|
|
|
|
158,739
|
|
Deferred
tax assets - Federal and State, net of valuation allowance
|
|
|
1,013,611
|
|
|
|
142,652
|
|
Other
Assets
|
|
|
1,376,126
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
67,626,973
|
|
|
$
|
70,686,764
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
$
|
5,635,408
|
|
|
|
-
|
|
Trade
payables
|
|
|
1,771,151
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
931,092
|
|
|
|
-
|
|
Accrued
expenses
|
|
|
1,368,219
|
|
|
$
|
237,286
|
|
Notes
payable to stockholders
|
|
|
-
|
|
|
|
870,000
|
|
Taxes
payable
|
|
|
58,590
|
|
|
|
296,842
|
|
Deferred
trust interest
|
|
|
-
|
|
|
|
32,526
|
|
Notes
Payable to Oliveira Capital, LLC
|
|
|
3,000,000
|
|
|
|
1,794,226
|
|
Due
to Underwriters
|
|
|
|
|
|
|
1,769,400
|
|
Due
to related parties
|
|
|
1,330,291
|
|
|
|
-
|
|
Other
current liabilities
|
|
|
3,289,307
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
17,384,059
|
|
|
$
|
5,000,280
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion
|
|
|
1,212,841
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
832,717
|
|
|
|
-
|
|
Deferred
taxes on income
|
|
|
608,535
|
|
|
|
-
|
|
Other
liabilities
|
|
|
6,717,109
|
|
|
|
-
|
|
Total
Liabilities
|
|
|
26,755,261
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
13,545,656
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible conversion, 2,259,770 at conversion
value
|
|
|
-
|
|
|
|
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; 8,570,107 issued
and outstanding at March 31, 2008 and 13,974,500 (including
2,259,770 shares subject to possible conversion) issued and outstanding at
March 31, 2007
|
|
|
857
|
|
|
|
1,397
|
|
Additional
paid-in capital
|
|
|
31,470,134
|
|
|
|
51,848,145
|
|
(Deficit)
Income accumulated during the development stage
|
|
|
(4,141,113
|
)
|
|
|
1,074,157
|
|
Accumulated
other comprehensive (loss) income
|
|
|
(3,822
|
)
|
|
|
-
|
|
Total
stockholders’ equity
|
|
|
27,326,056
|
|
|
|
52,923,699
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
67,626,973
|
|
|
$
|
70,686,764
|
|
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
Year
Ended
March 31,
2008
|
|
|
|
Year
Ended
March
31, 2007
|
|
|
|
April
29, 2005 (inception) through March 31, 2006
|
|
Revenue
|
$
|
2,188,018
|
|
|
$ |
-
|
|
|
$ |
-
|
|
Cost
of revenue
|
|
(1,783,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
404,901
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
(341,372
|
)
|
|
|
-
|
|
|
|
-
|
|
Depreciation
|
|
(58,376
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
5,153
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
and formation, travel and other start up costs
|
$
|
(5,765,620
|
)
|
|
$ |
|
(765,047
|
)
|
|
$ |
|
(68,183
|
)
|
Compensation
expense
|
|
(26,274
|
)
|
|
|
|
-
|
|
|
|
|
(535,741
|
)
|
Interest
expense
|
|
(1,944,660
|
)
|
|
|
|
(103,916
|
)
|
|
|
|
(5,500
|
)
|
Interest
income
|
|
2,213,499
|
|
|
|
|
3,171,818
|
|
|
|
|
210,584
|
|
Other
Income
|
|
202,858
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
/ (loss) before income taxes
|
|
(5,315,044
|
)
|
|
|
|
2,302,855
|
|
|
|
|
(398,840
|
)
|
Provision
for income taxes, net
|
|
(76,089
|
)
|
|
|
|
784,858
|
|
|
|
|
45,000
|
|
Income
after Income Taxes
|
|
(5,391,134
|
)
|
|
|
|
1,517,997
|
|
|
|
|
(443,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Dividend on Preference Stock and its Tax
|
|
171,084
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Minority
interest
|
|
4,780
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income / (loss)
|
$
|
(5,215,270
|
)
|
|
$ |
|
1,517,997
|
|
|
$ |
|
(443,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income / (loss) per share: basic and diluted
|
$
|
(0.61
|
)
|
|
$ |
|
0.11
|
|
|
$ |
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding-basic and diluted
|
|
8,570,107
|
|
|
|
|
13,974,500
|
|
|
|
|
3,191,000
|
|
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
Earnings
(Deficit)
Accumulated
during
the
Development
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
Stockholders'
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
Stage
|
|
|
/
Loss
|
|
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 / (Loss)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption
of 1,910,469 shares on March 7, 2008 and balance in shares subject to
possible conversion transferred to paid in capital
|
|
(1,910,469
|
)
|
|
|
(191
|
)
|
|
|
(1,689,164
|
)
|
|
-
|
|
|
-
|
|
|
1,688,973
|
|
Buyback
of 4,248,877 shares on March 7, 2008
|
|
(4,248,877
|
)
|
|
|
(425
|
)
|
|
|
(25,237,905
|
)
|
|
-
|
|
|
-
|
|
|
(25,238,330
|
)
|
"Issuance
of common stock to Bridge Investors at $.01 per share
|
|
754,953
|
|
|
|
76
|
|
|
|
3,170,730
|
|
|
-
|
|
|
-
|
|
|
3,170,806
|
|
Net
Loss for the year
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(5,215,270
|
)
|
|
(3,822)
|
|
|
(5,219,091
|
)
|
Balance
at March 31, 2008
|
$
|
8,570,107
|
|
|
$
|
857
|
|
|
$
|
31,470,134
|
|
$
|
(4,141,113
|
)
|
$
|
(3,822)
|
|
$
|
27,326,056
|
|
The
accompanying notes should be read in connection with the financial
statements.
India
Globalization Capital, Inc.
|
|
Year
Ended
March
31, 2008
|
|
|
Year
Ended
March
31, 2007
|
|
|
April
29, 2005 (inception) through March 31, 2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(5,215,270
|
)
|
|
$
|
1,517,997
|
|
|
$
|
(443,840
|
)
|
Adjustment
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
earned on Treasury Bills
|
|
|
(2,119,104
|
)
|
|
|
(3,098,769
|
)
|
|
|
(203,022
|
)
|
Non-cash
compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
535,741
|
|
Deferred
taxes
|
|
|
(743,652
|
)
|
|
|
(117,652
|
)
|
|
|
(25.000
|
)
|
Depreciation
|
|
|
58,376
|
|
|
|
-
|
|
|
|
-
|
|
Loss
/ (Gain) on sale of property, plant and equipment
|
|
|
29
|
|
|
|
-
|
|
|
|
-
|
|
Amortization
of debt discount on Oliveira debt
|
|
|
4,052,988
|
|
|
|
29,226
|
|
|
|
-
|
|
Amortization
of loan acquisition cost
|
|
|
250,000
|
|
|
|
-
|
|
|
|
-
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
808,978
|
|
|
|
-
|
|
|
|
-
|
|
Unbilled
Receivable
|
|
|
(635,207
|
)
|
|
|
-
|
|
|
|
-
|
|
Inventories
|
|
|
341,950
|
|
|
|
-
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
(3,063,771
|
)
|
|
|
2,569
|
|
|
|
(76,766
|
)
|
Trade
Payable
|
|
|
(1,744,137
|
)
|
|
|
-
|
|
|
|
-
|
|
Other
Current Liabilities
|
|
|
(884,639
|
)
|
|
|
-
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
(97,946
|
)
|
|
|
-
|
|
|
|
-
|
|
Other
non-current liabilities
|
|
|
3,050,821
|
|
|
|
-
|
|
|
|
-
|
|
Non-current
assets
|
|
|
928,698
|
|
|
|
-
|
|
|
|
-
|
|
BOT
Project under Progress
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
-
|
|
Interest
receivable - convertible debenture
|
|
|
(240,000
|
)
|
|
|
(37,479
|
)
|
|
|
-
|
|
Deferred
interest liability
|
|
|
(3,597,998
|
)
|
|
|
32,526
|
|
|
|
-
|
|
Accrued
expenses
|
|
|
854,902
|
|
|
|
(113,819
|
)
|
|
|
47,679
|
|
Prepaid
/ taxes payable
|
|
|
(569,283
|
)
|
|
|
226,842
|
|
|
|
70,000
|
|
Minority
Interest
|
|
|
(4,780
|
) -
|
|
|
-
|
|
|
|
-
|
|
Net
cash used in operating activities
|
|
$
|
(8,569,097
|
)
|
|
$
|
(1,558,559
|
)
|
|
$
|
(95,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of treasury bills
|
|
|
(585,326,579
|
)
|
|
|
(772,540,587
|
)
|
|
|
(131,229,427
|
)
|
Maturity
of treasury bills
|
|
|
653,554,076
|
|
|
|
725,189,331
|
|
|
|
65,780,000
|
|
Purchase
of property and equipment
|
|
|
(3,447
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from sale of property and equipment
|
|
|
(13,521
|
)
|
|
|
-
|
|
|
|
-
|
|
Purchase
of short term investments
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
Non
Current Investments
|
|
|
(498,677
|
)
|
|
|
-
|
|
|
|
-
|
|
Investment
in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted
cash
|
|
|
(1,714,422
|
)
|
|
|
-
|
|
|
|
-
|
|
Decrease
(increase) in cash held in trust
|
|
|
(4,116
|
)
|
|
|
170,766
|
|
|
|
(172,567
|
)
|
Purchase
of convertible debenture
|
|
|
-
|
|
|
|
(3,000,000
|
)
|
|
|
-
|
|
Deposit
towards acquisitions, net of cash acquired
|
|
|
(6,253,028
|
)
|
|
|
-
|
|
|
|
-
|
|
Payment
of deferred acquisition costs
|
|
|
(2,482,431
|
)
|
|
|
(93,739
|
)
|
|
|
-
|
|
Net
cash provided/(used) in investing activities
|
|
$
|
57,257,854
|
|
|
$
|
(274,229
|
)
|
|
$
|
(65,621,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock to founders
|
|
|
(541
|
)
|
|
|
-
|
|
|
|
27,000
|
|
Payments
of offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,024,688
|
)
|
Net
movement in cash credit and bank overdraft
|
|
|
646,515
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from other short-term borrowings
|
|
|
(275,114
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from long-term borrowings
|
|
|
(3,075,012
|
)
|
|
|
-
|
|
|
|
-
|
|
Repayment
of long-term borrowings
|
|
|
(1,023
|
)
|
|
|
-
|
|
|
|
-
|
|
Due
to related parties, net
|
|
|
(255,093
|
)
|
|
|
-
|
|
|
|
-
|
|
Issue
of Equity Shares
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
Money
received pending allotment
|
|
|
(3,669,574
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from notes payable to stockholders
|
|
|
(270,000
|
)
|
|
|
-
|
|
|
|
870,000
|
|
Proceeds
from notes payable to stockholders
|
|
|
(600,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from issuance of underwriters option
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
Gross
proceeds from initial public offering
|
|
|
(33,140,796
|
)
|
|
|
-
|
|
|
|
67,827,000
|
|
Proceeds
from private placement
|
|
|
-
|
|
|
|
-
|
|
|
|
1,020,000
|
|
Proceeds
from note payable to Oliveira Capital, LLC
|
|
|
(769,400
|
)
|
|
|
3,000,000
|
|
|
|
-
|
|
Proceeds
from loan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
cash provided/(used) by financing activities
|
|
$
|
(41,378,991
|
)
|
|
$
|
3,000,000
|
|
|
$
|
65,719,412
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(81,747
|
)
|
|
|
-
|
|
|
|
-
|
|
Net
increase/(decrease) in cash and cash equivalent
|
|
|
7,228,019
|
|
|
|
1,167,212
|
|
|
|
2,210
|
|
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
|
|
$
|
8,397,441
|
|
|
$
|
1,169,422
|
|
|
$
|
2,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of offering cost
|
|
|
-
|
|
|
|
-
|
|
|
|
238,426
|
|
Accrual
of deferred underwriters’ fees
|
|
|
-
|
|
|
|
-
|
|
|
|
1,769,400
|
|
Accrual
of deferred acquisition costs
|
|
|
26,000
|
|
|
|
65,000
|
|
|
|
-
|
|
Accrual
of loan acquisition cost
|
|
|
250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
Fair
value of warrants included in additional paid in capital
|
|
|
-
|
|
|
|
1,235,000
|
|
|
|
-
|
|
Issuance
of Common Stock to Bridge Investors
|
|
$
|
3,170,806
|
|
|
|
-
|
|
|
|
-
|
|
Interest
paid
|
|
|
1,977,660
|
|
|
|
-
|
|
|
|
-
|
|
Income
taxes paid
|
|
|
700,000
|
|
|
|
675,668
|
|
|
|
-
|
|
The
accompanying notes should be read in connection with the financial
statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended March 31, 2008 and 2007
And
the Period From April 29, 2005 (Inception) to March 31, 2006
NOTE
A — BASIS OF PRESENTATION
The
financial statements at March 31, 2008, 2007 and for the period from April 29,
2005 (date of inception) to March 31, 2006 are audited. The
statements ending March 31, 2008 are consolidated with the newly acquired
subsidiaries Sricon and TBL beginning March 8, 2008. All our
companies Sricon, TBL, IGC-M and IGC have financial years that end on March
31.
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 March 31, 2008 and the results of its operation and cash flows for the
three years ended March 31, 2008, March 31, 2007 and the period from April 29,
2005 (date of inception) to March 31, 2006.
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 have been derived from the
audited financial statements.
NOTE
B — ORGANIZATION AND BUSINESS OPERATIONS
India
Globalization Capital, Inc. (the “Company” or “IGC”), a Maryland
corporation, was incorporated on April 29, 2005 as a blank check
company, formed for the purpose of acquiring one or more infrastructure
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 the Company completed an initial public
offering. On February 19, 2007 the Company incorporated India
Globalization Capital, Mauritius, Limited (IGC-M), a wholly owned subsidiary,
under the laws of Mauritius.
Through
its subsidiaries, the company’s primary focus is to execute
major infrastructure projects in India such as constructing interstate
highways, rural roads, mining and quarrying, and construction of high
temperature cement and steel plants.
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 units (the “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).
As
described in Note J, on March 7, 2008 following the stockholder approval of and
pursuant to the terms of the purchase agreement, the Company consummated the
acquisition of 63% of the equity of Sricon Infrastructure Private Limited
(Sricon) for approximately $28.75 Million. As also
described in Note J, the Company paid about $12.03 Million for the acquisition
of 77% of Techni Bharathi Limited (TBL). The shares of the two Indian
companies, Sricon and TBL, are held by IGC-M. The founders and
management of Sricon own 37% of Sricon and the founders and management of TBL
own 23% of TBL.
NOTE
C — INITIAL PUBLIC OFFERING
On March
8, 2006, the Company sold 11,304,500 Units in the Public Offering, including the
exercise by the Underwriter of the over-allotment in full.
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. The Company has a right to redeem the
Warrants 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. If the Company redeems the Warrants, either the holder will
have to exercise the Warrants by purchasing the common stock from the Company
for $5.00, or the Warrants will expire. The Warrants expire on March 3,
2011, or earlier upon redemption.
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. 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 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation:
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany balances and transactions
have been eliminated.
Policy
for Goodwill / Impairment
Goodwill
represents the excess cost of an acquisition over the fair value of the Group's
share of net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill on acquisition of subsidiaries is disclosed
separately. Goodwill is stated at cost less accumulated amortization
and impairment losses, if any.
The
company adopted provisions of FAS No. 142, "Goodwill and Other Intangible
Assets" ('FAS 142') which sets forth the accounting for goodwill and intangible
assets subsequent to their acquisition. FAS 142 requires that goodwill and
indefinite-lived intangible assets be allocated to the reporting unit level,
which the Group defines as each circle.
FAS 142
also prohibits the amortization of goodwill and indefinite-lived intangible
assets upon adoption, but requires that they be tested for impairment at least
annually, or more frequently as warranted, at the reporting unit
level.
The
goodwill impairment test under FAS 142 is performed in two phases. The first
step of the impairment test, used to identify potential impairment, compares the
fair value of the reporting unit with its carrying amount, including goodwill.
If the carrying amount of the reporting unit exceeds its fair value, goodwill of
the reporting unit is considered impaired, and step two of the impairment test
must be performed. The second step of the impairment test quantifies the amount
of the impairment loss by comparing the carrying amount of goodwill to the
implied fair value. An impairment loss is recorded to the extent the carrying
amount of goodwill exceeds its implied fair value.
Impairment
of long – lived assets and intangible assets
The
company reviews its long-lived assets, including identifiable intangible
assets with finite lives, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of assets may not be fully
recoverable. Such circumstances include, though are not limited to, significant
or sustained declines in revenues or earnings and material adverse changes in
the economic climate. For assets that the company intends to hold for
use, if the total of the expected future undiscounted cash flows produced by the
assets or subsidiary company is less than the carrying amount of the assets, a
loss is recognized for the difference between the fair value and carrying value
of the assets. For assets the company intends to dispose of by
sale, a loss is recognized for the amount by which the estimated fair value less
cost to sell is less than the carrying value of the assets. Fair
value is determined based on quoted market prices, if available, or other
valuation techniques including discounted future net cash flows.
Income
per common share:
Basic
earnings per share is computed by dividing net income (loss) applicable to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect the additional dilution for
all potentially dilutive securities such as stock warrants and options. The
effect of the 23,374,000 warrants have been included in the diluted weighted
average shares. However, for the year ending March 31, 2008 the
weighted average price of the common stock was below the exercise price of all
outstanding warrants and therefore the warrants did not contribute to the
dilution of basic shares.
Use
of estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
Income
taxes:
Deferred
income taxes are provided for the differences between the bases of assets and
liabilities for financial reporting and income tax purposes. A valuation
allowance is established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Cash
and Cash Equivalents:
For
financial statement purposes, the Company considers all highly liquid debt
instruments with maturity of three months or less when purchased to be cash
equivalents. The company maintains its cash in bank accounts in the United
States of America and Mauritius, which at times may exceed applicable insurance
limits. The Company has not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk on cash and cash
equivalent. The company does not invest its cash in securities that
have an exposure to U.S. mortgages.
Recent
Pronouncements:
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 de-recognition, 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.
In
December 2007, the Financial Accounting Standards Board released SFAS 160
“Non-controlling Interests in Consolidated Financial Statements” that is
effective for annual periods beginning December 15, 2008. The pronouncement
resulted from a joint project between the FASB and the International Accounting
Standards Board and continues the movement toward the greater use of fair values
in financial reporting. Upon adoption of SFAS 160, the Company will re-classify
any non-controlling interests as a component of equity.
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
E — RELATED PARTY TRANSACTION
From
inception to March 31, 2008, $50,000 was paid to SJS Associates for Mr.
Selvaraj’s services. We entered into an agreement with SJS Associates
on substantially the same terms subsequent to the stockholder’s approval of the
acquisitions of Sricon and TBL. As a result of the
new agreement, an additional $3,871 was accrued as due to SJS Associates for the
period between March 8, 2008 and March 31, 2008. This was paid to SJS
Associates in the Company’s 2009 fiscal year.
The
Company had agreed to pay Integrated Global Network, LLC (“IGN, LLC”), an
affiliate of our 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 March 31, 2008, approximately $96,000 was
paid to IGN, LLC. The Company and IGN, LLC have agreed to continue
the agreement on a month-to-month basis.
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 March 31, 2008, the Company has incurred $169,847 for legal
services provided by ELP.
NOTE
F — COMMON STOCK
On August
24, 2005, the Company’s Board of Directors authorized a reverse stock split of
one share of common stock for each two outstanding shares of common stock and
approved an amendment to the Company’s Certificate of Incorporation to decrease
the number of authorized shares of common stock to 75,000,000. All references in
the accompanying financial statements to the number of shares of stock have been
retroactively restated to reflect these transactions. On March 7,
2008 we redeemed and bought a total of 6,159,346 shares at $5.94 per
share. At March 31, 2008 and 2007 we had 8,570,107 and 13, 974,500
shares of common stock issued and outstanding respectively. At
March 31, 2008 and 2007, 24,874,000 shares of common stock, were reserved for
issuance upon exercise of redeemable warrants, underwriters’ purchase option and
warrants issued to Oliveira Capital, LLC.
NOTE G
– INCOME TAXES
The
provision for income taxes for the year ended March 31, 2008 and the period
ended March 31, 2007 consists of the following:
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
708,868
|
|
|
$
|
902,510
|
|
Foreign
|
|
|
(370,355
|
)
|
|
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Net
Current
|
|
|
338,513
|
|
|
|
902,510
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(748,894
|
)
|
|
|
(117,652
|
)
|
Foreign
|
|
|
420,368
|
|
|
|
-
|
|
State
|
|
|
66,103
|
|
|
|
-
|
|
Net
Deferred
|
|
|
(262,424
|
)
|
|
|
(117,652
|
)
|
Total
tax provision
|
|
$
|
76,089
|
|
|
$
|
784,858
|
|
The total
tax provision for income taxes for year ended March 31, 2008 and the period
ended March 31, 2007 differs from that amount which would be computed by
applying the U.S. Federal income tax rate to income before provision for income
taxes as follows:
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Statutory
Federal income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Non-cash
compensation expense
|
|
|
|
|
|
|
|
|
State
tax benefit net of federal tax
|
|
|
(0.8
|
)%
|
|
|
(1.3
|
)%
|
Increase
in state valuation allowance
|
|
|
0.8
|
%
|
|
|
1.3
|
%
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
income tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Operating
costs deferred for income tax purposes
|
|
$
|
184,570
|
|
|
$
|
242,015
|
|
Interest
income deferred for reporting purposes
|
|
$
|
95,792
|
|
|
|
11,059
|
|
Difference
between accrual accounting for reporting purposes and cash accounting for
tax purposes
|
|
$
|
235,665
|
|
|
|
(75,514
|
)
|
Less:
Valuation Allowance
|
|
|
(110,951
|
)
|
|
|
(34,908
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
$
|
405,076
|
|
|
$
|
142,652
|
|
The
Company has recorded a valuation allowance against the state deferred tax asset
since they cannot determine realizability for tax purposes and therefore cannot
conclude that the deferred tax asset is more likely than not recoverable at this
time.
NOTE
H — COMMITMENTS AND CONTINGENCY
The
Founders 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.
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 was
consummated. While we do not admit that the unaffiliated third party
is a finder that is entitled to payment, we had expressed a willingness to pay
our customary Finder's fee of 0.25%. The parties were attempting to
reach an agreement on the amount of the fee to be paid if the acquisition was
consummated. As the MBL acquisition is no longer probable, we expect
that there will be no finders fees payable and the claim to be without
merit.
In
connection with our proposed acquisition of a wind energy farm from
Chiranjjeevi Wind Energy Limited ("CWEL"), we have agreed to pay a finder’s 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.
In
connection with the Public Offering and pursuant to an advisory agreement, the
Company 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 paid the Underwriter a cash fee at the closing
of a Business Combination equal to 2% of the aggregate consideration, or
$1,500,000. In addition, a fee of $90,000 was paid to Ferris, Baker
for facilitating the loan to the Company by Oliveira Capital, LLC, at the
closing of a Business Combination.
NOTE
I – INVESTMENT ACTIVITIES
MBL
Infrastructure Limited Purchase Agreement
On
February 5, 2007, the Company entered into an agreement to sell 425,000
warrants, and a note for $3,000,000 to Oliveira Capital, LLC for
$3,000,000. The note carries interest at the rate of 8% and was due upon the
earlier of February 5, 2008, or the consummation of a Business
Combination. The Company is negotiating an extension with Oliveira
Capital. If the Company extends the loan for 90 days without
renegotiating an extension we would be required to issue an additional 425,000
warrants. The Black Scholes valuation of the warrants was based on an
annualized volatility of 42.8%, an annual interest rate of 3% and an expiration
of 1,500 days would be $1,030,625. We computed volatility for a
period of 1,500 days. For approximately the first two years, we used the
trading history of two representative companies that are listed on the Indian
Stock exchange. For approximately two years, the trading history of the
Company’s common stock was used. The average volatility of the
combined data extending just over four years was calculated as 42.8%.
Management believes that this volatility is a reasonable benchmark to use in
estimating the value of the warrants. Following 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 interest at
the rate of 8%, are secured by 1,131,356 shares of MBL common stock and are
carried at cost. The note from Oliveira Capital, LLC is secured by the
convertible debentures issued to MBL.
Contract
Agreement between IGC, CWEL, AMTL and MAIL
As
previously disclosed in our Form 8-K dated May 2, 2007 and Form 10-QSB for the
quarterly period ended June 30, 2007, on April 29, 2007, the Company entered
into a Contract Agreement Dated April 29, 2007 (“CWEL Purchase Agreement”) with
CWEL, Arul Mariamman Textiles Limited (AMTL), and Marudhavel Industries
Limited (MAIL), collectively CWEL. Pursuant to the CWEL Purchase Agreement, the
Company or its subsidiary in Mauritius 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. Pursuant to the First Amendment dated August 20, 2007 (as
previously disclosed in the Company’s Form 8-K dated August 22, 2007), if the
Company does not consummate the transaction with CWEL, approximately $187,500
will be returned to the Company.
The
Company is contemplating pursuing this opportunity, or a similar one if it is
able to obtain adequate funding from the exercise of warrants, debt or other
means.
NOTE
J – BUSINESS COMBINATION
As
previously disclosed in our Form 8-K dated September 21, 2007 and Form 10-QSB
for the quarterly period ended June 30, 2007, on September 21, 2007, the Company
entered into a Share Subscription cum Purchase Agreement (the “Sricon
Subscription Agreement”) dated as of September 15, 2007 with Sricon
Infrastructure Private Limited (“Sricon”) and certain individuals
(collectively, the “Sricon Promoters”), pursuant to which the Company or its
subsidiary in Mauritius (IGC-M) will acquire (the “Sricon Acquisition”) 4,041,676 newly-issued
equity shares (the “New Sricon Shares”) directly from Sricon for
approximately $26 million and 351,840 equity shares from Mr. R. L. Srivastava
for approximately $3 million (both based on an exchange rate of INR 40 per USD)
so that at the conclusion of the transactions contemplated by the Sricon
Subscription Agreement the Company would own approximately 63% of the outstanding
equity shares of Sricon. The Sricon Acquisition was consummated on March
7, 2008.
As
previously disclosed in our Form 8-K dated September 21, 2007 and Form 10-QSB
for the quarterly period ended June 30, 2007, on September 21, 2007, the Company
entered into a Share Subscription Agreement (the “TBL Subscription
Agreement”) dated as of September 16, 2007 with Techni Bharathi Limited (“TBL”)
and certain individuals (collectively, the “TBL Promoters”), pursuant to which
the Company through its subsidiary in Mauritius (IGC-M) acquired (the “TBL
Acquisition”) 7,150,000 newly-issued
company stock for approximately $6.9 million, 1,250,000 newly-issued convertible
preference shares for approximately $3.13 million (both at an
exchange rate of INR 40 per USD; collectively, the “New Shares”) directly from
TBL and 5,000,000 convertible preference shares from Odeon, a Singapore based
holder of TBL securities, for approximately $2 million. With the
conclusion of this transaction, on March 7, 2008 the Company owns approximately 77%, of
the outstanding equity shares of TBL.
The
assets and liabilities acquired as a result of above business combinations were
recorded at fair values, with the excess of the purchase consideration over fair
value of the net assets acquired recorded as goodwill. The following table
summarizes the company's share of the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition during the year
ended March 31, 2007:
|
|
Sricon
$
|
|
|
TBL
$
|
|
|
Total
$
|
|
Current
assets
|
|
|
23,205,026
|
|
|
|
9,428,415
|
|
|
|
32,633,442
|
|
Property
and equipment, net
|
|
|
3,356,275
|
|
|
|
1,520,974
|
|
|
|
4,877,249
|
|
BOT
under Progress
|
|
|
2,195,651
|
|
|
|
-
|
|
|
|
2,195,651
|
|
Other
non current assets
|
|
|
1,389,571
|
|
|
|
1,371,199
|
|
|
|
2,760,770
|
|
Total Assets
|
|
|
30,146,523
|
|
|
|
12,320,588
|
|
|
|
42,467,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
|
3,611,176
|
|
|
|
1,873,115
|
|
|
|
5,484,290
|
|
Other
Current liabilities
|
|
|
4,409,153
|
|
|
|
2,277,528
|
|
|
|
6,686,682
|
|
Long-term
debt, net of current portion
|
|
|
796,296
|
|
|
|
-
|
|
|
|
796,296
|
|
Other
non-current liabilities
|
|
|
1,337,077
|
|
|
|
2,250,720
|
|
|
|
3,587,797
|
|
Total
Liabilities
|
|
|
10,153,702
|
|
|
|
6,401,363
|
|
|
|
16,555,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value of net assets acquired
|
|
|
19,992,822
|
|
|
|
5,919,225
|
|
|
|
25,912,047
|
|
The
allocation of the purchase considerations of the above business combinations
during the year ended March 31, 2007 was as follows:
|
|
Sricon
|
|
|
TBL
|
|
|
Total
|
|
New
Shares - Equity or Preference
|
|
$
|
25,705,119
|
|
|
$
|
10,038,081
|
|
|
$
|
35,743,199
|
|
Existing
Shares purchased
|
|
|
2,985,147
|
|
|
|
2,000,000
|
|
|
$
|
4,985,147
|
|
Allocation
of estimated acquisition costs
|
|
|
1,854,750
|
|
|
|
812,451
|
|
|
$
|
2,667,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Purchase Price
|
|
$
|
30,545,016
|
|
|
$
|
12,850,532
|
|
|
$
|
43,395,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of Purchase Price:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value of net assets acquired
|
|
$
|
19,992,822
|
|
|
$
|
5,919,225
|
|
|
$
|
25,912,047
|
|
Goodwill
|
|
|
10,552,194
|
|
|
|
6,931,307
|
|
|
|
17,483,501
|
|
Total
Purchase Price
|
|
$
|
30,545,016
|
|
|
$
|
12,850,532
|
|
|
$
|
43,395,547
|
|
NOTE
K – PRIVATE PLACEMENT OF PROMISSORY NOTES
Private
Placement Offering of Secured Promissory Notes (the “Bridge
Offering”)
As
previously disclosed in our Form 8-K dated December 27, 2007, we conducted a
private placement offering of secured promissory notes (the “Notes”) for an
aggregate principal amount of $7,275,000 (the “Bridge Offering”). The
Notes bear interest at a rate equal to 5% per annum from the date of issuance
(January 10, 2008) until paid in full. The Notes were repaid in
full on March 19, 2008.
On March
7, 2008 the Company, issued 754,953 shares of common stock to the holders
of the Notes on a pro rata basis and recorded the cost of the shares as an
expense based on the closing price of the company’s stock on March 7,
2008. The expense associated with the issuance of the shares is about
$3,170,806.
NOTE
L – VALUATION OF WARRANTS ISSUED TO OLIVEIRA CAPITAL, LLC
As
previously disclosed, 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 and expires five years from the date of issuance. 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.
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.
NOTE
M – SPAC RELATED EXPENSES
As of
March 31, 2008 we incurred about $5.765 Million of SPAC related expenses, and
about $1.9 Million of SPAC interest related expenses, mostly as one-time
expenses. The major expenses are as follows: 1) as explained in Note
K, about $3.1 Million was non-cash expenses associated with the award of stock
to the Bridge investors. 2) As described in Note H, approximately
$1.5 Million was paid to Ferris Baker Watts, of which $.9 Million was expensed
as the services rendered by them related to acquisitions that we did not
close. 3) Approximately, $.469 Million relates to the bridge loan
from Oliveira Capital, LLC as described in Note I, and 5) approximately $.5
Million was incurred for legal and professional fees for two bridge loans and
several acquisitions that we did not close. In addition, we incurred
about $1.23 Million in non-cash interest related expenses for the warrants
issued to Oliveira Capital as described in Note I.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Shareholders
Sricon
Infrastructure Private Limited (Formerly Srivastava Construction Private
Limited):
We have
audited the accompanying balance sheets of Sricon Infrastructure
Private Limited as of March 7, 2008, and as of March 31, 2007 and the
related statements of operations, stockholders' equity
and cash flows for the period ended March 7, 2008, and years ended
March 31, 2007 and 2006. 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 auditing standards
generally accepted in the United States of America. 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.
In our
opinion, the financial statements referred to above present fairly ,
in all material respects, the financial position of Sricon Infrastructure
Private Limited (Formerly Srivastava Construction Private Limited), Nagpur,
India as of March 7, 2008, and as of March 31, 2007 and the results of
its operations, stockholders' equity and cash flows for the period
ended March 7, 2008, and years ended March 31, 2007 and 2006 in conformity with
United States generally accepted accounting principles.
YOGANANDH
& RAM
Chartered
Accountants
Independent
Auditors registered with
Public
Company Accounting Oversight Board (USA)
Chennai,
India, 2008
BALANCE
SHEETS
(Amounts
in Thousand US Dollars)
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
89
|
|
|
$
|
301
|
|
Accounts
receivables
|
|
|
2,751
|
|
|
|
7,764
|
|
Unbilled
receivables
|
|
|
2,866
|
|
|
|
4,527
|
|
Inventories
|
|
|
71
|
|
|
|
447
|
|
Restricted
cash
|
|
|
-
|
|
|
|
1
|
|
Short
term investments
|
|
|
-
|
|
|
|
1
|
|
Prepaid
and other assets
|
|
|
674
|
|
|
|
727
|
|
Due
from related parties
|
|
|
259
|
|
|
|
1,004
|
|
Total
Current Assets
|
|
|
6,710
|
|
|
|
14,772
|
|
Property
and equipment, net
|
|
|
4,903
|
|
|
|
5,327
|
|
BOT
Project under Progress
|
|
|
3,080
|
|
|
|
3,485
|
|
Investment
– others
|
|
|
387
|
|
|
|
1,103
|
|
Restricted
cash, non-current
|
|
|
62
|
|
|
|
217
|
|
Other
assets
|
|
|
216
|
|
|
|
886
|
|
Total
Assets
|
|
$
|
15,358
|
|
|
$
|
25,790
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
$
|
3,646
|
|
|
$
|
5,732
|
|
Trade
payables
|
|
|
139
|
|
|
|
1,263
|
|
Advance
from Customers
|
|
|
-
|
|
|
|
1,019
|
|
Due
to related parties
|
|
|
2,264
|
|
|
|
1,322
|
|
Other
current liabilities
|
|
|
39
|
|
|
|
3,395
|
|
Total
current liabilities
|
|
|
6,088
|
|
|
|
12,731
|
|
Long-term
debt, net of current portion
|
|
|
2,182
|
|
|
|
1,264
|
|
Deferred
taxes on income
|
|
|
538
|
|
|
|
603
|
|
Security
Deposit from joint ventures
|
|
|
348
|
|
|
|
-
|
|
Other
liabilities
|
|
|
1,913
|
|
|
|
1,519
|
|
Total
liabilities
|
|
$
|
11,069
|
|
|
$
|
16,117
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Common
stock, par value USD 0.23 (INR 10) per share
|
|
|
674
|
|
|
|
674
|
|
Additional
Paid in Capital
|
|
|
726
|
|
|
|
726
|
|
Money
received pending allotment
|
|
|
-
|
|
|
|
3,643
|
|
Retained
earnings
|
|
|
2,818
|
|
|
|
4,284
|
|
Accumulated
other comprehensive (loss) income
|
|
|
71
|
|
|
|
346
|
|
Total
stockholders' equity
|
|
|
4,289
|
|
|
|
9,673
|
|
Total
liabilities and stockholders' equity
|
|
$
|
15,358
|
|
|
$
|
25,790
|
|
The
accompanying notes form an integral part of these financial
statements.
STATEMENT
OF OPERATIONS
(Amounts
in Thousand US Dollars)
|
|
Year
ended
|
|
|
Year
ended
|
|
|
Period
ended
|
|
|
|
March
31, 2006
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Revenue
|
|
$
|
11,011
|
|
|
$
|
10,604
|
|
|
$
|
22,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
(8,596
|
)
|
|
|
(8,101
|
)
|
|
|
(15,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
2,415
|
|
|
|
2,503
|
|
|
|
6,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
(1,241
|
)
|
|
|
(1,115
|
)
|
|
|
(2,385
|
)
|
Depreciation
|
|
|
(240
|
)
|
|
|
(243
|
)
|
|
|
(416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
934
|
|
|
|
1,145
|
|
|
|
3,845
|
|
Interest
expense (net)
|
|
|
(389
|
)
|
|
|
(533
|
)
|
|
|
(994
|
)
|
Interest
income (net)
|
|
|
50
|
|
|
|
66
|
|
|
|
259
|
|
Other
income
|
|
|
73
|
|
|
|
100
|
|
|
|
34
|
|
Operating
income before income taxes
|
|
|
668
|
|
|
|
778
|
|
|
|
3,144
|
|
Income
tax gain / (expense)
|
|
|
(179
|
)
|
|
|
(357
|
)
|
|
|
(746
|
)
|
Fringe
Benefit tax expense
|
|
|
(7
|
)
|
|
|
(11
|
)
|
|
|
(22
|
)
|
Net
Income:
|
|
$
|
482
|
|
|
$
|
410
|
|
|
$
|
2,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.81
|
|
Diluted
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.78
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
Diluted
|
|
|
2,932,159
|
|
|
|
2,932,159
|
|
|
|
3,058,881
|
|
The
accompanying notes form an integral part of these financial
statements.
Sricon Infrastructure Private Limited
STATEMENT
OF STOCKHOLDERS’ EQUITY
(Amounts
in Thousand US Dollars)
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Additional
Paid
in Capital
|
|
|
Money
received
pending
allotment
|
|
|
Retained
Earnings
|
|
|
Accumulated
other comprehensive income / (loss)
|
|
|
Total
|
|
Balance
as of April 1, 2005
|
|
|
2,932,159
|
|
|
$
|
674
|
|
|
$
|
726
|
|
|
$
|
-
|
|
|
$
|
1,926
|
|
|
$
|
(1
|
)
|
|
$
|
3,325
|
|
Loss
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(67
|
)
|
|
|
(67
|
)
|
Net
Income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
482
|
|
|
|
-
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2006
|
|
|
2,932,159
|
|
|
|
674
|
|
|
|
726
|
|
|
|
-
|
|
|
|
2,408
|
|
|
|
(68
|
)
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at April 1, 2006
|
|
|
2,932,159
|
|
|
|
674
|
|
|
|
726
|
|
|
|
-
|
|
|
|
2,408
|
|
|
|
(68
|
)
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140
|
|
|
|
140
|
|
Net
Income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
409
|
|
|
|
-
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2007
|
|
|
2,932,159
|
|
|
|
674
|
|
|
|
726
|
|
|
|
-
|
|
|
|
2,817
|
|
|
|
72
|
|
|
|
4,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at April 1, 2007
|
|
|
2,932,159
|
|
|
|
674
|
|
|
|
726
|
|
|
|
-
|
|
|
|
2,817
|
|
|
|
72
|
|
|
|
4,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
274
|
|
|
|
274
|
|
Net
Income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,467
|
|
|
|
-
|
|
|
|
1,467
|
|
Money
received pending allotment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,643
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,643
|
|
Balance
as of March 7, 2008
|
|
|
2,932,159
|
|
|
$
|
674
|
|
|
$
|
726
|
|
|
$
|
3,643
|
|
|
$
|
4,284
|
|
|
$
|
346
|
|
|
$
|
9,673
|
|
The
accompanying notes form an integral part of these financial
statements.
Sricon Infrastructure Private Limited
STATEMENT
OF CASH FLOWS
(Amounts
in Thousand US Dollars)
|
|
Year
ended
|
|
|
Year
ended
|
|
|
Period
ended
|
|
|
|
March
31, 2006
|
|
|
March
31, 2007
|
|
|
March
31, 2008
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
482
|
|
|
$
|
409
|
|
|
$
|
2,376
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided
(used) in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
240
|
|
|
|
243
|
|
|
|
416
|
|
Deferred
tax expense
|
|
|
34
|
|
|
|
79
|
|
|
|
30
|
|
Loss
on sale of property and equipment
|
|
|
5
|
|
|
|
(67
|
)
|
|
|
117
|
|
|
|
|
761
|
|
|
|
664
|
|
|
|
2,939
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
4
|
|
|
|
(574
|
)
|
|
|
(3,757
|
)
|
Unbilled
Receivable
|
|
|
(2,039
|
)
|
|
|
200
|
|
|
|
(1,481
|
)
|
Inventories
|
|
|
(98
|
)
|
|
|
177
|
|
|
|
(88
|
)
|
Prepaid
expenses and other current assets
|
|
|
(473
|
)
|
|
|
(36
|
)
|
|
|
828
|
|
Trade
payables
|
|
|
792
|
|
|
|
(1,214
|
)
|
|
|
781
|
|
Other
current liabilities
|
|
|
(302
|
)
|
|
|
(15
|
)
|
|
|
1,633
|
|
Advance
from Customers
|
|
|
340
|
|
|
|
-
|
|
|
|
(522
|
)
|
Other
non-current liabilities
|
|
|
528
|
|
|
|
1,140
|
|
|
|
(524
|
)
|
Non-current
assets
|
|
|
(91
|
)
|
|
|
126
|
|
|
|
(583
|
)
|
BOT
Project under Progress
|
|
|
(1,595
|
)
|
|
|
(1,380
|
)
|
|
|
(201
|
)
|
Net
cash used in (provided by) operating activities
|
|
|
(2,173
|
)
|
|
|
(911
|
)
|
|
|
(975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(1,415
|
)
|
|
|
(727
|
)
|
|
|
(228
|
)
|
Proceeds
from sale of property and equipment
|
|
|
26
|
|
|
|
10
|
|
|
|
315
|
|
Purchase
of short term investments
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
Non
Current Investments
|
|
|
506
|
|
|
|
(224
|
)
|
|
|
(694
|
)
|
Investment
in joint ventures
|
|
|
(43
|
)
|
|
|
111
|
|
|
|
-
|
|
Restricted
cash
|
|
|
(483
|
)
|
|
|
654
|
|
|
|
(152
|
)
|
Net
cash (used in) provided by investing activities
|
|
|
(1,409
|
)
|
|
|
(176
|
)
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
movement in cash credit and bank overdraft
|
|
|
2,294
|
|
|
|
(628
|
)
|
|
|
(967
|
)
|
Proceeds
from other short-term borrowings
|
|
|
44
|
|
|
|
165
|
|
|
|
55
|
|
Proceeds
from long-term borrowings
|
|
|
2,343
|
|
|
|
1,497
|
|
|
|
2,618
|
|
Repayment
of long-term borrowings
|
|
|
(752
|
)
|
|
|
(966
|
)
|
|
|
(1,597
|
)
|
Due
to related parties, net
|
|
|
(63
|
)
|
|
|
572
|
|
|
|
(1,834
|
)
|
Issue
of Equity Shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Money
received pending allotment
|
|
|
-
|
|
|
|
-
|
|
|
|
3,670
|
|
Net
cash provided by financing activities
|
|
|
3,866
|
|
|
|
640
|
|
|
|
1,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
2
|
|
Net
increase (decrease) in cash and cash equivalents during the
year
|
|
|
277
|
|
|
|
(450
|
)
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Balance as at the beginning of the period
|
|
|
262
|
|
|
|
539
|
|
|
|
89
|
|
Balance
as at the end of the period
|
|
$
|
539
|
|
|
$
|
89
|
|
|
$
|
301
|
|
Supplementary
information to Cash flow Statement
|
|
Year
ended
|
|
|
Year
ended
|
|
|
Period
ended
|
|
|
|
March
31, 2006
|
|
|
March
31, 2007
|
|
|
March
31, 2008
|
|
Cash
paid during the year
|
|
|
|
|
|
|
|
|
|
Income
tax
|
|
$
|
270
|
|
|
$
|
170
|
|
|
$
|
198
|
|
Interest
|
|
|
293
|
|
|
|
386
|
|
|
|
994
|
|
The
accompanying notes form an integral part of these financial
statements.
Sricon Infrastructure Private Limited
NOTES
TO FINANCIAL STATEMENTS
(Amounts
in Thousand US Dollars, except share data and as stated otherwise)
1.
BACKGROUND
a)
Incorporation and History
Sricon
Infrastructure Private Limited (“SIPL” or “Sricon”) is an Infrastructure Company
that has established itself as one of the leading companies in terms
of in India infrastructure projects such as: National
Highways, Civil and Structural Engineering Works for Power Plants, Steel Mills,
Sugar Plants, Turnkey Power Supply Systems, Water Supply Schemes, Mining,
Quarrying, and Cement Plants. SIPL’s business strategy is inspired by R.L.
Srivastava, the Company Chairman and Managing Director, who started his career
as a Civil Engineering Contractor. Mr. Srivastava’s years of
experience and technological insight has guided this company in the mist of
great economic achievement and promise in the country of India. SIPL was
incorporated in 1997 with the Registrar of Companies, Maharashtra
as “Srivastava Construction Private Limited”.
Until the
official formation of SIPL, the infrastructure construction
projects performed by our partner firm, Vijay Engineering Enterprises
“VEE” (partnership concern). SIPL was later formed to participate in larger
scale development projects such as Highway development, Water Management
Systems, Power and Cement Plants to name a few. The two rapidly
growing companies eventually combined to take advantage of greater synergies in
terms of better managed resources, both human and capital. SIPL
is proud to service it’s impressive book of business which includes
notable infrastructure clients and partners such as the National Highway
Authority of India, National Thermal Power Corporation, Western Coalfields
Limited, Larsen & Turbo Limited, Nagpur Municipal Corporation, Bharat Heavy
Electrical Limited, and Hindustan Steelworks Construction Limited.
The
company is accredited with ISO 9001:2000 Certification and the scope for
registration being “To execute projects in the field of
construction comprising of Road Works, Industrial Building/Infrastructure
Projects, Plants foundations, Housing/Colony construction, bridge construction,
Water works, Refractory Works and Jetty Works ”.
b)
Description of Business
The
current infrastructure construction business of the company primarily comprises
of:
·
|
Road
Construction and Maintenance
|
·
|
Maintenance
of Cement Plant including Refractory
work
|
·
|
Civil
work for Power and Steel Plants
|
·
|
Limestone
and Coal Mining
|
c)
Industry Overview
India’s
construction industry revenue is estimated to be over $28 billion annually,
which accounts for more than 6% of the GDP. The construction industry is
currently the largest employer in the country, employing nearly32 million
workers. The country’s apparent and limitless demand for new highways for better
transportation systems, dams, pipelines along with government incentives, has
caused a drastic surge in nearly all segments of the country. This is
evidenced by the increase in the large number of infrastructure procurement
contracts over the past 7 to 10 years. This remarkable growth
is anticipated to continue for many years to come.
To
illustrate India’s shared economic optimism among country leaders, Indian Prime
Minister Dr. Manmohan Singh, n, while addressing the Finance Ministers of ASEAN
countries at the Indo ASEAN Summit in New Delhi, forecasted that India requires
$150 billion at the rate of $15 billion per annum over the next 10 years. The
current rate of U.S. Foreign Direct Investment in India is estimated at $5
billion per year.. It is further estimated that more than 50%
of future FDI’s will be earmarked for Infrastructure, Telecom, and
Power projects.
Another
example of India’s infrastructural growth is the Golden Quadrilateral, which is
one of the largest highway projects under current development. It now has
approximately 4,500 miles with and an impressive 13,300 miles of
north-south corridors. Legislation is underway to plan miles
of East and West Coast corridors.
The Nodal
Agencies (NHAI, NTPC, NHPC, and PGCL, which specializes in alternative energy
sources, has ambitious development plans in the near future. The
value of overseas projects, under execution by Indian Companies is
conservatively estimated to be nearly 4.2176 billion U.S. dollars , which covers
major markets including Malaysia, Middle East, and East Africa. The
Industry is led by an intensely competitive environment, which is typically
characteristic of larger and mature markets such as the United States and Japan.
Therefore, no single alternative energy company controls the overall
market.
The
Infrastructure Budget of the Government for the 10th Plan (FY 02-07) is as
under:
|
|
(USD
in Millions)
|
|
Sector
|
|
FY20
01-04
|
|
|
FY20
04-07
|
|
Roads
|
|
$
|
7,656.61
|
|
|
$
|
14,617.16
|
|
Power
|
|
|
9,280.74
|
|
|
|
19,721.57
|
|
Oil
& Gas
|
|
|
8,816.70
|
|
|
|
15,313.22
|
|
Ports/
Airports/ Shipping
|
|
|
2,088.16
|
|
|
|
3,712.29
|
|
Railways
|
|
|
7,424.59
|
|
|
|
11,136.89
|
|
Telecom
|
|
|
15,313.22
|
|
|
|
16,937.35
|
|
Total
|
|
$
|
50,580.02
|
|
|
$
|
81,438.48
|
|
The
Outlay for the Central Sector Roads alone is 12,642.69 million. The position of
on-going Road Projects in India is:
|
|
(USD
in Millions)
|
|
Funding
Agency/Source
|
|
No.
of Projects
|
|
|
Total
Value
|
|
NHAI
|
|
$
|
50
|
|
|
$
|
2,218.46
|
|
World
Bank
|
|
|
15
|
|
|
|
1,043.20
|
|
Asian
Development Bank
|
|
|
8
|
|
|
|
290.14
|
|
Annuity
|
|
|
8
|
|
|
|
546.10
|
|
BOT
|
|
|
7
|
|
|
|
768.90
|
|
Total
|
|
$
|
88
|
|
|
$
|
4,866.80
|
|
|
|
|
|
|
|
|
|
|
d)
Business Outlook
Sricon
has networked with many partners in the industry in anticipation of jointly
executing very large projects. The Company has signed MOU’s (Memoranda of
Understanding) with industry leaders, Systems America and Hindustan Steel Works
Construction Limited “HSCL”, to participate in large value
projects.
The
company has also been pre-qualified by the National Highway Authority of India f
to bid in various projects. National Highway Authority of India is
implementing highways projects totaling 12,529 million including the Golden
Quadrilateral Projects, which is publically funded by taxes levied on petrol and
diesel fuel sales. . The company, using its network of
infrastructure building partners, has strategically positioned itself to be
frontrunners in acquiring these types of highway construction
contracts. The National Highway Authority has
pre-qualified the company to bid on construction contracts with values up to 116
million. The company has been awarded a National Highway Authority contract for
24.36 million which is eligible to expand by 10.44 million in additional
contracts acquisitions. Also, the following
companies have joined Scrion in expanding its’ service delivery
capability:
·
|
Systems
America Inc.: An established and leading American company engaged in
construction and development of infrastructure projects, which will
support SIPL in large highways
projects.
|
·
|
MECON
Limited: A public enterprise having vast experience in engineering and
turnkey execution of civil construction and infrastructure projects that
will assist SIPL in undertaking projects within the GCC
countries on turnkey basis
|
·
|
Hindustan
Steelworks Construction Limited (“HSCL”): A Government undertaking having
vast experience in turnkey execution of civil construction and
infrastructure projects and will assist SIPL participate in
various NHAI contracts in Maharashtra and Madhya Pradesh each
valuing 225 million US dollars
|
SIPL has
successfully completed various infrastructure projects with the following
strategic partners:
·
|
National
highway Authority of India
|
·
|
National
Thermal Power Corporation
|
·
|
Maharashtra
Jeevan Pradhikaran
|
·
|
Western
Coalfields Limited
|
·
|
Larsen
and Tubro Limited
|
·
|
Public
Works Department
|
·
|
Nagpur
Municipal Corporation
|
·
|
Nagpur
Improvement Trust
|
·
|
Bharat
Heavy Electricals Limited
|
·
|
Hindustan
Steelworks Construction Limited
|
·
|
Pradhan
Mantri Gram Sadak Yojana
|
The
Company’s registration with the following entities reflects its technical
expertise, project execution capabilities and reliability:
·
|
Central
Public Works Department
|
·
|
National
Building Construction Corporation
Limited
|
·
|
Engineers
Project India Limited
|
·
|
Hindusthan
Construction Limited
|
·
|
National
Project Construction Limited
|
·
|
Sardar
Sarovar Narmada Nigam Limited
|
·
|
Nagpur
Municipal Corporation
|
·
|
Nagpur
Improvement Trust
|
The
Company’s registration with the following entities reflects its technical
expertise, project execution capabilities and reliability:
·
|
Central
Public Works Department
|
·
|
National
Building Construction Corporation
Limited
|
·
|
Engineers
Project India Limited
|
·
|
Hindusthan
Construction Limited
|
·
|
National
Project Construction Limited
|
·
|
Sardar
Sarovar Narmada Nigam Limited
|
·
|
Nagpur
Municipal Corporation
|
·
|
Nagpur
Improvement Trust
|
e)
Risks and Threats
·
|
The
industry is highly governed by the political environment and economical
policies prevalent within the country since significant portion of
infrastructure spending originates from the Government. Any adverse change
in the policies may slow down the Government’s commitment towards
Infrastructure development.
|
Foreign
Competition – The Government has opened the sector to foreign companies who can
bid on projects on their own, or through joint ventures with domestic companies.
This could create more competition in the future.
Domestic
Competition - The Company faces two types of competition in the domestic
sector:
(i)
|
|
Competition
from the local development companies in and around their state, typically
this is applicable to low value contracts.
|
|
(ii)
|
|
Marketing
/ Business Development - Construction contracts for infrastructure in
India are offered by the Government sector, Central Government and the
State Governments. Funds for these are allocated through their budgetary
support as well as through international and domestic financial
institutions such as World Bank, Asian Development Bank, Japan Bank for
International co-operation, Housing & Urban Development Corporation,
National Bank for Agricultural & Rural Development, etc. In view of
the nature of our market, the major sources of information of ensuing
tenders for construction contracts are newspapers and government gazettes.
In addition to these, construction contracts are also offered by the
private sector.
|
f)
Strengths and Opportunities
·
|
The
Company is an integrated construction and infrastructure development
company with front-end civil engineering and design
skills.
|
·
|
The
Company has sufficient internal resources, technology and human capital
that will. that enables us to pre-qualify for major contract
solicitations.
|
·
|
The
Company leverages its’ key relationships with national and
international organizations for use of specialized resources whenever the
market dictates.
|
·
|
The
Company has a diverse service capability ranging from water and sewer
management, to , installing power transmission lines,
construction of roads, housing complexes, airport and sea port
construction, cement plant operations, canal excavation
projects.
|
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)
Basis of preparation
The
financial statements for the years ended March 31, 2006, 2007 and for the period
ended March 7, 2008 have been prepared in accordance with accounting principles
generally accepted in the United States of America (‘US GAAP’). The significant
accounting policies adopted by Sricon, in respect of these financial statements,
are set out below.
These
Financial statements have been prepared in US Dollars (USD), the national
currency of United States of America.
b)
Foreign Currency Translation
The
accompanying financial statements are reported in U.S. dollars. The Indian rupee
is the functional currency for the company. The translation of the functional
currencies into U.S. dollars is performed for assets and liabilities using the
exchange rates in effect at the balance sheet date and for revenues, costs and
expenses using average exchange rates prevailing during the reporting periods.
Adjustments resulting from the translation of functional currency financial
statements to reporting currency are accumulated and reported as other
comprehensive income/(loss), a separate component of shareholders’
equity.
Transactions
in foreign currency are recorded at the exchange rate prevailing on the date of
transaction. Monetary assets and liabilities denominated in foreign currencies
are expressed in the functional currency at the exchange rates in effect at the
balance sheet date. Revenues, costs and expenses are recorded using exchange
rates prevailing on the date of transaction. Gains or losses resulting from
foreign currency transactions are included in the statement of income. Share
Capital issued has been recorded at historical rates whereas those existing on
March 31, 2004 have been translates at the rates prevailing on that
date.
The
exchange rates used for translation purposes are as under:
Year
|
|
Month
end Average Rate (P&L rate)
|
|
Year
end rate (Balance sheet rate)
|
2005-06
|
|
INR
44.18 per USD
|
|
INR
44.48 per USD
|
2006-07
|
|
INR
45.11 per USD
|
|
INR
43.10 per USD
|
2007-08
|
|
INR
40.13 per USD
|
|
INR
40.42 per USD
|
c)
Revenue recognition
Sales and
services include adjustments made towards liquidated damages, price variation
and charges paid for discounting of receivables arising from
construction/project contracts on a non-recourse basis, wherever
applicable.
Revenue
is recognized based on the nature of activity when consideration can be
reasonably measured and there exists reasonable certainty of its
recovery.
Revenue
from sale of goods is recognized when substantial risks and rewards of ownership
are transferred to the buyer under the terms of the contract.
Revenue
from construction/project related activity and contracts for
supply/commissioning of complex plant and equipment is recognized as
follows:
|
a)
|
|
Cost
plus contracts: Contract revenue is determined by adding the aggregate
cost plus proportionate margin as agreed with the customer and expected to
be realized.
|
|
|
|
b)
|
|
Fixed
price contracts: Contract revenue is recognized using the percentage
completion method. Percentage of completion is determined as a proportion
of cost incurred-to-date to the total estimated contract cost. Changes in
estimates for revenues, costs to complete and profit margins are
recognized in the period in which they are reasonably
determinable
|
Full
provision is made for any loss in the period in which it is
foreseen.
Revenue
from property development activity is recognized when all significant risks and
rewards of ownership in the land and/or building are transferred to the customer
and a reasonable expectation of collection of the sale consideration from the
customer exists.
Revenue
from service related activities and miscellaneous other contracts are recognized
when the service is rendered using the proportionate completion method or
completed service contract method.
d)
Use of estimates
The
preparation of financial statements in conformity with US GAAP requires the use
of management estimates and assumptions that affect the amounts reported. These
estimates are based on historical experience and information that is available
to management about current events and actions that the Company may take in the
future. Significant items subject to estimates and assumptions include revenue
recognition, the useful lives and the evaluation of impairment of property and
equipment, the income tax, the contingencies and the provision for impairment of
receivables and advances. Actual results could differ from these
estimates.
e)
Joint venture
The
Company’s interest in jointly controlled entities is initially recognized at
cost.
f)
Restricted cash
Restricted
cash consists of deposits pledged with various government authorities and
deposits restricted as to usage under lien to banks for guarantees and letters
of credit given by the Company. The restricted cash is primarily invested in
time deposits with banks.
g)
Cash and cash equivalents
Cash
includes cash in hand, cash with banks and cash equivalents, which represent
highly liquid deposits with an original maturity of ninety days or less. All the
investments which include government securities are classified as non current
investments (refer Note 2 (j)).
h)
Accounts receivable
Accounts
receivables are recorded at the invoiced amount. Account balances are written
off when the company believes that the receivables will not be recovered. The
company’s bad debts are included in selling and general administrative expenses.
The company did not recognize any bad debts during the year ended March 31,
2006, 2007 and March 7, 2008, respectively.
i)
Investments
Investments
are initially measured at cost, which is the fair value of the consideration
given for them, including transaction costs. Investments generally comprises of
fixed deposits with banks.
j)
Inventories
Inventories
primarily comprise finished goods, raw materials, work in progress, stock at
customer site, stock in transit, components and accessories, stores and spares,
scrap, residue and real estate. Inventories are stated at the lower of cost or
estimated net realizable value.
The Cost
of various categories of inventories is determined on the following
basis:
Raw
Material are valued at weighted average of landed cost (Purchase price, Freight
inward and transit insurance charges), Work in progress is valued as confirmed,
valued & certified by the technicians & site engineers and Finished
Goods at material cost plus appropriate share of labor cost and production
overhead. Components and accessories, stores erection, materials, spares and
loose tools are valued on a First-in-First out basis. Real Estate is valued at
the lower of cost or net realizable value.
k)
Property and equipment
Property
and equipment is stated at historical cost, net of accumulated depreciation. All
direct costs relating to the acquisition and installation of property and
equipment are capitalized
Depreciation
is recorded on a straight-line basis over the estimated useful lives of the
assets as follows:
Category
|
|
Years
|
Buildings
|
|
|
25
|
|
Plant
and Machinery
|
|
|
20
|
|
Computer
Equipment
|
|
|
3
|
|
Office
Equipment
|
|
|
5
|
|
Furniture
and Fixtures
|
|
|
5
|
|
Vehicles
|
|
|
5
|
|
Leasehold
Improvements
|
|
Over
the period of lease or useful life (if
less)
|
Assets
individually costing INR 5 (equivalent to USD 0.124 as at March 7, 2008) or less
are fully depreciated in the year of purchase.
Land is
not depreciated.
The
assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
Gains and
losses arising from retirement or disposal of property and equipment are
determined as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of operations on the
date of retirement and disposal.
Costs of
additions and substantial improvements to property and equipment are
capitalized. The costs of maintenance and repairs of property and equipment are
charged to operating expenses.
l)
Asset retirement obligations
Asset
retirement obligations associated with the Company’s leasehold land are subject
to the provisions of FAS No. 143 “Accounting for Asset Retirement Obligations”
and related interpretation, FIN No. 47, “Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement No. 143” . The lease
agreements entered into by the Company may contain clauses requiring restoration
of the leased site at the end of the lease term and therefore create asset
retirement obligations. The Company records the fair value of a liability for an
asset retirement obligation in the period in which it is incurred and
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value of each period,
and the capitalized cost is depreciated over the estimated useful life of the
related asset. Upon settlement of the liability, the Company either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement.
m)
Foreign currency transactions
Monetary
assets and liabilities denominated in foreign currencies are expressed in the
functional currency Indian Rupees at the rates of exchange in effect at the
balance sheet date. Transactions in foreign currencies are recorded at rates
ruling on the transaction dates. Gains or losses resulting from foreign currency
transactions are included in the statement of operations.
n)
Operating leases
Lease
payments under operating leases are recognized as an expense on a straight-line
basis over the lease term.
o)
Capital leases
Assets
acquired under capital leases are capitalized as assets by the Company at the
lower of the fair value of the leased property or the present value of the
related lease payments or where applicable, the estimated fair value of such
assets. Amortization of leased assets is computed on straight line basis over
the useful life of the assets. Amortization charge for capital leases is
included in depreciation expense.
p)
Impairment of long – lived assets
The
Company reviews its long-lived assets, including identifiable assets with finite
lives, for impairment whenever events or changes in business circumstances
indicate that the carrying amount of assets may not be fully recoverable. Such
circumstances include, though are not limited to, significant or sustained
declines in revenues or earnings and material adverse changes in the economic
climate. For assets that the Company intends to hold for use, if the total of
the expected future undiscounted cash flows produced by the assets or asset
Company is less than the carrying amount of the assets, a loss is recognized for
the difference between the fair value and carrying value of the assets. For
assets the Company intends to dispose of by sale, a loss is recognized for the
amount by which the estimated fair value less cost to sell is less than the
carrying value of the assets. Fair value is determined based on quoted market
prices, if available, or other valuation techniques including discounted future
net cash flows.
q)
Borrowing costs
(i)
Capitalized interest
The
interest cost incurred for funding a qualifying asset during the construction
period is capitalized based on actual investment in the asset at the average
interest rate. The capitalized interest is included in the cost of the relevant
asset and is depreciated over the estimated useful life of the
asset.
(ii)
Debt issue expenses
The
Company defers and amortizes debt issue expenses over the term of the related
borrowing based on the effective interest method.
r)
Provision for Warranties and Liquidated Damages
The
company recognizes warranty claims and liquidated damages as and when they are
probable/ incurred. In past years the company does not have any material
warranty claims. The liquidated damages recognized during year ended March 31,
2006, 2007 and for the period ended March 7, 2008 are USD 21, 21 and Nil
respectively. The liquidated Damages are included in cost of
revenue.
s)
Employee benefits
(i) Retirement
Plans (Gratuity Plan)
In
accordance with Indian law, the Company provides for gratuity obligations
through a defined benefit retirement plan (the ‘Gratuity Plan’) covering all
employees. Under the Gratuity Plan, a lump sum payment to vested employees is
made at retirement or termination of employment based on the respective
employee’s salary and the number of years of employment with the Company. The
Company provides for the Plan based on actuarial valuations in accordance with
FAS No. 87, “Employers’ Accounting for Pensions”.
(ii)
Provident Fund and employees’ state insurance schemes
In
accordance with Indian law, all employees of the Company are entitled to receive
benefits under the Provident Fund, which is a defined contribution plan. Both
the employees and the employer make monthly contributions to the plan at a
predetermined rate (presently 12.0%) of the employees’ basic salary. These
contributions are made to the fund administered and managed by the Government of
India (GoI). In addition some employees of the Company are covered under the
employees’ state insurance schemes, which are also defined contribution schemes
recognized by the Indian Revenue Authorities, and are administered through the
GoI.
The
Company’s contributions to both these schemes are expensed in the statement of
operations. The Company has no further obligations under these plans beyond its
monthly contributions.
(iii)
Compensated absences
The
employees of the Company are entitled to be compensated for absences based on
the unused leave balance and the last drawn salary of the respective employees.
The Company has provided for the liability on account of compensated absences in
accordance with FAS No. 43, “Accounting for Compensated Absences”.
t)
Income taxes
In
accordance with the provisions of FAS 109, “Accounting for Income Taxes”, income
taxes for the years ended March 31, 2006, 2007 and for the period ended March 7,
2008 are accounted for under the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of assets and
liabilities and their respective tax bases and operating loss carry-forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statement
of operations in the period in which the change is enacted. Based on
management’s judgment, the measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance for any tax benefits for which it is more
likely than not that some portion or all of such benefits will not be
realized.
u)
Pre-operating costs
Pre-operating
costs represent certain marketing and administrative expenses incurred prior to
the commencement of commercial operations of the new line of business. These
costs are expensed as incurred.
v)
Earnings per share
In
accordance with FAS 128, “Earnings Per Share”, a basic earnings per equity share
is computed using the weighted average number of equity shares outstanding
during the period. Diluted earnings per equity share are computed using the
weighted average number of common and dilutive common equivalent equity shares
outstanding during the period except where the result would be
anti-dilutive.
w)
Recent accounting pronouncements
The
Company does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
x)
Reclassification
Certain
items previously reported in specific captions of the financial statements have
been reclassified to conform to the current year’s presentation.
3.
INVESTMENT IN JOINT VENTURES
The
company has entered into a joint venture dated March 24, 2005 with Hindustan
Steel Works Limited having a participation of 49% and 51%, respectively for the
purpose of preparation and submitting the bids and executing the contract works
in the name of HSCL – SIPL (JV) for National Highway Authority of India. The
principal objective of joint venture is construction of a four lane highway from
km marker 94,000 to km 123,000 of the Nagpur – Hyderabad Section of NH-7 in the
State of Maharashtra.
The above
said Joint Venture Agreement was amended by an agreement dated 28th September
2007 wherein the percentage of profit sharing was amended to 98.75 % for the
Company and 1.25% for HSCL and in case of any loss , the same shall be borne by
the Company in entirety .In view of the Company’s predominance in Joint Venture,
the audited financial statements of the Joint Venture for the period ended
7th
March 2008 was in the Company’s statements. HSCL’s share of Joint
Venture profit amounting to USD 6 in thousands has not been provided pending the
completion of the project under Joint Venture.
4.
PROPERTY AND EQUIPMENT, NET
Property
and equipment consist of the following:
|
|
As
of
|
|
|
As
of
|
|
Particulars
|
|
March
31, 2007
|
|
|
March
7 2008
|
|
Land
|
|
$
|
45
|
|
|
$
|
17
|
|
Buildings
|
|
|
49
|
|
|
|
290
|
|
Plant
& Machinery
|
|
|
5,468
|
|
|
|
6,005
|
|
Computers
|
|
|
58
|
|
|
|
84
|
|
Furniture
and Fixture
|
|
|
56
|
|
|
|
76
|
|
Office
equipment
|
|
|
25
|
|
|
|
34
|
|
Vehicles
|
|
|
165
|
|
|
|
173
|
|
Leasehold
Improvements
|
|
|
160
|
|
|
|
175
|
|
Asset
under Construction
|
|
|
-
|
|
|
|
16
|
|
Total
|
|
$
|
6,026
|
|
|
$
|
6,870
|
|
Less:
Accumulated depreciation
|
|
|
1,123
|
|
|
|
1543
|
|
Net
|
|
$
|
4,903
|
|
|
$
|
5,327
|
|
Plant
& Machinery included plant & machinery and commercial vehicles acquired
under capital leases amounting to USD 2,372 and 2,530 as of March 31, 2007 and
March 7, 2008, respectively.
The gross
carrying amounts of fully depreciated assets included in the overall balance of
property and equipment above, which were still in active use, are as
follows:
|
|
As
of
|
|
|
As
of
|
|
Particulars
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Furniture
and Fixture
|
|
$
|
19
|
|
|
$
|
28
|
|
Office
equipment
|
|
|
11
|
|
|
|
12
|
|
Computers
|
|
|
17
|
|
|
|
33
|
|
Vehicles
|
|
|
86
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
133
|
|
|
$
|
177
|
|
All
property and equipment of the Company have been pledged as collateral for its
secured borrowings.
5.
INCOME TAXES
The
Company accounted for the deferred tax assets and liabilities as of March 31
2006, 2007 and March 7, 2008, on the temporary differences.
The
primary components of the income tax expense were:
|
|
Year
ended March 31,
|
|
Period
ended March 7,
|
|
|
|
2006
|
|
2007
|
|
2008
|
|
Current
Tax Expense
|
|
$
|
145
|
|
|
$
|
278
|
|
|
$
|
716
|
|
Deferred
Tax Expenses / (Income)
|
|
|
34
|
|
|
|
79
|
|
|
|
30
|
|
Income Tax Expense /
(Income)
|
|
$
|
179
|
|
|
$
|
357
|
|
|
$
|
746
|
|
The
reconciliation between the provisions for income tax to the amount computed by
applying the statutory income tax rate to the income before provision for income
tax is summarized below:
|
|
Year
ended March 31,
|
|
Period
ended March 7,
|
|
|
|
2006
|
|
|
2007
|
|
2008
|
|
Net Income before
Taxes
|
|
$
|
668
|
|
|
$
|
779
|
|
|
$
|
3,144
|
|
Enacted
Tax Rates in India
|
|
|
33.6600
|
%
|
|
|
33.9900
|
%
|
|
|
33.9900
|
%
|
Computed
Tax Expense / (Income)
|
|
|
(225
|
)
|
|
|
(265
|
)
|
|
|
1069
|
|
Increase
/ (reduction) in taxes on account of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of changes in tax rate
|
|
|
(12
|
)
|
|
|
1
|
|
|
|
---
|
|
Timing
Differences
|
|
|
416
|
|
|
|
620
|
|
|
|
(323
|
)
|
Income tax expense / (income)
reported
|
|
$
|
(179
|
)
|
|
$
|
(357
|
)
|
|
$
|
746
|
|
The
components that gave rise to deferred tax assets and liabilities included in the
balance sheet were as follows:
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Deferred Tax
Assets
|
|
|
|
|
|
|
Retirement
Benefits
|
|
$
|
11
|
|
|
$
|
17
|
|
|
|
|
11
|
|
|
|
17
|
|
Deferred Tax
Liabilities
|
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
(549
|
)
|
|
|
(620
|
)
|
|
|
|
(549
|
)
|
|
|
(620
|
)
|
Net deferred tax
liability
|
|
$
|
(538
|
)
|
|
$
|
(603
|
)
|
6.
SHORT TERM BORROWINGS AND CURRENT PORTION OF LONG TERM DEBT
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Secured
|
|
$
|
2,069
|
|
|
$
|
1,571
|
|
Unsecured
|
|
|
278
|
|
|
|
351
|
|
Total
|
|
|
2,347
|
|
|
|
1,922
|
|
Add:
|
|
|
|
|
|
|
|
|
Current
portion of long term debt
|
|
|
1,299
|
|
|
|
3,810
|
|
Total
|
|
$
|
3,646
|
|
|
$
|
5,732
|
|
The
above-secured borrowings were secured by collateralization against the company’s
inventory and receivables.
The
details of unused lines of credit (Cash credit) were as follows:
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Secured
|
|
$
|
109
|
|
|
$
|
--
|
|
7.
EMPLOYEE BENEFITS
Retirement (Gratuity plan):
The
measurement dates for the Company’s Gratuity Plan were March 31, 2007 and March
7, 2008. The following table sets forth the changes in the projected benefit
obligation and amounts recognized in the Company’s balance sheet as of the
respective measurement dates:
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Change
in Projected Benefit Obligation
|
|
|
|
|
|
|
Accumulated
Benefit Obligation
|
|
$
|
13
|
|
|
$
|
22
|
|
Projected
Benefit obligation at the beginning of the year
|
|
|
22
|
|
|
|
31
|
|
Current
Service Cost
|
|
|
3
|
|
|
|
5
|
|
Interest
Cost
|
|
|
2
|
|
|
|
2
|
|
Benefits
paid
|
|
|
—
|
|
|
|
—
|
|
Actuarial
(gain)/ loss
|
|
|
2
|
|
|
|
5
|
|
Projected
Benefit obligation at the end of the year
|
|
|
29
|
|
|
|
43
|
|
Net
amount recognized
|
|
$
|
29
|
|
|
$
|
43
|
|
The
components of the net gratuity cost were as follows:
|
|
For
Year Ended
|
|
|
For
Period ended
|
|
|
|
March
31, 2006
|
|
|
March
31, 2007
|
|
|
March
31, 2007
|
|
Current
Service Cost
|
|
$
|
2
|
|
|
$
|
3
|
|
|
|
5
|
|
Interest
Cost
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Recognized
actuarial (gain)/loss
|
|
|
(5
|
)
|
|
|
(2
|
)
|
|
|
5
|
|
Net Gratuity
Cost
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
|
|
12
|
|
The net
gratuity accrued liabilities, were as follows:
|
|
As
of
|
|
As
of
|
|
|
March
31, 2007
|
|
March
7, 2008
|
Net
Gratuity Liability
|
|
$
|
29
|
|
|
$
|
43
|
|
The
weighted average assumptions used to determine the benefit obligations and the
net periodic cost were as follows:
|
|
Year
ended
|
|
Period
ended
|
|
|
March
31, 2007
|
|
March
7, 2008
|
Discounting
Rate
|
|
$
|
8.00
|
%
|
|
$
|
8.00
|
%
|
Rate
of Compensation increase
|
|
|
5.50
|
%
|
|
|
5.50
|
%
|
Actuarial
gains and losses are recognized as and when incurred. The Company has not
recognized any of the following as of March 31, 2006, 2007 and March 7,
2008:
·
|
unamortized
prior service cost
|
·
|
unrecognized
net gain or loss
|
·
|
the
remaining unamortized, unrecognized net obligation existing at the initial
date of application of FAS 87 or FAS 106;
and
|
·
|
any
intangible asset and the amount of accumulated other comprehensive income
recognized pursuant to paragraph 37 of FAS 87, as
amended.
|
The
estimated amounts of gratuity benefits expected to be paid in each of the next 5
years and in the aggregate for 5 years thereafter, are as follows:
|
|
As
of
|
|
|
|
March
7, 2008
|
|
Year
Ending March 31, 2009
|
|
$
|
1
|
|
Year
Ending March 31, 2010
|
|
|
3
|
|
Year
Ending March 31, 2011
|
|
|
4
|
|
Year
Ending March 31, 2012
|
|
|
4
|
|
Year
Ending March 31, 2013
|
|
|
5
|
|
Year
Ending March 31, 2014 - 18
|
|
|
26
|
|
Total
|
|
$
|
43
|
|
Actuarial
gains and losses are recognized as and when incurred. The Company has not
recognized any of the following as of March 31, 2006, 2007 and March 7,
2008:
·
|
unamortized
prior service cost
|
·
|
unrecognized
net gain or loss
|
·
|
the
remaining unamortized, unrecognized net obligation or net asset existing
at the initial date of application of FAS 87 or FAS 106;
and
|
·
|
any
intangible asset and the amount of accumulated other comprehensive income
recognized pursuant to paragraph 37 of FAS 87, as
amended.
|
c)
Provident Fund
The
Company’s contribution towards the Provident Fund amounted to USD 14, 12 and 20
for the years ended March 31, 2006, 2007 and March 7, 2008,
respectively.
3.
LONG TERM DEBT
Long-term
debt comprises:
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Secured
|
|
$
|
|
|
|
$
|
|
|
Term
loans
|
|
|
1,568
|
|
|
|
3,522
|
|
Loan
for assets purchased under capital lease
|
|
|
1,913
|
|
|
|
1,552
|
|
Total
|
|
|
3,481
|
|
|
|
5,074
|
|
Less:
Current portion (Payable within 1 year)
|
|
|
1,299
|
|
|
|
3,810
|
|
Total
|
|
$
|
2,182
|
|
|
$
|
1,264
|
|
The
secured loans were collateralized by:
·
|
Unencumbered
Net Asset Block of the Company
|
·
|
Equitable
mortgage of properties owned by promoter directors/
guarantors
|
·
|
Hypothecation
of receivables, assignment of toll
rights
|
·
|
First
charge on Debt-Service Reserve
Account
|
The
scheduled repayments of the long term debts during the next 5 years and beyond
are as follows:
|
|
As
of
|
|
Year ended March
31,
|
|
March
7, 2008
|
|
2009
|
|
$
|
3,810
|
|
2010
|
|
|
385
|
|
2011
|
|
|
23
|
|
2012
|
|
|
24
|
|
2013
and beyond
|
|
|
832
|
|
Total
|
|
$
|
5,074
|
|
The
details of unused secured term loans are as follows:
|
|
As
of
|
|
|
As
of
|
|
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Term
Loans
|
|
$
|
2,376
|
|
|
$
|
----
|
|
The
amounts payable for the capital lease obligation would be 828, 385, 23, 24 and
27 for the years ending March 31, 2009, 2010, 2011, 2012 and 2013,
respectively.
Under the
loan agreements, the company must maintain, among other things, certain
specified financial ratios, with which the company was in compliance as of March
7, 2008.
4.
DIVIDENDS
Final
dividends proposed by the Board of Directors will be payable when formally
declared by the shareholders, who have the right to decrease but not increase
the amount of the dividend recommended by the Board of Directors. Interim
dividends will be declared by the Board of Directors without the need for
shareholders’ approval.
Dividends
payable to equity shareholders will be based on the net income available for
distribution as reported in the Company’s financial statements prepared in
accordance with Indian GAAP. Dividends can only be declared and paid in Indian
Rupees and/or converted into foreign currency for an equivalent amount in cases
where dividend is permitted to be repatriated.
Under the
Indian Companies Act 1956, dividends may be paid out of the profits of a company
in the year in which the dividend is declared or out of the undistributed
profits of previous fiscal years. Before declaring a dividend greater than 10%
of the par value of its equity shares, a company is required to transfer to its
reserves a minimum percentage of its profits for that year, ranging from 2.5% to
10 %, depending on the dividend percentage to be declared in such year.
Dividends can be distributed out of the general reserve in case of a loss or
inadequacy of current distributable profits. Presently, the Company is required
to pay dividend tax on the total amount of the dividend declared, distributed or
paid at the specified tax rate including surcharge (applicable tax rate is
16.99% as at March 7, 2008).
The
Company has not paid any dividends from inception through March 7,
2008.
Under the
agreements with the lenders, lender specific permission will be required in
certain cases for distributing dividends. The company has an outstanding secured
loan of USD 2.83 million from the Bank of India wherein as per the terms of
sanction, the company has submitted a stamped undertaking to the Bank; the
company shall not without the Banks written permission declare dividend for any
year except out of the profits relating to that year after meeting all the
financial commitments to the bank and making all dues and necessary
provisions.
5.
DONATIONS
Donations
were made to premier educational institutions and others amounting to USD 5, 7
and 8 for the years ended March 31, 2006, 2007 and March 7, 2008, respectively
and were included in selling, general and administration expenses in the
statements of operations.
6.
RELATED PARTY TRANSACTIONS
The
Company has entered into transactions with the following related
parties.
Key
management personnel:
Mr.
R.L Srivastava
Mr.
S.P Srivastava
Mrs.I.R
Srivastava
Mr.
Ram Mukunda
Other
related parties (entities which are controlled or significantly influenced by
the key management personnel and their close relatives)
Biharilal
Srivastava
Gulablal
Srivastava
Ramdularidevi
Srivastava
R.
D. Srivastava
Vijayshaker
Srivastava
Aurobindo
Laminations Limited
Narbada
Finance & Leasing Private Limited.
Vijay
Engineering Enterprise Private Limited
Srivastava
Construction Company
Reaselack
Polymers Private Limited
Srivastava
Hi-Tech Pro-Oil Complex Priavte Limited
Bhalchandra
Finance & Leasing Company Limited
The
transactions and balances with the following related parties are described
below:
|
|
Year
ended March 31, 2006
|
|
|
Key
Management
|
|
Other
Related
|
Relationship
|
|
Personnel
|
|
Parties
|
Fund
Transferred
|
|
$
|
—
|
|
|
$
|
437
|
|
Fund
Received
|
|
|
—
|
|
|
|
(913
|
)
|
Purchase
of Assets
|
|
|
(39
|
)
|
|
|
(2
|
)
|
Sale/transfer
of Assets
|
|
|
—
|
|
|
|
1
|
|
Employee
related transaction by the Company
|
|
|
—
|
|
|
|
1
|
|
Employee
related transaction for the Company
|
|
|
—
|
|
|
|
(2
|
)
|
Expenses
incurred by the Company
|
|
|
168
|
|
|
|
818
|
|
Expenses
incurred for the Company
|
|
|
(63
|
)
|
|
|
(9
|
)
|
|
|
Year
ended March 31, 2007
|
|
|
Key
Management
|
|
Other
Related
|
Relationship
|
|
Personnel
|
|
Parties
|
Fund
Transferred
|
|
$
|
—
|
|
|
$
|
780
|
|
Fund
Received
|
|
|
—
|
|
|
|
(1,258
|
)
|
Purchase
of Assets
|
|
|
—
|
|
|
|
—
|
|
Sale/transfer
of Assets
|
|
|
—
|
|
|
|
1
|
|
Employee
related transaction by the Company
|
|
|
—
|
|
|
|
—
|
|
Employee
related transaction for the Company
|
|
|
—
|
|
|
|
—
|
|
Expenses
incurred by the Company
|
|
|
634
|
|
|
|
150
|
|
Expenses
incurred for the Company
|
|
$
|
(172
|
)
|
|
$
|
(73
|
)
|
|
|
Period
ended March 7, 2008
|
|
|
Key
Management
|
|
|
Other
Related
|
|
Relationship
|
|
Personnel
|
|
|
Parties
|
|
Fund
Transferred
|
|
$
|
1474
|
|
|
$
|
2,247
|
|
Fund
Received
|
|
|
(879
|
)
|
|
|
(510
|
)
|
Purchase
of Assets
|
|
|
—
|
|
|
|
—
|
|
Sale/transfer
of Assets
|
|
|
—
|
|
|
|
30
|
|
Employee
related transaction by the Company
|
|
|
4
|
|
|
|
5
|
|
Employee
related transaction for the Company
|
|
|
—
|
|
|
|
(31
|
)
|
Expenses
incurred by the Company
|
|
|
52
|
|
|
|
58
|
|
Expenses
incurred for the Company
|
|
$
|
(76
|
)
|
|
$
|
(38
|
)
|
Purchase
& sale/ transfer of assets – included primarily purchase & sale/
transfer of Plant and Machinery for and by the key management personnel, joint
venture and other related parties.
Employee
related transactions – included primarily salary, wages and other allowances to
employees, traveling and boarding expenses incurred for and by joint venture and
other related parties.
Expenses
incurred – included primarily cost of sales and selling, general &
administrative expenses incurred for and by joint venture and other related
parties.
Transactions
with related parties were at competitive market prices as charged to
unaffiliated customers for similar services or charged by other
suppliers.
7.
SEGMENT INFORMATION
The
Company follows the provisions of SFAS No 131 “Disclosure about Segments of an
Enterprise and Related Information”. SFAS No 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. The Company operates in a
single infrastructure construction segment.
13.
COMMITMENTS AND CONTINGENCIES
The
company has to observe the laws, government orders and regulations of the state
in which they operate. A number of them are currently involved in administrative
proceedings arising out of the normal conduct of their business. In the opinion
of management, however, the outcome of these actions will not materially affect
the financial position, result of operations or cash flow.
Commitments
a)
Capital commitments
The
estimated amount of contracts remaining to be executed on capital account not
provided for as on March 31, 2006, March 31, 2007, March 7, 2008 are USD
zero.
b)
Guarantees
The
Company had outstanding financial / performance bank guarantees of USD 4,116,
USD 153 and USD 1,364 as of March 31, 2006, March 31, 2007 and March 7,
2008.
Contingencies
|
a)
|
|
The
company was awarded a contract from National Highway Authority of India
(‘NHAI’) in 2004-05, for restoring the Jaipur – Gurgaon National Highway
8. The total contract value was USD 5.10 million to be completed in 9
months. The entire stretch of the site was handed over on piecemeal basis
without any defined schedule in contravention with contractual provisions
and approved construction program and methodology. This has resulted in
additional costs due to additional deployment of resources for prolonged
period. Thus, the company invoked the escalation clause of the contract
and filed a claim of USD 8.16 million. The dispute has been referred to
arbitration. The company has not recognized the claim amounts on its
books.
|
|
|
|
b)
|
|
The
company was awarded a contract from National Highway Authority of India
(‘NHAI’) in 2001-02 for construction of a four lane highway on the Namkkal
bypass on National Highway 7, in the state of Tamilnadu. The total
contract value was USD 4 million and the construction was to have been
completed by November 30, 2002. The escalation and variation claim of USD
5.27 million is pending with NHAI. An arbitration process was initiated on
July 3, 2007. The company has not recognized the claim amounts on its
books.
|
14.
CONCENTRATION OF CREDIT RISK
The
Company is concentrated on projects undertaken by government and government
enterprises.
Company’s
business therefore requires that we continue to maintain pre-qualified status
with key clients and we are not disqualified from future projects that these
clients may award. Company’s major clients vary from period to period depending
on the demand and the completion schedule of projects. The loss of a significant
client or a number of significant clients or projects from such clients for any
reason, including as a result of disqualification or dispute, may have an
adverse effect on Company’s results of operations.
15.
VENDOR RISK
The
Company is significantly affected by the availability, cost and quality of the
raw material and fuel, which we need to construct and develop
Company’s projects. The prices and supply of raw materials, bought out items and
fuel depend on factors not under Company’s control, including general economic
conditions, competition, production levels, transportation costs and import
duties. Although we generally provide for price contingencies in Company’s
contracts to limit Company’s exposure, if, for any reason, Company’s primary
suppliers of raw materials, bought out items and fuel should curtail or
discontinue their delivery of such materials to us in the quantities we need or
at prices that are competitive or expected by us, Company’s ability to meet
Company’s material requirements for our projects could be impaired, Company’s
construction schedules could be disrupted, or Company’s earnings and business
could suffer. Additionally, we rely on manufacturers and other suppliers and do
not have control over the quality of products they supply, which may adversely
affect the quality and workmanship of Company’s projects.
16.
SUBSEQUENT EVENTS
On March
14, 2008, the company has allotted 4,041,776 equity shares @ USD 6.30 per equity
share to India Globalization Capital, Mauritius (“IGC”) against the total
consideration of 25.48 million. IGC has also purchased 12% equity from the
promoters resulting in a 63% post investment ownership by IGC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Shareholders
Techni
Bharathi Limited:
We have
audited the accompanying balance sheets of Techni Bharathi Limited as
of March 7, 2008, and as of March 31, 2007 and the related statements
of operations, stockholders' equity and cash flows for the period
ended March 7, 2008, and years ended March 31, 2007 and 2006. 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 auditing standards
generally accepted in the United States of America. 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.
In our
opinion, the financial statements referred to above present fairly ,
in all material respects, the financial position of Techni Bharathi Limited,
Cochin, India as of March 7, 2008, and as of March 31, 2007 and the results of
its operations, stockholders' equity and cash flows for the period
ended March 7, 2008, and years ended March 31, 2007 and 2006 in conformity with
United States generally accepted accounting principles.
/s/ Yoganandh &
Ram
YOGANANDH
& RAM
Chartered
Accountants
Independent
Auditors registered with
Public
Company Accounting Oversight Board (USA)
Chennai,
India, 2008
BALANCE
SHEETS
(Amounts
in Thousand US Dollars)
|
|
March
31,
|
|
|
March
7,
|
|
Assets
|
|
2007
|
|
|
2008
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
& Cash Equivalents
|
|
$
|
1,208
|
|
|
$
|
736
|
|
Accounts
Receivable
|
|
|
43
|
|
|
|
1,663
|
|
Inventories
|
|
|
1,284
|
|
|
|
1,428
|
|
Restricted
Cash
|
|
|
---
|
|
|
|
5
|
|
Prepaid
and Other Assets
|
|
|
1,231
|
|
|
|
271
|
|
Due
from Related Parties
|
|
|
218
|
|
|
|
63
|
|
Total Current
Assets
|
|
|
3,984
|
|
|
|
4,166
|
|
|
|
|
|
|
|
|
|
|
Investment-Others
|
|
|
72
|
|
|
|
74
|
|
Property,
Plant & Equipment (net)
|
|
|
2,265
|
|
|
|
1,979
|
|
Deferred
Tax Asset
|
|
|
199
|
|
|
|
126
|
|
Restricted
Cash & Cash Equivalents
|
|
|
371
|
|
|
|
185
|
|
Other
Assets
|
|
|
207
|
|
|
|
1,399
|
|
Total
Assets
|
|
$
|
7,098
|
|
|
$
|
7.929
|
|
Liabilities and Shareholder’s
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Short
Term Borrowings and current portion of long term
loan
|
|
|
6,079
|
|
|
|
2,437
|
|
Trade
Payable
|
|
|
1,502
|
|
|
|
2,222
|
|
Other
Current Liabilities
|
|
|
144
|
|
|
|
740
|
|
Total Current
Liabilities
|
|
|
7,725
|
|
|
|
5,399
|
|
Long
Term Debts, net of current portion
|
|
|
2,333
|
|
|
|
----
|
|
Other
Liabilities
|
|
|
58
|
|
|
|
2,103
|
|
Advance
from Customers
|
|
|
1,877
|
|
|
|
824
|
|
Total
Liabilities
|
|
|
11,993
|
|
|
|
8,326
|
|
Share Holders
Equity
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
988
|
|
|
|
988
|
|
Preferred
Stock
|
|
|
----
|
|
|
|
1,182
|
|
Money
received pending Allotment
|
|
|
----
|
|
|
|
1,940
|
|
Additional
Paid in Capital
|
|
|
199
|
|
|
|
199
|
|
Retained
Earnings
|
|
|
(5,948
|
)
|
|
|
(3,960
|
)
|
Accumulated
Other Comprehensive Income/(Loss)
|
|
|
(134
|
)
|
|
|
(746
|
)
|
Total Stockholders
Equity
|
|
|
(4,895
|
)
|
|
|
(397
|
)
|
Total Liabilities and
Shareholder’s Equity
|
|
$
|
7,098
|
|
|
$
|
7.929
|
|
The
accompanying notes form an integral part of the financial
statements.
STATEMENTS
OF OPERATIONS
(Amounts
in Thousand US Dollars)
|
|
Year
ended
|
|
|
Year
ended
|
|
|
Year
ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
March
7,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
Revenue
|
|
$
|
2,285
|
|
|
$
|
4,318
|
|
|
$
|
5,321
|
|
Cost
of Revenue
|
|
|
(2,567
|
)
|
|
|
(2,656
|
)
|
|
|
(4,711
|
)
|
Gross (Loss) /
Profit
|
|
|
(282
|
)
|
|
|
1,662
|
)
|
|
|
610
|
|
Selling,
General & Administration Expenses
|
|
|
(615
|
)
|
|
|
(458
|
)
|
|
|
(246
|
)
|
Depreciation
|
|
|
(513
|
)
|
|
|
(207
|
)
|
|
|
(447
|
)
|
Operating (Loss) /
Income
|
|
|
(1,410
|
)
|
|
|
997
|
)
|
|
|
(83
|
)
|
Interest
Income(net)
|
|
|
49
|
|
|
|
16
|
|
|
|
40
|
|
Interest
Expenses(net)
|
|
|
(1,524
|
)
|
|
|
(1,144
|
)
|
|
|
(473
|
)
|
Other
Income
|
|
|
516
|
|
|
|
532
|
|
|
|
2,761
|
|
Net operating (loss) / income
before income taxes
|
|
|
(2,369
|
)
|
|
|
401
|
)
|
|
|
2,245
|
|
Income
Tax Income
|
|
|
67
|
|
|
|
140
|
|
|
|
(86
|
)
|
Fringe
Benefit Tax Expense
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
----
|
|
Provision
for Preference Dividend
|
|
|
|
|
|
|
|
|
|
|
(152
|
)
|
Provision
for Tax on Preference Dividend
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
Net (Loss) /
Income
|
|
$
|
(2,307
|
)
|
|
$
|
536
|
|
|
$
|
1,988
|
|
(Loss) / Earnings per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.54
|
)
|
|
$
|
0.13
|
|
|
$
|
0.46
|
|
Diluted
|
|
$
|
(0.54
|
)
|
|
$
|
0.13
|
|
|
$
|
0.22
|
|
Weighted average number of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
Diluted
|
|
|
4,287,500
|
|
|
|
4,287,500
|
|
|
|
9,089,928
|
|
The
accompanying notes form an integral part of the financial
statements.
Techni
Bharathi Limited
STATEMENTS
OF OPERATIONS
(Amounts
in Thousand US Dollars)
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
Year
Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
March
7,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
Net (Loss) /
Income
|
|
$
|
(2,307
|
)
|
|
$
|
536
|
|
|
$
|
1,988
|
|
Adjustments to reconcile net
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
to net cash from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
506
|
|
|
|
207
|
|
|
|
447
|
|
Deferred
Tax Expense / (Income)
|
|
|
(87
|
)
|
|
|
(192
|
)
|
|
|
86
|
|
Loss
on sale on property and equipment-net
|
|
|
119
|
|
|
|
3
|
|
|
|
--
|
|
Loss
on sale of Investment-net
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
Other
non cash expenditure
|
|
|
268
|
|
|
|
219
|
|
|
|
|
|
Changes in Assets and
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
279
|
|
|
|
219
|
|
|
|
207
|
|
Accounts
Receivable
|
|
|
1,010
|
|
|
|
261
|
|
|
|
(1,629
|
)
|
Inventories
|
|
|
274
|
|
|
|
2,898
|
|
|
|
(59
|
)
|
Prepaid
and other Assets
|
|
|
385
|
|
|
|
—
|
|
|
|
1,049
|
|
Long
term other assets
|
|
|
(134
|
)
|
|
|
(12
|
)
|
|
|
(1,186
|
)
|
Accounts
Payable
|
|
|
(71
|
)
|
|
|
937
|
|
|
|
625
|
|
Other
Current Liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
591
|
|
Advance
from Customer
|
|
|
(978
|
)
|
|
|
(214
|
)
|
|
|
(1,185
|
)
|
Other
liabilities
|
|
|
(21
|
)
|
|
|
85
|
|
|
|
2,,056
|
|
Net cash (used in) provided by
operating activities
|
|
|
(757
|
)
|
|
|
4,947
|
|
|
|
2,990
|
|
Cash flow from Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(7
|
)
|
Proceeds
from sale of property and equipment
|
|
|
433
|
|
|
|
13
|
|
|
|
--
|
|
Purchase
of Investments
|
|
|
—
|
|
|
|
—
|
|
|
|
---
|
|
Proceeds
from Sale of Investments
|
|
|
125
|
|
|
|
401
|
|
|
|
----
|
|
Net cash provided by Investing
activities
|
|
|
554
|
|
|
|
411
|
|
|
|
(7
|
)
|
Cash flow from Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Debts
– net
|
|
|
199
|
|
|
|
(4,275
|
)
|
|
|
(6,581
|
)
|
Due
to related parties, net
|
|
|
---
|
|
|
|
----
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue
of Preferred Stock
|
|
|
---
|
|
|
|
----
|
|
|
|
1,182
|
|
Money
received pending allotment
|
|
|
---
|
|
|
|
----
|
|
|
|
1,940
|
|
Net Cash provided by (used in)
financing Activities
|
|
|
199
|
|
|
|
(4,275
|
)
|
|
|
(3,289
|
)
|
Effect
of exchange rate on cash equivalents
|
|
|
(9
|
)
|
|
|
56
|
|
|
|
(166
|
)
|
Net (decrease) increase in cash
and cash equivalents during the year
|
|
|
(4
|
)
|
|
|
1,083
|
|
|
|
(472
|
)
|
Add:
Balance at beginning of year
|
|
|
82
|
|
|
|
69
|
|
|
|
1,208
|
|
Balance at end of the
year
|
|
$
|
69
|
|
|
$
|
1,208
|
|
|
$
|
736
|
|
The
accompanying notes form an integral part of the financial
statements
Techni
Bharathi Limited
STATEMENTS
OF OPERATIONS
(Amounts
in Thousand US Dollars)
|
Common
Stock
|
|
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
value
|
|
Shares
|
|
Par
value
|
|
|
Money
received pending allotment
|
|
Additional
Paid
in Capital
|
|
|
Retained
Earnings
|
|
Accumulated
other
Comprehensive
Income/(Loss)
|
|
Total
|
|
Balance as of March 31,
2005
|
|
428,750
|
|
$
|
988
|
|
-
|
|
-
|
|
|
-
|
|
$
|
199
|
|
|
$
|
(4,177
|
)
|
$
|
(42
|
)
|
$
|
(3,032
|
)
|
Net
Loss for the period
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
(2,307
|
)
|
|
-
|
|
|
(2307
|
)
|
Loss
on Foreign Currency Translation
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(99
|
)
|
|
(99
|
)
|
Balance as of March 31,
2006
|
|
428,750
|
|
|
988
|
|
-
|
|
-
|
|
|
-
|
|
|
199
|
|
|
|
(6,484
|
)
|
|
(141
|
)
|
|
(5438
|
)
|
Net
Income for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
536
|
|
|
-
|
|
|
536
|
|
Gain
on foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
7
|
|
|
7
|
|
Balance as of March 31,
2007
|
|
4,287,500
|
|
|
988
|
|
-
|
|
-
|
|
|
-
|
|
|
199
|
|
|
|
(5,948
|
)
|
|
(134
|
)
|
|
(4,895
|
)
|
Net
Income for the period
|
|
-
|
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,988
|
|
|
-
|
|
1,988
|
|
Gain
on foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
(612
|
)
|
|
(612
|
)
|
Issue
of Preferred Stock
|
|
-
|
|
|
-
|
|
5,000,000
|
|
|
1,182
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1,182
|
|
Money
received pending allotment
|
|
|
|
|
|
|
|
|
|
|
|
|
1,940
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1,940
|
|
Balance as of March 7,
2008
|
|
4,287,500
|
|
$
|
988
|
|
5,000,000
|
|
$
|
1,182
|
|
$ |
1,940
|
|
$
|
199
|
|
|
$
|
(3,960
|
)
|
$
|
(746
|
)
|
$
|
(397
|
)
|
The
accompanying notes form an integral part of the financial
statements.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
1.
BACKGROUND
a)
Incorporation and History:
Techni
Bharathi Limited (“TBL”) was incorporated in the year 1982 by a team of
enterprising technocrats who, inspired by the revolutionary ideas in the field,
started pursuing the goal of becoming a world-class construction specialist. For
TBL, the first decade was a period of learning. The TBL team worked vigorously
on projects of moderate size, finding new ways to build without compromising on
quality, designing innovative building methods and charting out cost-effective
construction formulas.
The Year
1991 witnessed the company’s first foray into the strategic construction arena
when Kudremukh Iron Ore Company Limited (a leading Government of India Company)
assigned TBL for the construction of the Lakhya Dam. Since then TBL has
been engaged in engineering construction contracts for national
infrastructure development such as highways, bridges, dams, hydro electric
projects and rail roads.
b)
Description of Business:
The
various construction activities taken up by the company are as
follows:
·
|
Hydro
Electric Projects
|
·
|
High
Rise Building Complexes and
Townships
|
c)
Industry Overview
India’s
construction industry is estimated over $ 28 billion, which accounts for more
than 6% of the country’s Gross Domestic Product (GDP). This industry is the
largest employer in India which is almost 32 million workers. The sector is
riding on a high growth pattern, powered by large government subsidized
expenditures, which is evidenced by newly constructed highways, dams, power
plant and pipelines. Ancillary sectors such as power, transportation, petroleum
and urban development are contributing to the high growth rates in the
infrastructure building industry. are Power, Transport, Petroleum and urban
Infrastructure.
To
illustrate India’s shared economic optimism among country leaders, Indian Prime
Minister Dr. Manmohan Singh, while addressing the Finance Ministers of ASEAN
countries at the Indo ASEAN Summit in New Delhi, forecasted that
India requires $150 billion at the rate of $15 billion per
annum over the next 10 years. The current rate of U.S. Foreign Direct Investment
in India is estimated at $5 billion per year.. It is further estimated that more
than 50% of future FDI’s will be earmarked for Infrastructure,
Telecom, and Power projects.
Another
example of India’s infrastructural growth is the Golden Quadrilateral, which is
one of the largest highway projects under current development. It now has
approximately 4,500 miles with and an impressive 13,300 miles of
north-south corridors. Legislation is underway to build many
miles of East and West Coast corridors.
The Nodal
Agencies (NHAI, NTPC, NHPC, and PGCL, which specializes in alternative energy
sources, has ambitious development plans in the near future .The
value of overseas projects, under construction by Indian Companies are
conservatively estimated to be nearly $4.2 billion U.S. dollars , which covers
major markets including Malaysia, Middle East, and East Africa. The
Industry is led by an intensely competitive environment, which is characteristic
of larger and mature markets such as the United States and Japan. No single
alternative energy company controls the overall
market.
The
Infrastructure Budget of the Government for the 10th Plan (FY 02-07) is as
follows
(USD
in Millions)
|
|
Sector
|
|
FY20
01-04
|
|
|
FY20
04-07
|
|
Roads
|
|
$
|
7,656.61
|
|
|
$
|
14,617.16
|
|
Power
|
|
|
9,280.74
|
|
|
|
19,721.57
|
|
Oil
& Gas
|
|
|
8,816.70
|
|
|
|
15,313.22
|
|
Ports/
Airports/ Shipping
|
|
|
2,088.16
|
|
|
|
3,712.29
|
|
Railways
|
|
|
7,424.59
|
|
|
|
11,136.89
|
|
Telecom
|
|
|
15,313.22
|
|
|
|
16,937.35
|
|
Total
|
|
$
|
50,580.02
|
|
|
$
|
81,438.48
|
|
The
Outlay for the Central Sector Roads alone is $12,642.69 million. The position of
on-going Road Projects in India is as under:
|
|
|
|
|
Total
Value
|
|
Funding
Agency/Source
|
|
No.
of Projects
|
|
|
USD
in Millions
|
|
NHAI
|
|
|
50
|
|
|
$
|
2,218.46
|
|
World
Bank
|
|
|
15
|
|
|
|
1,043.20
|
|
Asian
Development Bank
|
|
|
8
|
|
|
|
290.14
|
|
Annuity
|
|
|
8
|
|
|
|
546.10
|
|
BOT
|
|
|
7
|
|
|
|
768.90
|
|
Total
|
|
|
88
|
|
|
$
|
4,866.80
|
|
d)
Business
TBL has
been in operations for more than two decades, executing engineering
contracts throughout the country. It’s primary focus is large
infrastructure contracts. The company is led by Mr. V. C. Antony and
his son, Mr. Jortin Anthony.
TBL’s
main objective is to establish a strong presence in the infrastructure
development market, engaging in Roads and highways, Earthen and Rock
Fill Dam, Civil Works including tunneling in Hydro Electric Projects,
Construction of Canals, Civil and structural works, Rail/Road construction,
Airport Construction and Real Estate development. The company has
won various NHAI projects and has successfully completed
all contracts within time and cost requirements.
TBL is a
closely held Public Limited Company incorporated under the Indian Companies Act
of 1956. The shares are largely held by V C
Anthony, Mr. Jortin Anthony and a close group of other investors. TBL often
participates in joint venture bids, namely, Tantia-TBL joint , BEL-TBL, and
Valecha-TBL joint ventures.
e)
Risks and Threats
·
|
The
industry is highly governed by the political environment and economical
policies prevalent within the country since significant portion of
infrastructure spending originates from the Government. Any adverse change
in the policies may slow down the Government’s commitment towards
Infrastructure development.
|
|
Foreign
Competition – The Government has opened the sector to foreign companies
who can bid on projects on their own, or through joint ventures with
domestic companies. This could create more competition in the
future.
|
|
Domestic
Competition - The Company faces two types of competition in the domestic
sector:
|
|
|
|
|
|
(i)
|
|
Competition
from the local players in and around their state, typically this is
applicable to low value contracts.
|
|
|
|
|
|
(ii)
|
|
Marketing
/ Business Development - Construction contracts for infrastructure in
India are offered by the Government sector, Central Government and the
State Governments. Funds for these are allocated through their budgetary
support as well as through international and domestic financial
institutions such as World Bank, Asian Development Bank, Japan Bank for
International co-operation, Housing & Urban Development Corporation,
National Bank for Agricultural & Rural Development, etc. In view of
the nature of our market, the major sources of information of ensuing
tenders for construction contracts are newspapers and government gazettes.
In addition to these, construction contracts are also offered by the
private sector.
|
f)
Strengths and Opportunities
·
|
The
Company is an integrated construction and infrastructure development
company with front-end civil engineering and design
skills.
|
·
|
The
Company has sufficient internal resources, technology and human capital
that will. that enables us to pre-qualify for major contract
solicitations.
|
The
Company has a diverse service capability ranging from water and sewer
management, to installing power transmission lines, construction of roads,
housing complexes, airports and sea port construction, cement plant operations,
canal excavation projects.
2.
SIGNIFICANT ACCOUNTING POLICIES
a)
Basis of preparation
The
financial statements for the years ended March 31, 2006, 2007 and for the period
ended March 7, 2008 have been prepared in accordance with accounting principles
generally accepted in the United States of America (‘US GAAP’). The significant
accounting policies adopted by TBL, in respect of these financial statements,
are set out below.
These
Financial statements have been prepared in US Dollars (USD), the national
currency of United States of America.
b)
Foreign Currency Translation
The
accompanying financial statements are reported in U.S. dollars. The Indian rupee
is the functional currency of the Company. The translation of the functional
currencies into U.S. dollars is performed for assets and liabilities using the
exchange rates in effect at the balance sheet date and for revenues, costs and
expenses using average exchange rates prevailing during the reporting periods.
Adjustments resulting from the translation of functional currency financial
statements to reporting currency are accumulated and reported as other
comprehensive income/ (loss), a separate component of shareholders’
equity.
Transactions
in foreign currency are recorded at the exchange rate prevailing on the date of
transaction. Monetary assets and liabilities denominated in foreign currencies
are expressed in the functional currency at the exchange rates in effect at the
balance sheet date. Revenues, costs and expenses are recorded using exchange
rates prevailing on the date of transaction. Gains or losses resulting from
foreign currency transactions are included in the statement of income. Share
Capital issued has been recorded at historical rates whereas those existing on
March 31, 2004 have been translates at the rates prevailing on that
date.
TECHNI
BHARATHI LIMITED
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
The
exchange rates used for translation purposes are as under:
Year
|
|
Month end Average Rate (P&L
rate)
|
|
Year end rate (Balance sheet
rate)
|
2005-06
|
|
INR
44.18 per USD
|
|
INR
44.48 per USD
|
2006-07
|
|
INR
45.11 per USD
|
|
INR
43.10 per USD
|
2007-08
|
|
INR
40.13 per USD
|
|
INR
40.42 per USD
|
c)
Revenue Recognition
For
Revenue from construction contracts, we recognize revenue on construction type
of contracts using the percentage of completion method of accounting where by
revenue is recognized as performance under contract progresses. The Company has
also made requisite adjustments in the recognized revenues under Indian GAAP
(IGAAP) in order to ensure conformity with the provisions of SOP 81-1. All
infrastructure contracts of TBL are in the nature of item rate contracts, where
there is a Bill of Quantity (BOQ) and item rate prescribed for each activity
done. As on closing date of all individual activities of the BOQ executed are
jointly measured and valued at the item quoted rate. Accordingly, percentage of
completion is determined in terms of the proportion of value added (the contract
value of total work performed to date) to the total contract value.
d)
Use of estimates
The
preparation of financial statements in conformity with US GAAP requires the use
of management estimates and assumptions that affect the amounts reported. These
estimates are based on historical experience and information that is available
to management about current events and actions that the Company may take in the
future. Significant items subject to estimates and assumptions include revenue
recognition, the useful lives and the evaluation of impairment of property and
equipment, the income tax, the contingencies and the provision for impairment of
receivables and advances. Actual results could differ from these
estimates.
Estimated
losses on uncompleted contracts and changes in contract estimates
The
Company records the provisions for estimated losses on uncompleted contracts in
the period in which such losses are identified. The cumulative effects of
revisions to contract revenue and estimated completion costs are recorded in the
accounting period in which the amounts became evident and can be reasonably
estimated. These revisions may include such items as
the effects of change orders, claims, warranty claims, liquidated damages or
other contractual penalties, adjustments for audit findings on government
contracts and contract closeout settlements.
e)
Restricted Cash and Cash Equivalents
The
components of item are as follows:
·
|
Fixed
Deposit with various banks in order to obtain Bank
Guarantees
|
·
|
Margin
Money Deposit for Letter of Credit
|
Restricted
Cash has been deposited into bank with specified period of time. Specified
period is based on estimated time taken by each project. The classification of
restricted cash into current and non-current is determined based on maturity
date of the deposit.
TECHNI
BHARATHI LIMITED
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
f)
Cash and Cash Equivalents
The
components of item are as follows:
·
|
Bank
balance of Current Accounts
|
·
|
Highly
liquid investments which has maturity period less than 90 days and
maturity value will not be affected significantly in accordance with
interest rate changes.
|
g)
Accounts receivable
Accounts
receivables are recorded at the invoiced amount. Account balances are written
off when the company believes that the receivables will not be recovered. The
company’s bad debts are included in selling and general administrative
expenses.
h)
Investments
Investments
are initially measured at cost, which is the fair value of the consideration
given for them, including transaction costs.
Techni
Soft India Ltd (TSIL) was a subsidiary of TBL for the year 2003-04, 2004-05
& 2005-06. Another company by name Techni Soft Inc, USA (TSA) is a
subsidiary of TSIL and thus, TSA was a subsidiary of TBL until
2006-07.
In the
year 2006-07, investment in the TSIL were fully realized and on account of the
fact that there were no significant activity in TSIL and also on account of the
fact that the entire investment in TSIL stands realized in 2006-07, the accounts
of TSIL have not with TBL.
i)
Inventories
Inventories
consist primarily of construction materials and trading goods valued at lower of
Cost or Market value.
The
following are major items of inventory
·
|
Work-in-progress-
construction
|
·
|
Work-in-progress-
Real Estate
|
The cost
of the above mentioned items are valued on the following basis:
Construction
materials are valued at weight average procurement cost which includes purchase
price, fright inward and insurance charges on transportation if applicable.
Work-in-progress is valued by cost incurred to that work and apportioned
overheads to that project. Construction materials and scraps are valued at FIFO
(“First In First Out”) basis. Work-in-progress of real estate is valued at cost
or net realizable value, whichever is less.
j)
Property and equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation of
computers, construction, scrap processing and other equipments, buildings and
other assets are provided based on the Straight-line method over useful life of
the assets.
TECHNI
BHARATHI LIMITED
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
The value
of plant and equipment that are capitalized include the acquisition price and
other direct attributable expenses.
The
estimated useful life of various categories of assets has been considered as
under:
Category
|
|
Useful
Life (years)
|
|
Building
(Flat)
|
|
|
25
|
|
Plant
and Machinery
|
|
|
20
|
|
Computer
Equipment
|
|
|
3
|
|
Office
Equipment
|
|
|
5
|
|
Furniture
and Fixtures
|
|
|
5
|
|
Vehicles
|
|
|
5
|
|
Leasehold
Improvements
|
|
Over
the period of lease or useful life (if less)
|
|
Upon
disposition, cost and related accumulated depreciation of the Property and
equipment are removed from the accounts and the gain or loss is reflected in the
results of operation.
Cost of
additions and substantial improvements to property and equipment are capitalized
in the books of accounts. The cost of maintenance and repairs of the property
and equipment are charged to operating expenses.
k)
Asset retirement obligations
Asset
retirement obligations associated with the Company’s leasehold land are subject
to the provisions of FAS No. 143 “Accounting for Asset Retirement Obligations”
and related interpretation, FIN No. 47, “Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement No. 143” . The lease
agreements entered into by the Company may contain clauses requiring restoration
of the leased site at the end of the lease term and therefore create asset
retirement obligations. The Company records the fair value of a liability for an
asset retirement obligation in the period in which it is incurred and
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value of each period,
and the capitalized cost is depreciated over the estimated useful life of the
related asset. Upon settlement of the liability, the Company either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement.
l)
Foreign currency transactions
Monetary
assets and liabilities denominated in foreign currencies are expressed in the
functional currency Indian Rupees at the rates of exchange in effect at the
balance sheet date. Transactions in foreign currencies are recorded at rates
ruling on the transaction dates. Gains or losses resulting from foreign currency
transactions are included in the statement of operations.
m)
Operating leases
Lease
payments under operating leases are recognized as an expense on a straight-line
basis over the lease term.
n)
Capital leases
Assets
acquired under capital leases are capitalized as assets by the Group at the
lower of the fair value of the leased property or the present value of the
related lease payments or where applicable, the estimated fair value of such
assets. Amortization of leased assets is computed on straight line basis over
the useful life of the assets. Amortization charge for capital leases is
included in depreciation expense.
TECHNI
BHARATHI LIMITED
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
o)
Impairment of long-lived assets
The
Company reviews its long-lived assets, including identifiable assets with finite
lives, for impairment whenever events or changes in business circumstances
indicate that the carrying amount of assets may not be fully recoverable. Such
circumstances include, though are not limited to, significant or sustained
declines in revenues or earnings and material adverse changes in the economic
climate. For assets that the Company intends to hold for use, if the total of
the expected future undiscounted cash flows produced by the assets or asset
Company is less than the carrying amount of the assets, a loss is recognized for
the difference between the fair value and carrying value of the assets. For
assets the Company intends to dispose of by sale, a loss is recognized for the
amount by which the estimated fair value less cost to sell is less than the
carrying value of the assets. Fair value is determined based on quoted market
prices, if available, or other valuation techniques including discounted future
net cash flows.
p)
Borrowing costs
(i)
Capitalized interest
The
interest cost incurred for funding a qualifying asset during the construction
period is capitalized based on actual investment in the asset at the average
interest rate. The capitalized interest is included in the cost of the relevant
asset and is depreciated over the estimated useful life of the
asset.
(ii)
Debt issue expenses
The
Company defers and amortizes debt issue expenses over the term of the related
borrowing based on the effective interest method.
q)
Provision for Warranties and Liquidated Damages
The
company recognizes warranty claims and liquidated damages as and when they are
probable/ incurred. The company did not have any material warranty claims in
2005 and 2006. The liquidated damages recognized during year ended March 31,
2007 is $ 119. The liquidated damages are included in selling, and general and
administrative expenses.
r)
Retirement Benefits to employees
(i)
Retirement Plans(Gratuity)
In
accordance with the Payment of Gratuity Act, 1972, TBL provides for gratuity
under a defined contribution plan covering eligible employees of TBL.
Liabilities with regard to the Gratuity plan have not been provided for on
Actuarial Basis . The Gratuity plan provides a lump-sum payment to vested
employees at retirement, death, incapacitation or termination of employment, of
an amount based on the respective employee’s salary and tenure of the
employment.
(ii)
Provident Fund
Eligible
employees of TBL receive benefits from a provident fund, which is a defined
contribution plan. Both the employees and the company make monthly contributions
to the provident fund plan equal to a specified percentage of the covered
employee’s salary. The company deposits contributions to the Government
administrated provident fund. The rate at which the annual interest is payable
to the beneficiaries by the fund is administrated by the Indian
Government.
The
Company has no further obligations under this plan beyond its monthly
contributions.
TECHNI
BHARATHI LIMITED
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Amounts
in Thousand US Dollars, except share data and as stated otherwise
(iii)
Compensated absences
The
employees of the Company are entitled to compensate absences based on the
unavailed leave balance and the last drawn salary of the respective employees.
The Company has provided for the liability on account of compensated absences in
accordance with FAS No. 43, “Accounting for Compensated Absences”.
s)
Income Taxes
Income
Taxes are accounted using the asset and liability method . Deferred income tax
assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities, and the respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years on which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in the period
in which the change is enacted. Based on management’s judgment, the measurement
of deferred tax assets is reduced, if necessary, by a valuation allowance for
any tax benefits for which it is more likely than not that some portion or all
of such benefits will not be realized. Tax credits are generally recognized in
the year they arise.
t)
Pre-operating costs
Pre-operating
costs represent certain marketing and administrative expenses incurred prior to
the commencement of commercial operations of the new circles. These costs are
expensed as incurred.
u)
Earnings per share
In
accordance with FAS 128, “Earnings Per Share”, a basic earnings per equity share
is computed using the weighted average number of equity shares outstanding
during the period. Diluted earnings per equity share are computed using the
weighted average number of common and dilutive common equivalent equity shares
outstanding during the period except where the result would be
anti-dilutive.
v)
Recent accounting pronouncements
The
Company does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
w)
Reclassification
Certain
items previously reported in specific captions of the financial statements have
been reclassified to conform to the current year’s presentation.
3.
SHAREHOLDERS STOCK
On
January 15, 2007, the company split its common stock from par value INR 100 per
share (equivalent to $2.32 per share at a conversion of INR 43.10 per USD) to
par value of INR 10 per share (equivalent to $.0232 per share) and increased its
authorized capital to total limit of 15 million common stock of par value INR 10
per share. This resulted in an increase of issued and outstanding common stock
from 428,750 shares of par value INR 100 per share to 4,287,500 shares of par
value INR 10 per share.
On March
30, 2007, the company restructured its authorized common stock to eight million
equity stock of par value INR 10 per share and seven million of preference stock
with par value INR 10 per share. All the relevant filings along with fees have
been made with the Registrar of Companies on April 15, 2007.
During
Q1, 2007, the company has issued 5,000,000 preference shares with par value INR
10 per share.
The
Company has signed a Letter of Intent with India Globalization Capital, Inc.
(USA), (“IGC”), dated 5th September 2007 to accept investment through its
subsidiary IGC (Mauritius) by allotment of new equity shares leading to post
investment ownership of approximately 74% by IGC and or its assignee. On
September 16, 2007 the Company signed a Share Subscription Agreement with IGC to
1) agree to the sale of the convertible preference stock held by Odeon, 2) the
subscription of shares and 3) sell a convertible preference stock
instrument.
4.
PROPERTY AND EQUIPMENT
The Cost,
Depreciation to date and the Net value of Assets of the company are as
follows:
Asset
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Land
|
|
$
|
2
|
|
|
$
|
2
|
|
Building
(Apartment)
|
|
|
23
|
|
|
|
24
|
|
Machineries
& Equipment
|
|
|
4,177
|
|
|
|
4,462
|
|
Furniture
& Fixtures
|
|
|
75
|
|
|
|
80
|
|
Vehicles
|
|
|
698
|
|
|
|
744
|
|
Total
|
|
|
4,975
|
|
|
|
5,312
|
|
Less:
Accumulated Depreciation
|
|
|
2,710
|
|
|
|
3,333
|
|
Net
|
|
$
|
2,265
|
|
|
$
|
1,979
|
|
5.
INCOME TAXES
The
Company accounted for the deferred tax assets and liabilities as of March 31
2006, 2007 and March 7, 2008, on the temporary differences.
Unabsorbed
depreciation represented depreciation in excess of the currently deductible
amounts that could be carried forward and utilized as tax deductions in future
periods.
6.
SHORT TERM BORROWINGS & CURRENT PORTION OF LONG-TERM DEBT
|
|
As
of
|
|
|
As
of
|
|
Particulars
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Secured
|
|
|
|
|
|
|
Cash
Credit Loan & WCTL from Bank
|
|
$
|
6,079
|
|
|
$
|
2,436
|
|
Total
|
|
|
6,079
|
|
|
|
2,436
|
|
The above
secured by hypothecation of materials/stock of spares, WIP, Receivables and
property plant & machinery in addition to personal guarantee of
three directors & collaterally secured by mortgage of company’s land &
other immovable properties of directors and their relatives.
7.
EMPLOYEE BENEFITS
|
|
As
of
|
|
|
As
of
|
|
Particulars
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Earned
leave
|
|
$
|
11
|
|
|
$
|
28
|
|
Provident
Fund
|
|
|
13
|
|
|
|
—
|
|
Gratuity
|
|
|
34
|
|
|
|
32
|
|
Total
|
|
$
|
58
|
|
|
$
|
60
|
|
8.
LONG TERM DEBTS
As
at
|
|
March
31, 2007
|
|
|
March
7, 2008
|
|
Term
loan
|
|
$
|
1,656
|
|
|
|
—
|
|
Loan
for assets purchased under Capital lease
|
|
|
—
|
|
|
|
—
|
|
Unsecured
Loan – Directors
|
|
|
1
|
|
|
|
—
|
|
Unsecured
Loan – Others
|
|
|
676
|
|
|
|
—
|
|
Total
|
|
$
|
2,333
|
|
|
|
—
|
|
These
loans are secured by hypothecation of machineries and vehicles and collaterally
secured by deposit of title deeds of land
9.
DIVIDENDS
Final
dividends proposed by the Board of Directors will be payable when formally
declared by the shareholders, who have the right to decrease but not increase
the amount of the dividend recommended by the Board of Directors. Interim
dividends will be declared by the Board of Directors without the need for
shareholders’ approval.
Dividends
payable to equity shareholders will be based on the net income available for
distribution as reported in the Company’s financial statements prepared in
accordance with Indian GAAP. Dividends can only be declared and paid in Indian
Rupees and/or converted into foreign currency for an equivalent amount in cases
where dividend is permitted to be repatriated.
Under the
Indian Companies Act 1956, dividends may be paid out of the profits of a company
in the year in which the dividend is declared or out of the undistributed
profits of previous fiscal years. Before declaring a dividend greater than 10%
of the par value of its equity shares, a company is required to transfer to its
reserves a minimum percentage of its profits for that year, ranging from 2.5% to
10 %, depending on the dividend percentage to be declared in such year.
Dividends can be distributed out of the general reserve in case of a loss or
inadequacy of current distributable profits. Presently, the Company is required
to pay dividend tax on the total amount of the dividend declared, distributed or
paid at the specified tax rate including surcharge (Applicable tax rate is
16.99% as at March 07).
The
Company has not paid any dividends from the year 2004 through March 7,
2008.
10.
INTENTIONALLY LEFT BLANK
11.
RELATED PARTY TRANSACTIONS DISCLOSURE
List
of Related Parties
Key
Management Personal
V
C Anthony – Executive Chairman
Jortin
Anthony - Managing Director
Ram
Mukunda - Director
Associate
Companies
Bhagheeratha
Engineering Limited
Kairali
Orchids Private Limited
Bhagheeratha
Electricals & Structurals Limited
VC
Homes Limited
Mares
Steel Casting Limited
Related
Party Transactions:
Financial
Year 2005-06:
Techni
Soft India Limited was paid USD 2 by TBL. Amount outstanding at end of the year
was USD 102.
Financial
Year 2006-07:
TBL has
given advance to M/s Bhagheeratha Engineering limited amounting to USD 147 in
which Directors are interested. The company has also mortgaged 1.44 Acres of its
land as security for a loan taken by M/s Bhagheeratha Engineering Limited in
which Director is interested.
Financial
Year 2007-08:
TBL has
transferred funds to VC Homes Limited, Mares Steel Casting Limited and Techni
Soft Limited amounting to USD 482, 3 and 3 respectively
12.
SEGMENT INFORMATION
The
Company follows the provisions of SFAS No 131 “Disclosure about Segments of an
Enterprise and Related Information”. SFAS No 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. The Company operates in a
single infrastructure construction segment.
13.
COMMITMENTS AND CONTINGENCIES
The
company has to observe the laws, government orders and regulations of the state
in which they operate. A number of them are currently involved in administrative
proceedings arising out of the normal conduct of their business. In the opinion
of management, however, the outcome of these actions will not materially affect
the financial position, result of operations or cash flow.
Commitments
a)
Capital commitments
The
estimated amount of contracts remaining to be executed on capital account not
provided for as on March 31, 2006, March 31, 2007 and March 7, 2008 are
$0.
b)
Guarantees
The
Company had outstanding financial / performance bank guarantees
of $4,783, $3,804 and $1,898 as of March 31,
2006, March 31, 2007 and March 7, 2008.
Contingencies
The
Company is contingently liable to pay $4 towards interest and penalty
towards Provident Dues as per the orders of the competent
authorities.
14.
CONCENTRATION OF CREDIT RISK
The
Company is concentrated on projects undertaken by government and government
enterprises.
Company’s
business therefore requires that we continue to maintain pre-qualified status
with key clients and that we are not disqualified from future projects that
these clients may award. Company’s major clients vary from period to period
depending on the demand and the completion schedule of projects. The loss of a
significant client or a number of significant clients or projects from such
clients for any reason, including as a result of disqualification or dispute,
may have an adverse effect on Company’s results of operations.
15.
VENDOR RISK
The
Company is significantly affected by the availability, cost and quality of the
raw material and fuel, which we need to construct and develop Company’s
projects. The prices and supply of raw materials, bought out items and fuel
depend on factors not under Company’s control, including general economic
conditions, competition, production levels, transportation costs and import
duties. Although we generally provide for price contingencies in Company’s
contracts to limit Company’s exposure, if, for any reason, Company’s primary
suppliers of raw materials, bought out items and fuel should curtail or
discontinue their delivery of such materials t us in the quantities we need or
at prices that are competitive or expected by us, Company’s ability to meet
Company’s material requirements for our projects could be impaired, Company’s
construction schedules could be disrupted, or Company’s earnings and business
could suffer. Additionally, we rely on manufacturers and other suppliers and do
not have control over the quality of products they supply, which may adversely
affect the quality and workmanship of Company’s projects.
16.
SUBSEQUENT EVENTS
The
Company has received USD 11,224 against issue of 7.15 million equity stock and
12,5 million preference stock with par value of INR 10 (equivalent to USD 0.247)
from India Globalization Capital, Inc. (USA), (“IGC”) through its subsidiary
India Globalization Capital, Mauritius (IGC-M). Further, IGC has purchased 5
million shares from the shareholders for USD 2 million through its subsidiary
IGC-M.. All the preference stock has been converted into equity stock leading to
post investment ownership of approximately 77% by IGC-M.
India Globalization
Capital, Inc.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
Three
Months
|
|
|
|
Three
Months
|
|
|
Combined
Predecessor Three Months
|
|
|
|
Ended
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June
30, 2008
|
|
|
|
June
30, 2007
|
|
|
June
30, 2007
|
|
Revenues:
|
|
$
|
17,928,381
|
|
|
$ |
-
|
|
|
$
|
3,311,309
|
|
Cost
of revenues:
|
|
|
(13,155,698
|
)
|
|
|
-
|
|
|
|
(2,747,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
4,772,683
|
|
|
|
-
|
|
|
|
564,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative
|
|
|
(947,506
|
)
|
|
|
-
|
|
|
|
(429,601
|
)
|
Depreciation
|
|
|
(231,583
|
)
|
|
|
-
|
|
|
|
(193,565
|
)
|
One
Time Legal and start up costs
|
|
|
-
|
|
|
|
|
(179,844
|
)
|
|
|
-
|
|
Total
operating expenses
|
|
|
(1,179,089
|
)
|
|
|
|
(179,844
|
)
|
|
|
(623,166
|
)
|
Operating
income (loss)
|
|
|
3,593,594
|
|
|
|
|
(179,844
|
)
|
|
|
(59,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
128,879
|
|
|
|
|
694,918
|
|
|
|
87,561
|
|
Interest
expense
|
|
|
(474,310
|
)
|
|
|
|
(459,878
|
)
|
|
|
(251,761
|
)
|
Total
other income (expense)
|
|
|
(345,431
|
)
|
|
|
|
235,040
|
|
|
|
(164,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before provision for income taxes
|
|
|
3,248,163
|
|
|
|
|
55,196
|
|
|
|
(223,293
|
)
|
(Provision)
benefit for income taxes
|
|
|
(1,089,090
|
)
|
|
|
|
(18,913
|
)
|
|
|
(216,721
|
)
|
Income
(loss) after provision for income tax
|
|
|
2,159,073
|
|
|
|
|
36,283
|
|
|
|
(440,013
|
)
|
Provision
for Dividend on Preference Stock and its Tax
|
|
|
|
|
|
|
|
|
|
|
|
(25,904
|
)
|
Minority
interest
|
|
|
(872,255
|
)
|
|
|
|
-
|
|
|
|
-
|
|
Net
income (loss)
|
|
$
|
1,286,818
|
|
|
$ |
|
36,283
|
|
|
$
|
(465,917
|
)
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,570,107
|
|
|
|
|
13,974,500
|
|
|
|
-
|
|
Diluted
|
|
|
8,885,618
|
|
|
|
|
13,974,500
|
|
|
|
-
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Basis
|
|
$
|
0.15
|
|
|
$ |
|
.00
|
|
|
|
-
|
|
Diluted
|
|
$
|
0.14
|
|
|
$ |
|
.00
|
|
|
|
-
|
|
The
accompanying notes should be read in connection with the financial
statements.
CONSOLIDATED
BALANCE SHEETS
|
|
June
30, 2008
(unaudited)
|
|
|
March
31, 2008
(audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,549,528
|
|
|
$
|
8,397,441
|
|
Accounts
Receivable
|
|
|
12,653,106
|
|
|
|
8,708,861
|
|
Unbilled
Receivables
|
|
|
4,883,994
|
|
|
|
5,208,722
|
|
Inventories
|
|
|
1,763,712
|
|
|
|
1,550,080
|
|
Interest
Receivable - Convertible Debenture
|
|
|
337,479
|
|
|
|
277,479
|
|
Convertible
debenture in MBL
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Prepaid
taxes
|
|
|
50,038
|
|
|
|
49,289
|
|
Restricted
cash
|
|
|
625
|
|
|
|
6,257
|
|
Short
term investments
|
|
|
3,372,057
|
|
|
|
671
|
|
Prepaid
expenses and other current assets
|
|
|
1,216,991
|
|
|
|
4,324,201
|
|
Due
from related parties
|
|
|
321,261
|
|
|
|
1,373,447
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
$
|
29,148,791
|
|
|
$
|
32,896,447
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
8,185,108
|
|
|
|
7,337,361
|
|
Build,
Operate and Transfer (BOT under Progress)
|
|
|
3,281,365
|
|
|
|
3,519,965
|
|
Goodwill
|
|
|
17,483,501
|
|
|
|
17,483,501
|
|
Investment
|
|
|
1,763,506
|
|
|
|
1,688,303
|
|
Deposits
towards acquisitions
|
|
|
187,500
|
|
|
|
187,500
|
|
Restricted
cash, non-current
|
|
|
1,974,241
|
|
|
|
2,124,160
|
|
Deferred
tax assets - Federal and State, net of valuation allowance
|
|
|
982,200
|
|
|
|
1,013,611
|
|
Other
Assets
|
|
|
2,796,767
|
|
|
|
1,376,126
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
65,802,979
|
|
|
$
|
67,626,973
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Short-term
borrowings and current portion of long-term debt
|
|
$
|
7,772,429
|
|
|
$
|
5,635,408
|
|
Trade
payables
|
|
|
2,627,966
|
|
|
|
1,771,151
|
|
Advance
from Customers
|
|
|
594,958
|
|
|
|
931,092
|
|
Accrued
expenses
|
|
|
820,183
|
|
|
|
1,368,219
|
|
Taxes
payable
|
|
|
71,259
|
|
|
|
58,590
|
|
Notes
Payable to Oliveira Capital, LLC
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Due
to related parties
|
|
|
2,661,171
|
|
|
|
1,330,291
|
|
Other
current liabilities
|
|
|
3,418,352
|
|
|
|
3,289,307
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
20,966,318
|
|
|
$
|
17,384,058
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion
|
|
|
1,456,422
|
|
|
|
1,212,841
|
|
Advance
from Customers
|
|
|
|
|
|
832,717
|
|
Deferred
taxes on income
|
|
|
669,503
|
|
|
|
608,535
|
|
Other
liabilities
|
|
|
2,424,115
|
|
|
|
6,717,109
|
|
Total
Liabilities
|
|
|
25,516,358
|
|
|
|
26,755,261
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
14,417,912
|
|
|
|
13,545,656
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Common
stock — $.0001 par value; 75,000,000 shares authorized; 8,570,107 issued
and outstanding at June 30, 2008 and March 31, 2008
|
|
|
857
|
|
|
|
857
|
|
Additional
paid-in capital
|
|
|
31,470,133
|
|
|
|
31,470,134
|
|
Money
received pending allotment
|
|
|
|
|
|
|
|
|
Retained
Earnings (Deficit)
|
|
|
(2,854,295
|
)
|
|
|
(4,141,113
|
)
|
Accumulated
other comprehensive (loss) income
|
|
|
(2,747,986
|
)
|
|
|
(3,822
|
)
|
Total
stockholders’ equity
|
|
|
25,868,709
|
|
|
|
27,326,056
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
65,802,979
|
|
|
$
|
67,626,973
|
|
The
accompanying notes should be read in connection with the financial
statements.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
|
|
Common
Stock
|
|
Additional
Paid-in
|
|
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
(Deficit)
|
|
|
/
Loss
|
|
Equity
|
|
Balance
at March 31, 2008
|
|
|
8,570,107
|
|
|
$
|
857
|
|
|
$
|
31,470,134
|
|
|
$
|
(4,141,113
|
)
|
|
$
|
(3,822
|
)
|
|
$
|
27,326,056
|
|
Net
Income (Loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,286,818
|
|
|
|
(2,744,164
|
)
|
|
|
(1,457,347
|
)
|
Balance
at June 30, 2008
|
|
|
8,570,107
|
|
|
$
|
857
|
|
|
$
|
31,470,134
|
|
|
$
|
(2,854,295
|
)
|
|
$
|
(2,747,986
|
)
|
|
$
|
25,868,709
|
|
India Globalization Capital, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
(unaudited)
|
|
Three
months ended
|
|
|
|
June
30, 2008
|
|
|
June
30, 2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,286,818
|
|
|
$
|
36,283
|
|
Adjustment
to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Interest
earned on Treasury Bills
|
|
|
-
|
|
|
|
(721,805
|
)
|
Non-cash
compensation expense
|
|
|
|
|
|
|
|
|
Deferred
taxes
|
|
|
129,517
|
|
|
|
(348,236
|
)
|
Depreciation
|
|
|
231,583
|
|
|
|
-
|
|
Loss/(Gain)
on sale of property, plant and equipment
|
|
|
(33,740
|
)
|
|
|
-
|
|
Amortization
of debt discount on Oliveira debt
|
|
|
|
|
|
|
386,850
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(4,685,180
|
)
|
|
|
-
|
|
Unbilled
Receivable
|
|
|
(29,286
|
)
|
|
|
-
|
|
Inventories
|
|
|
(329,288
|
)
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
3,284,246
|
|
|
|
38,340
|
|
Interest
receivable - convertible debenture
|
|
|
(60,000
|
)
|
|
|
(60,000
|
)
|
Deferred
interest liability
|
|
|
-
|
|
|
|
95,268
|
|
Accrued
expenses
|
|
|
(563,535
|
)
|
|
|
111,367
|
|
Taxes
payable
|
|
|
11,920
|
|
|
|
12,149
|
|
Trade
Payable
|
|
|
1,009,317
|
|
|
|
-
|
|
Other
Current Liabilities
|
|
|
2,690
|
|
|
|
-
|
|
Advance
from Customers
|
|
|
(1,084,142
|
)
|
|
|
-
|
|
Non
current assets
|
|
|
(1,564,201
|
)
|
|
|
-
|
|
Other
non-current liabilities
|
|
|
(3,965,110
|
)
|
|
|
-
|
|
Minority
Interest
|
|
|
872,255
|
|
|
|
-
|
|
Net
cash used in operating activities
|
|
|
(5,486,136
|
)
|
|
|
(449,784
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of treasury bills
|
|
|
-
|
|
|
|
(132,811,913
|
)
|
Maturity
of treasury bills
|
|
|
-
|
|
|
|
133,166,157
|
|
Decrease
(increase) in cash held in trust
|
|
|
-
|
|
|
|
486
|
|
Purchase
of property and equipment
|
|
|
(1,646,738
|
)
|
|
|
-
|
|
Proceeds
from sale of property and equipment
|
|
|
59,085
|
|
|
|
-
|
|
Purchase
of short term investments
|
|
|
(3,483,283
|
)
|
|
|
-
|
|
Non
Current Investments
|
|
|
(195,944
|
)
|
|
|
-
|
|
Restricted
Cash
|
|
|
11,386
|
|
|
|
-
|
|
Deposit
to CWEL
|
|
|
-
|
|
|
|
(250,000
|
)
|
Payment
of deferred acquisition costs
|
|
|
-
|
|
|
|
(77,333
|
)
|
Net
cash provided used in investing activities
|
|
|
(5,255,494
|
)
|
|
|
27,397
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
movement in cash credit and bank overdraft
|
|
|
2,414,063
|
|
|
|
-
|
|
Proceeds
from other short-term borrowings
|
|
|
1,699,083
|
|
|
|
-
|
|
Repayment
of long-term borrowings
|
|
|
(1,173,852
|
)
|
|
|
-
|
|
Due
to related parties
|
|
|
1,213,865
|
|
|
|
-
|
|
Proceeds
from notes payable to stockholders
|
|
|
-
|
|
|
|
275,000
|
|
Repayment
of notes payable to stockholder
|
|
|
-
|
|
|
|
(600,000
|
)
|
Net
cash provided by financing activities
|
|
|
4,153,159
|
|
|
|
(325,000
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(259,442
|
)
|
|
|
-
|
|
Net
increase in cash and cash equivalent
|
|
|
(6,847,913
|
)
|
|
|
(747,387
|
)
|
Cash
and cash equivalent at the beginning of the period
|
|
|
8,397,441
|
|
|
|
1,169,422
|
|
Cash
and cash equivalent at the end of the period
|
|
$
|
1,549,528
|
|
|
$
|
422,035
|
|
Supplemental
schedule of non cash financing activities:
|
|
|
-
|
|
|
$
|
-
|
|
Accrual
of deferred acquisition costs
|
|
|
-
|
|
|
|
40,000
|
|
Predecessor
cash flow statements for the three month ended period June 30, 2007 are not
available, and not included with the Consolidated Cash Flow Report.
The
accompanying notes should be read in connection with the financial
statements.
Background of India Globalization Capital, Inc.
(IGC)
Notes
to Consolidated Financial Statements (unaudited)
Note
1 - Nature of Operations and Basis of Presentation
IGC
operates through two infrastructure companies in India, Sricon Infrastructure
Private Limited (“Sricon”) and Techni Bharathi, Limited (“TBL”). IGC
owns sixty-three percent of Sricon and seventy-seven percent of
TBL. IGC through its subsidiaries has three core businesses: 1)
highway and other heavy construction, 2) mining & quarrying and 3) civil
construction and engineering of high temperature plants. The Company’s medium
term plans are to expand each of these lines of business.
The
Company’s operations are subject to certain risks and uncertainties, including
among others, dependency on India’s economy and government policies, seasonal
business factors, competitively priced raw materials, dependence upon key
members of the management team and increased competition from existing and new
entrants.
India
Globalization Capital, Inc.
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, the company completed an initial public offering. On February
19, 2007, the Company incorporated India Globalization Capital, Mauritius,
Limited (IGC-M), a wholly owned subsidiary, under the laws of
Mauritius.
Merger
and Accounting Treatment
On March
7, 2008, the Company 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 37% of Sricon and the founders and management of TBL
own 23% of TBL. Prior to the acquisitions of Sricon and TBL, IGC had no
operations and was considered a developmental stage enterprise.
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. The consolidated financial
statements provided here and going forward are the consolidated statements of
IGC, which include IGC-M following the date of formation of IGC-M and Sricon and
TBL following the date of the Company’s acquisition of the interests in Sricon
and TBL. The consolidated financial statements do not reflect the
operating results of Sricon and TBL prior to the acquisition. However, for
comparative purposes, the combined statement of operations for the two acquired
companies are presented as the “Combined Predecessors” for the three month
period ended June 30, 2007.
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, and its direct and indirect subsidiaries
(Sricon and TBL). Ownership in these two companies is reflected in
the financial statements as “Minority Interest”. The following represents our
corporate structure after the acquisitions:
Securities
We have
three securities listed on the American Stock Exchange: (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 were separated into common stock
and warrants on April 13, 2006. 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 currently
not exercisable pending the effectiveness of a registration statement relating
to the warrants. When the warrants become exercisable, they 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, on June 30, 2008, we had 8,570,107 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.
Unaudited
Interim Financial Statements
The
unaudited consolidated balance sheet as of June 30, 2008, consolidated
statements of operations and cash flows for the three months ended June 30, 2008
and 2007 and consolidated statements of stockholders’ equity (deficit) for the
three months ended June 30, 2008 include the accounts of the Company and its
subsidiaries. The unaudited financial statements include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of such financial
statements. Operating results for the interim periods presented are
not necessarily indicative of the
results
to be expected for a full fiscal year.
Pro
Forma Results of Operations
The
accompanying unaudited consolidated statements of operations only reflect the
operating results of companies acquired following the date of acquisition and do
not reflect the operating results prior to the acquisitions. The
following are pro forma unaudited results of operations for the Company for the
three months ended June 30, 2008 and 2007 with the results for the Company alone
for the three months ended June 30, 2007 included for comparative
purposes. The results in the column labeled “Pro Forma Three Months
Ended June 30, 2007” assume the Sricon and TBL acquisitions occurred on
April 1, 2007. The unaudited pro forma results of operations are not
necessarily indicative of results of operations that may have actually occurred
had the acquisitions taken place on the dates noted, or the future financial
position or operating results of the Company. The pro forma adjustments are
based upon available information and assumptions that the Company believes are
reasonable. The pro forma adjustments include adjustments for interest expense,
start up costs, increased depreciation and amortization expense as a result of
the application of the purchase method of accounting based on the fair values of
the tangible and intangible assets.
PRO
FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
Three
Months
|
|
|
|
Three
Months
|
|
|
Pro
forma Three Months
|
|
|
|
Ended
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June
30, 2008
|
|
|
|
June
30, 2007
|
|
|
June
30, 2007
|
|
Revenues:
|
|
$
|
17,928,381
|
|
|
$ |
-
|
|
|
$
|
3,311,309
|
|
Cost
of revenues:
|
|
|
(13,155,698
|
)
|
|
|
- |
|
|
|
(2,747,235
|
)
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Gross
Profit
|
|
|
4,772,683
|
|
|
|
- |
|
|
|
564,074
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Selling,
general and administrative
|
|
|
(947,506
|
)
|
|
|
- |
|
|
|
(429,601
|
)
|
Depreciation
|
|
|
(231,583
|
)
|
|
|
- |
|
|
|
(193,565
|
)
|
One
Time Legal and other start up costs
|
|
|
-
|
|
|
|
|
(179,844
|
)
|
|
|
(179,844
|
)
|
Total
operating expenses
|
|
|
(1,179,089
|
)
|
|
|
|
(179,844
|
)
|
|
|
(803,010
|
)
|
Operating
income (loss)
|
|
|
3,593,594
|
|
|
|
|
(179,844
|
)
|
|
|
(238,936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
128,879
|
|
|
|
|
694,918
|
|
|
|
87,561
|
|
Interest
expense
|
|
|
(474,310
|
)
|
|
|
|
(459,878
|
)
|
|
|
(711,639
|
)
|
Total
other income (expense)
|
|
|
(345,431
|
)
|
|
|
|
235,040
|
|
|
|
(624,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before provision for income taxes
|
|
|
3,248,163
|
|
|
|
|
55,196
|
|
|
|
(863,014
|
)
|
(Provision)
benefit for income taxes
|
|
|
(1,089,090
|
)
|
|
|
|
(18,913
|
)
|
|
|
2,481
|
|
Income
(loss) after provision for income tax
|
|
|
2,159,073
|
|
|
|
|
36,283
|
|
|
|
(860,533
|
)
|
Provision
for Dividend on Preference Stock and its Tax
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(25,904
|
)
|
Minority
interest
|
|
|
(872,255
|
)
|
|
|
|
-
|
|
|
|
64,091
|
|
Net
income (loss)
|
|
$
|
1,286,818
|
|
|
$ |
|
36,283
|
|
|
$
|
(822,346
|
)
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,570,107
|
|
|
|
|
13,974,500
|
|
|
|
-
|
|
Diluted
|
|
|
8,885,618
|
|
|
|
|
13,974,500
|
|
|
|
-
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis
|
|
$
|
0.15
|
|
|
$ |
|
.00
|
|
|
|
-
|
|
Diluted
|
|
$
|
0.14
|
|
|
$ |
|
.00
|
|
|
|
-
|
|
The
accompanying notes should be read in connection with the financial
statements.
Note
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation:
The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.
Reclassifications
Certain
prior year balances have been reclassified to the presentation of the current
year. Sales and services include adjustments made towards liquidated
damages, price variation and charges paid for discounting of receivables arising
from construction/project contracts on a non-recourse basis, wherever
applicable.
Revenue
Recognition
The
majority of the revenue recognized for the three month period ended June 30,
2008 was derived from the Company’s subsidiaries and as follows:
Revenue
is recognized based on the nature of activity when consideration can be
reasonably measured and there exists reasonable certainty of its
recovery.
Revenue
from sale of goods is recognized when substantial risks and rewards of ownership
are transferred to the buyer under the terms of the
contract.
Revenue
from construction/project related activity and contracts for
supply/commissioning of complex plant and equipment is recognized as
follows:
|
a)
|
|
Cost
plus contracts: Contract revenue is determined by adding the aggregate
cost plus proportionate margin as agreed with the customer and expected to
be realized.
|
|
|
|
b)
|
|
Fixed
price contracts: Contract revenue is recognized using the percentage
completion method. Percentage of completion is determined as a proportion
of cost incurred-to-date to the total estimated contract cost. Changes in
estimates for revenues, costs to complete and profit margins are
recognized in the period in which they are reasonably
determinable
|
Full
provision is made for any loss in the period in which it is
foreseen.
Revenue
from property development activity is recognized when all significant risks and
rewards of ownership in the land and/or building are transferred to the customer
and a reasonable expectation of collection of the sale consideration from the
customer exists.
Revenue
from service related activities and miscellaneous other contracts are recognized
when the service is rendered using the proportionate completion method or
completed service contract method.
Policy
for Goodwill / Impairment
Goodwill
represents the excess cost of an acquisition over the fair value of the Group's
share of net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill on acquisition of subsidiaries is disclosed
separately. Goodwill is stated at cost less accumulated amortization
and impairment losses, if any.
The
company adopted provisions of FAS No. 142, "Goodwill and Other Intangible
Assets" ('FAS 142') which sets forth the accounting for goodwill and intangible
assets subsequent to their acquisition. FAS 142 requires that goodwill and
indefinite-lived intangible assets be allocated to the reporting unit level,
which the Group defines as each circle.
FAS 142
also prohibits the amortization of goodwill and indefinite-lived intangible
assets upon adoption, but requires that they be tested for impairment at least
annually, or more frequently as warranted, at the reporting unit
level.
The
goodwill impairment test under FAS 142 is performed in two phases. The first
step of the impairment test, used to identify potential impairment, compares the
fair value of the reporting unit with its carrying amount, including goodwill.
If the carrying amount of the reporting unit exceeds its fair value, goodwill of
the reporting unit is considered impaired, and step two of the impairment test
must be performed. The second step of the impairment test quantifies the amount
of the impairment loss by comparing the carrying amount of goodwill to the
implied fair value. An impairment loss is recorded to the extent the carrying
amount of goodwill exceeds its implied fair value.
Impairment
of long – lived assets and intangible assets
The
company reviews its long-lived assets, including identifiable intangible
assets with finite lives, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of assets may not be fully
recoverable. Such circumstances include, though are not limited to, significant
or sustained declines in revenues or earnings and material adverse changes in
the economic climate. For assets that the company intends to hold for
use, if the total of the expected future undiscounted cash flows produced by the
assets or subsidiary company is less than the carrying amount of the assets, a
loss is recognized for the difference between the fair value and carrying value
of the assets. For assets the company intends to dispose of by
sale, a loss is recognized for the amount by which the estimated fair value less
cost to sell is less than the carrying value of the assets. Fair
value is determined based on quoted market prices, if available, or other
valuation techniques including discounted future net cash flows.
Income
per common share:
Basic
earnings per share is computed by dividing net income (loss) applicable to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect the additional dilution for
all potentially dilutive securities such as stock warrants and options. The
effect of the 23,374,000 warrants have been included in the diluted weighted
average shares.
For June
30, 2008, the basis shares include shares sold in the IPO, founder’s shares and
shares sold in the private placement, and shares awarded to the Bridge
Investors, and shares redeemed by the company. The fully diluted shares
include basic shares plus the following: shares arising from the exercise of
warrants sold as part of the units in the offering plus shares arising from the
exercise of warrants issued to Oliveira Capital. The UPO issued to the
underwriters (1,500,000 shares) is not considered in this calculation as the
strike price for the UPO is “out of the money” at $6.50 per share. The
historical weighted average per share, for our shares, for the three month
period ended June 30, 2008, was applied using the treasury method of calculating
the fully diluted shares. The calculation for fully diluted shares
includes 378,511 shares and excludes 22,999,489 shares from the EPS
computations.
Use
of estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
Income
taxes:
Deferred
income taxes are provided for the differences between the bases of assets and
liabilities for financial reporting and income tax purposes. A valuation
allowance is established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Cash
and Cash Equivalents:
For
financial statement purposes, the Company considers all highly liquid debt
instruments with maturity of three months or less when purchased to be cash
equivalents. The company maintains its cash in bank accounts in the United
States of America and Mauritius, which at times may exceed applicable insurance
limits. The Company has not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk on cash and cash
equivalent. The company does not invest its cash in securities that
have an exposure to U.S. mortgages.
Recent
Pronouncements:
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 de-recognition, 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.
In
December 2007, the Financial Accounting Standards Board released SFAS 160
“Non-controlling Interests in Consolidated Financial Statements” that is
effective for annual periods beginning December 15, 2008. The pronouncement
resulted from a joint project between the FASB and the International Accounting
Standards Board and continues the movement toward the greater use of fair values
in financial reporting. Upon adoption of SFAS 160, the Company will re-classify
any non-controlling interests as a component of equity.
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
3 – SHORT TERM BORROWINGS & CURRENT PORTION OF LONG-TERM DEBT
(Amounts
in Thousand US Dollars)
Short
term debt for the consolidated companies consists of the following:
|
|
As
of
|
|
|
As
of
|
|
|
|
June
30, 2008
|
|
|
March
31, 2008
|
|
Secured
|
|
$
|
6,578
|
|
|
$
|
4,556
|
|
Unsecured
|
|
|
3,316
|
|
|
|
3,306
|
|
Total
|
|
|
9,894
|
|
|
|
7,862
|
|
Add:
|
|
|
|
|
|
|
|
|
Current
portion of long term debt
|
|
|
878
|
|
|
|
773
|
|
Total
|
|
$
|
10,772
|
|
|
$
|
8,635
|
|
The above
debt is secured by hypothecation of materials/stock of spares, Work in Progress,
receivables and property & equipment in addition to personal guarantee of
three directors & collaterally secured by mortgage of company’s land &
other immovable properties of directors and their relatives.
Note
4 - LONG TERM DEBT COMPRIMISES:
(Amounts
in Thousand US Dollars)
Long term
debt for the consolidated companies consists of the following:
|
|
As
of
|
|
|
As
of
|
|
|
|
June
30, 2008
|
|
|
March
31, 2008
|
|
Secured
|
|
$
|
|
|
|
$
|
|
|
Term
loans
|
|
|
-
|
|
|
|
632
|
|
Loan
for assets purchased under capital lease
|
|
|
2,335
|
|
|
|
1,354
|
|
Total
|
|
|
2,335
|
|
|
|
1,982
|
|
Less:
Current portion (Payable within 1 year)
|
|
|
878
|
|
|
|
773
|
|
Total
|
|
$
|
1,456
|
|
|
$
|
1,213
|
|
The
secured loans were collateralized by:
·
|
Unencumbered
Net Asset Block of the Company
|
·
|
Equitable
mortgage of properties owned by promoter directors/
guarantors
|
·
|
Term
Deposits
|
·
|
Hypothecation
of receivables, assignment of toll rights, machineries and vehicles and
collaterally secured by deposit of title deeds of
land
|
·
|
First
charge on Debt-Service Reserve
Account
|
NOTE
5 - RELATED PARTY TRANSACTIONS
For the
three month period ended June 30, 2008, $10,000 was paid to SJS Associates for
Mr. Selvaraj’s consulting services.
The
Company had agreed to pay Integrated Global Network, LLC (“IGN, LLC”), an
affiliate of our Chief Executive Officer, Mr. Mukunda, an administrative fee of
$4,000 per month for office space and general and administrative
services. A total $12,000 was paid to IGN, LLC including a $4,000
payment for the prior period. The Company and IGN, LLC have agreed to
continue the agreement on a month-to-month basis.
In April
2008 R.L. Srivastava, Chairman of Sricon, made an unsecured loan of $1,953,157
to Sricon which is due in 6 months from the date of the loan, which due date is
extendable after the 6 month period by mutual consent. The loan’s
interest rate is 2% annually.
NOTE
6 -COMMITMENTS AND CONTINGENCY
The
Founders 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. In addition, the holders of certain shares of common stock
of the Company and warrants to purchase Common Stock of the Company purchased
from the Company in private placements are entitled to demand and “piggy back”
registration rights.
In
connection with our proposed acquisition of a wind energy farm from
Chiranjjeevi Wind Energy Limited ("CWEL"), we have agreed to pay a finder’s 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
7 - INVESTMENT ACTIVITIES
Contract
Agreement between IGC, CWEL, AMTL and MAIL
As
previously disclosed in our Form 8-K dated May 2, 2007 and Form 10-QSB for the
quarterly period ended June 30, 2007, on April 29, 2007, the Company entered
into a Contract Agreement Dated April 29, 2007 (“CWEL Purchase Agreement”) with
CWEL, Arul Mariamman Textiles Limited (AMTL), and Marudhavel Industries
Limited (MAIL), collectively CWEL. Pursuant to the CWEL Purchase Agreement, the
Company or its subsidiary in Mauritius 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. Pursuant to the First Amendment dated August 20, 2007 (as
previously disclosed in the Company’s Form 8-K dated August 22, 2007), if the
Company does not consummate the transaction with CWEL, approximately $187,500
will be returned to the Company.
The
Company is contemplating pursuing this opportunity, or a similar one if it is
able to obtain adequate funding from the exercise of warrants, debt or other
means.
NOTE
8 - COMMON STOCK
On August
24, 2005, the Company’s Board of Directors authorized a reverse stock split of
one share of common stock for each two outstanding shares of common stock and
approved an amendment to the Company’s Certificate of Incorporation to decrease
the number of authorized shares of common stock to 75,000,000. All references in
the accompanying financial statements to the number of shares of stock have been
retroactively restated to reflect these transactions. On March 7,
2008 we redeemed and bought a total of 6,159,346 shares at $5.94 per
share. At June 30, 2008 and 2007 we had 8,570,107 and 13,974,500
shares of common stock issued and outstanding respectively. At
June 30, 2008 and 2007, 24,874,000 shares of common stock, were reserved for
issuance upon exercise of redeemable warrants, underwriters’ purchase option and
warrants issued to Oliveira Capital, LLC.
NOTE
9 - BUSINESS COMBINATIONS
As
previously disclosed in our Form 8-K dated September 21, 2007 and Form 10-QSB
for the quarterly period ended June 30, 2007, on September 21, 2007, the Company
entered into a Share Subscription cum Purchase Agreement (the “Sricon
Subscription Agreement”) dated as of September 15, 2007 with Sricon
Infrastructure Private Limited (“Sricon”) and certain individuals
(collectively, the “Sricon Promoters”), pursuant to which the Company or its
subsidiary in Mauritius (IGC-M) will acquire (the “Sricon Acquisition”) 4,041,676 newly-issued
equity shares (the “New Sricon Shares”) directly from Sricon for
approximately $26 million and 351,840 equity shares from Mr. R. L. Srivastava
for approximately $3 million (both based on an exchange rate of INR 40 per USD)
so that at the conclusion of the transactions contemplated by the Sricon
Subscription Agreement the Company would own approximately 63% of the outstanding
equity shares of Sricon. The Sricon Acquisition was consummated on March
7, 2008.
As
previously disclosed in our Form 8-K dated September 21, 2007 and Form 10-QSB
for the quarterly period ended June 30, 2007, on September 21, 2007, the Company
entered into a Share Subscription Agreement (the “TBL Subscription
Agreement”) dated as of September 16, 2007 with Techni Bharathi Limited (“TBL”)
and certain individuals (collectively, the “TBL Promoters”), pursuant to which
the Company through its subsidiary in Mauritius (IGC-M) acquired (the “TBL
Acquisition”) 7,150,000 newly-issued
company stock for approximately $6.9 million, 1,250,000 newly-issued convertible
preference shares for approximately $3.13 million (both at an
exchange rate of INR 40 per USD; collectively, the “New Shares”) directly from
TBL and 5,000,000 convertible preference shares from Odeon, a Singapore based
holder of TBL securities, for approximately $2 million. With the
conclusion of this transaction, on March 7, 2008 the Company owns approximately 77%, of
the outstanding equity shares of TBL.
No
acquisitions or mergers transactions occurred during the three month period
ended June 30, 2008. Details of the Sricon and TBL acquisitions can
be found in the Company’s 10-KSB filed for year end March 31, 2008.
NOTE
10 - SUBSEQUENT EVENTS
On August
6, 2008, we received $3,000,000 plus interest from an investment in MBL
Infrastructures Limited and subsequently on August 6, 2008 repaid $3,000,000
principal and accrued interest to Oliveira Capital and is negotiating the
issuance of an additional 425,000 warrants. It will be reflected in
the financial results for quarter end September 30, 2008.
4,624,953 Shares
of
India
Globalization Capital, Inc.
Common
Stock
1,190,000
Warrants to Purchase India Globalization, Inc.
Common
Stock
PROSPECTUS
Until (25 days
after the date of this prospectus), all dealers that effect transactions in
these securities may be required to deliver this prospectus.
PART II
Information
not required in prospectus
Item 13.
|
Other
expenses of issuance and
distribution
|
The
following table sets forth all expenses payable in connection with registration
of the securities for resale by the Selling Stockholders. All the amounts shown
are estimates, except the SEC registration fee. The Selling Stockholders will
pay any underwriting discounts and commissions and expenses incurred by them in
disposing of the shares. We will bear all other costs, fees and expenses listed
below incurred in effecting the issuance and registration of the shares covered
by this prospectus.
|
|
Total
|
|
|
|
|
|
|
SEC
registration fee
|
|
$
|
5,645.84*
|
|
Printing
expenses
|
|
$
|
2,000**
|
|
Legal
fees and expenses
|
|
$
|
40,000**
|
|
Accounting
fees and expenses
|
|
$
|
15,000**
|
|
Miscellaneous
|
|
$
|
2,354.16
|
|
Total
|
|
$
|
$65,000**
|
|
|
|
*
|
Includes
registration fees previously paid
|
**
|
Estimated.
|
|
|
Item 14.
|
Indemnification
of officers and directors
|
Our
certificate of incorporation provides that all directors, officers, employees
and agents of the registrant shall be entitled to be indemnified by us to the
fullest extent permitted by Section 2-418 of the Maryland General
Corporation Law. Section 2-418 of the Maryland General Corporation Law
concerning indemnification of officers, directors, employees and agents is set
forth below.
“Section 2-418.
Indemnification of directors, officers, employees and agents.
(a) Definitions. — In
this section the following words have the meanings indicated.
(1)
|
“Director”
means any person who is or was a director of a corporation and any person
who, while a director of a corporation, is or was serving at the request
of the corporation as a director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan.
|
(2)
|
“Corporation”
includes any domestic or foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in which the predecessor’s
existence ceased upon consummation of the
transaction.
|
(3)
|
”Expenses”
includes attorney’s fees.
|
(4)
|
“Official
capacity” means the following:
|
(i)
|
When
used with respect to a director, the office of director in the
corporation; and
|
(ii)
|
When
used with respect to a person other than a director as contemplated in
subsection (j), the elective or appointive office in the corporation
held by the officer, or the employment or agency relationship undertaken
by the employee or agent in behalf of the
corporation.
|
(iii)
|
“Official
capacity” does not include service for any other foreign or domestic
corporation or any partnership, joint venture, trust, other enterprise, or
employee benefit plan.
|
(5)
|
“Party”
includes a person who was, is, or is threatened to be made a named
defendant or respondent in a
proceeding.
|
(6)
|
“Proceeding”
means any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.
|
(b) Permitted indemnification of
director. —
(1)
|
A
corporation may indemnify any director made a party to any proceeding by
reason of service in that capacity unless it is established
that:
|
(i)
|
The
act or omission of the director was material to the matter giving rise to
the proceeding; and
|
1.
|
Was
committed in bad faith; or
|
2.
|
Was
the result of active and deliberate dishonesty;
or
|
(ii)
|
The
director actually received an improper personal benefit in money,
property, or services; or
|
(iii)
|
In
the case of any criminal proceeding, the director had reasonable cause to
believe that the act or omission was
unlawful.
|
(2)
|
|
(i)
|
Indemnification
may be against judgments, penalties, fines, settlements, and reasonable
expenses actually incurred by the director in connection with the
proceeding.
|
|
|
(ii)
|
However,
if the proceeding was one by or in the right of the corporation,
indemnification may not be made in respect of any proceeding in which the
director shall have been adjudged to be liable to the
corporation.
|
(3)
|
|
(i)
|
The
termination of any proceeding by judgment, order, or settlement does not
create a presumption that the director did not meet the requisite standard
of conduct set forth in this subsection.
|
|
(ii)
|
The
termination of any proceeding by conviction, or a plea of nolo contendere
or its equivalent, or an entry of an order of probation prior to judgment,
creates a rebuttable presumption that the director did not meet that
standard of conduct.
|
(4)
|
A
corporation may not indemnify a director or advance expenses under this
section for a proceeding brought by that director against the corporation,
except:
|
|
(i)
|
For
a proceeding brought to enforce indemnification under this section;
or
|
|
(ii)
|
If
the charter or bylaws of the corporation, a resolution of the board of
directors of the corporation, or an agreement approved by the board of
directors of the corporation to which the corporation is a party expressly
provide otherwise.
|
(c) No indemnification of director
liable for improper personal benefit. — A director may not be
indemnified under subsection (b) of this section in respect of any
proceeding charging improper personal benefit to the director, whether or not
involving action in the director’s official capacity, in which the director was
adjudged to be liable on the basis that personal benefit was improperly
received.
(d) Required indemnification against
expenses incurred in successful defense — Unless limited by the
charter:
(1)
|
A
director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (b) of this
section shall be indemnified against reasonable expenses incurred by the
director in connection with the proceeding.
|
(2)
|
A
court of appropriate jurisdiction, upon application of a director and such
notice as the court shall require, may order indemnification in the
following circumstances:
|
(i)
|
If
it determines a director is entitled to reimbursement under paragraph
(1) of this subsection, the court shall order indemnification, in
which case the director shall be entitled to recover the expenses of
securing such reimbursement; or
|
(ii)
|
If
it determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not
the director has met the standards of conduct set forth in subsection
(b) of this section or has been adjudged liable under the
circumstances described in subsection (c) of this section, the court
may order such indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged in the
circumstances described in subsection (c) shall be limited to
expenses.
|
(3)
|
A
court of appropriate jurisdiction may be the same court in which the
proceeding involving the director’s liability took
place.
|
(e) Determination that indemnification
is proper. — (1) Indemnification under subsection (b) of
this section may not be made by the corporation unless authorized for a specific
proceeding after a determination has been made that indemnification of the
director is permissible in the circumstances because the director has met the
standard of conduct set forth in subsection (b) of this
section.
(2)
|
Such
determination shall be made:
|
|
|
|
(i) |
By
the board of directors by a majority vote of a quorum consisting of
directors not, at the time, parties to the proceeding, or, if such a
quorum cannot be obtained, then by a majority vote of a committee of the
board consisting solely of two or more directors not, at the time, parties
to such proceeding and who were duly designated to act in the matter by a
majority vote of the full board in which the designated directors who are
parties may participate;
|
(ii)
|
By
special legal counsel selected by the board of directors or a committee of
the board by vote as set forth in subparagraph (i) of this paragraph,
or, if the requisite quorum of the full board cannot be obtained therefor
and the committee cannot be established, by a majority vote of the full
board in which directors who are parties may participate; or
|
(iii)
|
By
the stockholders.
|
(3)
|
Authorization
of indemnification and determination as to reasonableness of expenses
shall be made in the same manner as the determination that indemnification
is permissible. However, if the determination that indemnification is
permissible is made by special legal counsel, authorization of
indemnification and determination as to reasonableness of expenses shall
be made in the manner specified in subparagraph (ii) of paragraph
(2) of this subsection for selection of such counsel.
|
(4)
|
Shares
held by directors who are parties to the proceeding may not be voted on
the subject matter under this
subsection.
|
(f) Payment of expenses in advance of
final disposition of action. — (1) Reasonable expenses incurred
by a director who is a party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding upon receipt
by the corporation of:
(i)
|
A
written affirmation by the director of the director’s good faith belief
that the standard of conduct necessary for indemnification by the
corporation as authorized in this section has been met; and
|
(ii)
|
A
written undertaking by or on behalf of the director to repay the amount if
it shall ultimately be determined that the standard of conduct has not
been met.
|
(2)
|
The
undertaking required by subparagraph (ii) of paragraph (1) of
this subsection shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to financial
ability to make the repayment.
|
(3)
|
Payments
under this subsection shall be made as provided by the charter, bylaws, or
contract or as specified in subsection (e) of this
section.
|
(g) Validity of indemnification
provision. — The indemnification and advancement of expenses
provided or authorized by this section may not be deemed exclusive of any other
rights, by indemnification or otherwise, to which a director may be entitled
under the charter, the bylaws, a resolution of stockholders or directors, an
agreement or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.
(h) Reimbursement of director’s expenses
incurred while appearing as witness. — This section does not limit
the corporation’s power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time when the
director has not been made a named defendant or respondent in the
proceeding.
(i) Director’s service to employee
benefit plan. — For purposes of this section:
(1)
|
The
corporation shall be deemed to have requested a director to serve an
employee benefit plan where the performance of the director’s duties to
the corporation also imposes duties on, or otherwise involves services by,
the director to the plan or participants or beneficiaries of the
plan;
|
(2)
|
Excise
taxes assessed on a director with respect to an employee benefit plan
pursuant to applicable law shall be deemed fines;
and
|
(3)
|
Action
taken or omitted by the director with respect to an employee benefit plan
in the performance of the director’s duties for a purpose reasonably
believed by the director to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the
corporation.
|
(j) Officer, employee or
agent. — Unless limited by the charter:
(1)
|
An
officer of the corporation shall be indemnified as and to the extent
provided in subsection (d) of this section for a director and shall
be entitled, to the same extent as a director, to seek indemnification
pursuant to the provisions of subsection (d);
|
(2)
|
A
corporation may indemnify and advance expenses to an officer, employee, or
agent of the corporation to the same extent that it may indemnify
directors under this section; and
|
(3)
|
A
corporation, in addition, may indemnify and advance expenses to an
officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors, or
contract.
|
(k) Insurance or similar
protection. — (1) A corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or who, while a director, officer, employee, or
agent of the corporation, is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted against and incurred by
such person in any such capacity or arising out of such person’s position,
whether or not the corporation would have the power to indemnify against
liability under the provisions of this section.
(2)
|
A
corporation may provide similar protection, including a trust fund, letter
of credit, or surety bond, not inconsistent with this
section.
|
(3)
|
The
insurance or similar protection may be provided by a subsidiary or an
affiliate of the corporation.
|
(l) Report of indemnification to
stockholders. — Any indemnification of, or advance of expenses to, a
director in accordance with this section, if arising out of a proceeding by or
in the right of the corporation, shall be reported in writing to the
stockholders with the notice of the next stockholders’ meeting or prior to the
meeting.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers, and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
incurred or paid by a director, officer or controlling person in a successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to the court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Paragraph B.
of Article Tenth of our amended and restated certificate of incorporation
provides:
“The
Corporation, to the full extent permitted by Section 2-418 of the MGCL, as
amended from time to time, shall indemnify all persons whom it may indemnify
pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding or which such officer or director may be entitled to
indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized hereby.”
Article XI
of our Bylaws provides for indemnification of any of our directors, officers,
employees or agents for certain matters in accordance with Section 2-418 of
the Maryland General Corporation Law.
Item 15.
|
Recent
sales of unregistered securities
|
Set forth
below is information regarding shares of common stock and preferred stock
issued, and options and warrants granted, by us within the past three years.
Also included is the consideration, if any, received by us for such shares,
options and warrants and information relating to the section of the Securities
Act, or rule of the SEC under which exemption from registration was
claimed.
On
February 3, 2006, the Company sold 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 the Company at the Time of Acquisition
|
Dr.
Ranga Krishna
|
|
100,000
|
|
|
Chairman
of the Board
|
John
Cherin
|
|
37,500
|
|
|
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
|
These
shares were issued in connection with our organization pursuant to the exemption
from registration contained in Section 4(2) of the Securities Act of 1933,
as they were sold to sophisticated, wealthy individuals. No underwriting
discounts or commissions were paid with respect to such sales.
In March,
2006, immediately prior to the initial public offering of the Company’s units,
in a private placement, the Company sold an aggregate of 170,000 units, with
each unit consisting of 1 share of Common Stock and 2 warrants, each exercisable
to purchase 1 share of common stock (at an initial exercise price of $5.00 per
share) at a price equal to the offering price of the Company’s initial public
offering, $6.00 per unit. These shares were issued in connection with
our organization pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as they were sold to
sophisticated, wealthy individuals. No underwriting discounts or commissions
were paid with respect to such sales. The units were sold as
follows:
Name
|
|
Number
of Units
|
|
Relationship
to the Company at the Time of Acquisition
|
Dr.
Ranga Krishna
|
|
120,000
|
|
|
Chairman
of the Board
|
John
Cherin
|
|
16,666
|
|
|
Chief
Financial Officer, Treasurer and Director
|
Ram
Mukunda
|
|
33,334
|
|
|
Chief
Executive Officer, President and
Director
|
On
February 5, 2007, the Company entered into a Note and Warrant Purchase Agreement
with Oliveira Capital, LLC (“Oliveira”) pursuant to which the Company sold
Oliveira a Promissory Note in the principal amount of $3,000,000 and a warrant
to purchase up to 425,000 shares of common stock of the Company (at an initial
exercise price of $5.00 per share) in a private placement. The Note
became due on February 5, 2008. As provided in the Note and Warrant
Purchase Agreement, the Company requested an extension of the term of the Note
and issued to Oliveira an additional warrant to purchase up to 425,000 shares of
common stock of the Company (at an initial exercise price of $5.00 per
share). These transactions were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act, which
exempts private issuances of securities in which the securities are not offered
or advertised to the general public. No underwriting discounts or
commissions were paid with respect to such sales.
On
December 24, 2007, the Company sold Promissory Notes and shares of the Company’s
common stock in a private placement as follows:
Name
|
|
Principal
Amount of
Promissory
Note
|
|
Number
of Shares
of
Common Stock
|
|
Relationship
to the Company
at
the Time of Acquisition
|
Dr.
Ranga Krishna
|
|
|
$4,300,000
|
|
|
446,226
|
|
Chairman
of the Board
|
Oliveira
Capital, LLC
|
|
|
$1,000,000
|
|
|
103,774
|
|
None
|
On
January 10, 2008, the Company sold Promissory Notes and shares of the Company’s
common stock in a private placement as follows:
Name
|
|
Principal
Amount of
Promissory
Note
|
|
|
Number
of Shares
of
Common Stock
|
|
Relationship
to the Company
at
the Time of Acquisition
|
Funcorp
Associates
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
Trufima
NV
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
Geri
Investments NV
|
|
$ |
100,000 |
|
|
|
10,377 |
|
None
|
Harmon
Corp NV
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
La
Legetaz
|
|
$ |
100,000 |
|
|
|
10,377 |
|
None
|
Arterio,
Inc.
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
Domanco
Venture Capital Find
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
Anthony
Polak
|
|
$ |
75,000 |
|
|
|
7,783 |
|
None
|
Anthony
Polak “S”
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
Jamie
Polak
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
RL
Capital Partners LP
|
|
$ |
250,000 |
|
|
|
25,943 |
|
None
|
Ronald
M. Lazar, IRA
|
|
$ |
50,000 |
|
|
|
5,189 |
|
None
|
White
Sand Investor Group
|
|
$ |
500,000 |
|
|
|
51,887 |
|
None
|
MLR
Capital Offshore Master Fund, Ltd.
|
|
$ |
550,000 |
|
|
|
57,075 |
|
None
|
The
December 2007 and January 2008 transactions were exempt from registration under
the Securities Act pursuant to Section 4(2) of the Securities Act, which
exempts private issuances of securities in which the securities are not offered
or advertised to the general public. No underwriting discounts or
commissions were paid with respect to such sales. These
Promissory Notes have been repaid in full Pursuant to the terms of
the Note Purchase Agreement (between the Company and the purchasers of the
Promissory Notes and shares, the shares of common stock were issued to the
purchasers subsequent to the Company’s acquisition of a controlling interest in
Sricon and TBL
On August
15, 2008, the Company issued 10,000 shares of its common stock to RedChip
Companies, Inc. as payment for services in a private
placement. This transactions was exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act, which
exempts private issuances of securities in which the securities are not offered
or advertised to the general public. No underwriting discounts or
commissions were paid with respect to such sale.
On
September 30, 2008, the Company entered into a Note and Share Purchase Agreement
with Steven M. Oliveira 1998 Charitable Remainder Unitrust (“Oliveira Trust”)
pursuant to which the Company sold the Oliveira Trust a Promissory Note in the
principal amount of $2,000,000 and 200,000 shares of common stock of the Company
.. The Promissory Note is due and payable on September 30, 2009, or
upon an earlie change in control of the Company, and bears interest at a rate of
6% per annum. The Note and Share Purchase Agreement, provides
for the issuance by the Company of additional shares of its Common Stock to the
Oliveira Trust for no additional consideration as follows: if an
event of default under the Promissory Note remains uncured for a period of more
than 30 days, the Company shall issue to the Oliveira Trust an additional 10,000
shares of Common Stock for each $100,000 of outstanding principal amount of the
Promissory Note and if the Company fails to file a registration statement
covering the resale Common Stock within 45 days after the sale of the Promissory
Note and Common Stock to the Oliveira Trust or such registration statement is
not declared effective within 150 days after filing (subject to certain
exceptions and extensions) the Company shall issue to the Oliveira Trust an
additional 25,000 shares of Common Stock for each $100,000 of outstanding
principal amount of the Promissory Note and an additional 5,000
shares for each $100,000 of outstanding principal amount of the
Promissory Note for each subsequent 30 day period such registration statement is
not declared effective, These transactions were exempt from
registration under the Securities Act pursuant to Regulation D promulgated under
the Securities Act, which exempts private issuances of securities in which the
securities are not offered or advertised to the general public. No
underwriting discounts or commissions were paid with respect to such
sales.
|
|
Item 16.
|
Exhibits
and financial statement schedules
|
Exhibit No.
|
|
Description
|
|
3.1
|
|
Amended
and Restated Articles of Incorporation. (1)
|
|
3.2
|
|
By-laws.
(2)
|
|
4.1
|
|
Specimen
Unit Certificate. (3)
|
|
4.2
|
|
Specimen
Common Stock Certificate. (3)
|
|
4.3
|
|
Specimen
Warrant Certificate. (3)
|
|
4.4
|
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant. (1)
|
|
4.5
|
|
Form
of Purchase Option to be granted to the Representative.
(1)
|
|
5.1
|
|
Opinion
of Seyfarth Shaw LLP*
|
|
10.1
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and Ram Mukunda. (4)
|
|
10.2
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and John Cherin. (4)
|
|
10.3
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and Ranga Krishna. (4)
|
|
10.4
|
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant. (5)
|
|
10.5
|
|
Promissory
Note issued by the Registrant to Ram Mukunda. (2)
|
|
10.5.1
|
|
Extension
of Due Date of Promissory Note issued to Ram Mukunda. (2)
|
|
10.6
|
|
Form
of Stock and Unit Escrow Agreement among the Registrant, Ram Mukunda, John
Cherin and Continental Stock Transfer & Trust Company.
(2)
|
|
10.7
|
|
Form
of Registration Rights Agreement among the Registrant and each of the
existing stockholders. (3)
|
|
10.8
|
|
Form
of Unit Purchase Agreement among Ferris, Baker Watts, Inc. and one or more
of the Initial Stockholders. (5)
|
|
10.9
|
|
Form
of Office Service Agreement between the Registrant and Integrated Global
Networks, LLC. (5)
|
|
10.10
|
|
Amended
and Restated Letter Advisory Agreement between the Registrant, Ferris,
Baker Watts, Inc. and SG Americas Securities, LLC. (5)
|
|
10.11
|
|
Form
of Letter Agreement between Ferris, Baker Watts, Inc. and certain officers
and directors of the Registrant. (4)
|
|
10.12
|
|
Form
of Letter Agreement between Ferris, Baker Watts, Inc. and each of the
Special Advisors of the Registrant. (4)
|
|
10.13
|
|
Form
of Letter Agreement between the Registrant and certain officers and
directors of the Registrant. (4)
|
|
10.14
|
|
Form
of Letter Agreement between the Registrant and each of the Special
Advisors of the Registrant. (4)
|
|
10.15
|
|
Promissory
Note issued by the Registrant to Ranga Krishna. (2)
|
|
10.15.1
|
|
Extension
of Due Date of Promissory Note issued to Ranga Krishna.
(2)
|
|
10.16
|
|
Form
of Promissory Note to be issued by the Registrant to Ranga Krishna.
(2)
|
|
10.17
|
|
Share
Subscription Cum Purchase Agreement dated February 2, 2007 by and
among India Globalization Capital, Inc., MBL Infrastructures Limited and
the persons “named as Promoters therein”. (6)
|
|
10.18
|
|
Debenture
Subscription Agreement dated February 2, 2007 by and among India
Globalization Capital, Inc., MBL Infrastructures Limited and the persons
named as Promoters therein. (6)
|
|
10.19
|
|
Note
and Warrant Purchase Agreement dated February 5, 2007 by and among
India Globalization Capital, Inc. and Oliveira Capital, LLC.
(6)
|
|
10.20
|
|
Promissory
Note dated February 5, 2007 in the initial principal amount for
$3,000,000 issued by India Globalization Capital, Inc. to Oliveira
Capital, LLC. (6)
|
|
10.21
|
|
Warrant
to Purchase Shares of Common Stock of India Globalization Capital, Inc.
issued by India Globalization Capital, Inc. to Oliveira Capital, LLC.
(6)
|
|
10.22
|
|
First
Amendment to Share Subscription Cum Purchase Agreement dated February 2,
2007 by and among India Globalization Capital, Inc., MBL Infrastructures
Limited and the persons named as Promoters therein. (7)
|
|
10.23
|
|
First
Amendment to the Debenture Subscription Agreement dated February 2, 2007
by and among India Globalization Capital, Inc., MBL Infrastructures
Limited and the persons named as Promoters therein. (7)
|
|
10.24
|
|
Contract
Agreement dated April 29, 2007 between IGC, CWEL, AMTL and MAIL.
(7)
|
|
10.25
|
|
First
Amendment dated August 20, 2007 to Agreement dated April 29, 2007 between
IGC, CWEL, AMTL and MAIL. (8)
|
|
10.26
|
|
Share
Subscription Cum Purchase Agreement dated September 16, 2007 by and among
India Globalization Capital, Inc., Techni Bharathi Limited and the persons
named as Promoters therein (9).
|
|
10.27
|
|
Shareholders
Agreement dated September 16, 2007 by and among India Globalization
Capital, Inc., Techni Bharathi Limited and the persons named as Promoters
therein. (9)
|
|
10.28
|
|
Share
Purchase Agreement dated September 21, 2007 by and between India
Globalization Capital, Inc. and Odeon Limited. (9)
|
|
10.29
|
|
Share
Subscription Cum Purchase Agreement dated September 15, 2007 by and among
India Globalization Capital, Inc., Sricon Infrastructure
Private Limited and the persons named as Promoters therein.
(9)
|
|
10.30
|
|
Shareholders
Agreement dated September 15, 2007 by and among India Globalization
Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (9)
|
|
10.31
|
|
Form
of Amendment to the Share Subscription Cum Purchase Agreement Dated
September 15, 2007, entered into on December 19, 2007 by and among India
Globalization Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (10)
|
|
10.32
|
|
Form
of Amendment to the Share Subscription Agreement Dated September 16, 2007,
entered into on December 21, 2007 by and among India Globalization
Capital, Inc., Techni Bharathi Limited and the persons named as Promoters
therein. (10)
|
|
10.33
|
|
Note
Purchase Agreement, effective as of December 24, 2007, by and among India
Globalization Capital, Inc. and the persons named as Lenders therein.
(10)
|
|
10.34
|
|
Form
of India Globalization Capital, Inc. Promissory Note. (10)
|
|
10.35
|
|
Form
of Registration Rights Agreement by and among India Globalization Capital,
Inc. and the persons named as Investors therein. (10)
|
10.36
|
|
Form
of Pledge Agreement, effective as of December 24, 2007, by and among India
Globalization Capital, Inc. and the persons named as
Secured Parties therein. (10)
|
10.37
|
|
Form
of Lock up Letter Agreement, dated December 24, 2007 by and between India
Globalization Capital, Inc. and Dr. Ranga Krishna.
(10)
|
10.38
|
|
Form
of Letter Agreement, dated December 24, 2007, with Dr. Ranga Krishna.
(10)
|
10.39
|
|
Form
of Letter Agreement, dated December 24, 2007, with Oliveira Capital, LLC.
(10)
|
10.40
|
|
Form
of Warrant Clarification Agreement, dated January 4, 2008, by and between
the Company and Continental Stock Transfer & Trust Company.
(11)
|
10.41
|
|
Form
of Amendment to Unit Purchase Options, dated January 4, 2008, by and
between the Company and the holders of Unit Purchase Options.
(11)
|
10.42
|
|
Second
Amendment to the Share Subscription Cum Purchase Agreement Dated September
15, 2007, entered into on January 14, 2008 by and among India
Globalization Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (12)
|
10.43
|
|
Letter
Agreement dated January 8, 2008 by and among India Globalization Capital,
Inc., Odeon Limited, and Techni Bharathi Limited with respect to the Share
Purchase Agreement dated September 21, 2007 by and among India
Globalization Capital, Inc. and Odeon Limited.
(12)
|
10.44
|
|
Employment
Agreement between India Globalization Capital, Inc., India Globalization
Capital Mauritius and Ram Mukunda dated as of March 8, 2008.
(13)
|
10.45
|
|
2008
Omnibus Incentive Plan. (14)
|
10.46
|
|
Note
and Share Purchase Agreement dated as of September 30, 2008, by and among
India Globalization Capital, Inc. and Steven M. Oliveira 1998
Charitable Remainder Unitrust (15)
|
10.47
|
|
Registration
Rights Agreement dated September 30, 2008 by and among India Globalization
Capital, Inc. and the persons named as Investors therein.
(15)
|
21
|
|
Subsidiaries
|
23.1
|
|
Consent
of Goldstein Golub Kessler LLP.
|
23.2
|
|
Consent
of Yoganandh & Ram
|
23.3
|
|
Consent
of Seyfarth Shaw LLP (incorporated by reference from
Exhibit 5.1)
|
23.4
|
|
Consent
of Mega Ace Consultancy. (4)
|
24
|
|
Power
of Attorney. (4)
|
99.1
|
|
Code
of Ethics. (5)
|
(1)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on November 2,
2005.
|
(2)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on February 14,
2006.
|
(3)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as originally filed on May 13,
2005.
|
(4)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on July 11,
2005.
|
(5)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on March 2,
2006.
|
(6)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on February 12,
2007.
|
(7)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on May 2, 2007.
|
(8)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on August 23, 2007.
|
(9)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on September 27, 2007.
|
(10)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on December 27, 2007.
|
(11)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on January 7, 2008.
|
(12)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on January 16, 2008.
|
(13)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on May 23, 2008.
|
(14)
|
Incorporated
by reference to the Registrant’s Definitive Proxy Statement on Schedule
14A (SEC File No. 333-124942), as originally filed on February 8,
2008.
|
(15)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on October 6,
2008.
|
* To be
filed by amendment
|
|
(b)
|
Financial
Statement Schedules
|
All
financial statement schedules are omitted because they are not applicable, not
required or the information is indicated elsewhere in the financial statements
or the notes thereto.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
(5) That,
for the purpose of determining liability of the registrant under the Securities
Act to any purchaser in the initial distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby further undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant’s annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan’s annual report pursuant to Section 15(d) of the Securities
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona
fide offering thereof.
(c) The
undersigned registrant hereby further undertakes that:
(i) For
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of the registration statement
in reliance upon Rule 430A and contained in the form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration statement as of
the time it was declared effective; and
(ii) For
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering
thereof.
(d) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Signatures
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bethesda, State of
Maryland, on October 29, 2008.
|
INDIA
GLOBALIZATION CAPITAL, INC.
|
|
|
|
|
By:
|
|
/s/ Ram
Mukunda
|
|
Name:
|
|
Ram
Mukunda
|
|
Title:
|
|
President
and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities indicated on October
29, 2008. This document may be executed by the signatories hereto on any number
of counterparts, all of which shall constitute one and the same
instrument.
Name
|
|
Position
|
|
Date
|
/s/ Ram
Mukunda
|
|
President
and Chief Executive Officer
|
|
October
29, 2008
|
Ram
Mukunda
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
/s/
*
|
|
Chairman
|
|
October
29, 2008
|
Ranga
Krishna
|
|
|
|
|
|
|
|
/s/ John
Selvaraj
|
|
Treasurer
|
|
October
29, 2008
|
John
Selvaraj
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
/s/
*
|
|
Director
|
|
October
29, 2008
|
Suhail
Nathani
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
October
29, 2008
|
Sudhakar
Shenoy
|
|
|
|
|
|
|
|
/s/ Richard
Prins
|
|
Director
|
|
October
29, 2008
|
Richard Prins |
|
|
|
|
|
|
|
|
*By:
|
|
/s/ Ram
Mukunda
|
|
|
|
Ram
Mukunda
|
|
|
|
Power
of Attorney
|
|
EXHIBIT INDEX
3.1
|
|
Amended
and Restated Articles of Incorporation. (1)
|
|
3.2
|
|
By-laws.
(2)
|
|
4.1
|
|
Specimen
Unit Certificate. (3)
|
|
4.2
|
|
Specimen
Common Stock Certificate. (3)
|
|
4.3
|
|
Specimen
Warrant Certificate. (3)
|
|
4.4
|
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant. (1)
|
|
4.5
|
|
Form
of Purchase Option to be granted to the Representative.
(1)
|
|
5.1
|
|
Opinion
of Seyfarth Shaw LLP*
|
|
10.1
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and Ram Mukunda. (4)
|
|
10.2
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and John Cherin. (4)
|
|
10.3
|
|
Amended
and Restated Letter Agreement between the Registrant, Ferris, Baker Watts,
Inc. and Ranga Krishna. (4)
|
|
10.4
|
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant. (5)
|
|
10.5
|
|
Promissory
Note issued by the Registrant to Ram Mukunda. (2)
|
|
10.5.1
|
|
Extension
of Due Date of Promissory Note issued to Ram Mukunda. (2)
|
|
10.6
|
|
Form
of Stock and Unit Escrow Agreement among the Registrant, Ram Mukunda, John
Cherin and Continental Stock Transfer & Trust Company.
(2)
|
|
10.7
|
|
Form
of Registration Rights Agreement among the Registrant and each of the
existing stockholders. (3)
|
|
10.8
|
|
Form
of Unit Purchase Agreement among Ferris, Baker Watts, Inc. and one or more
of the Initial Stockholders. (5)
|
|
10.9
|
|
Form
of Office Service Agreement between the Registrant and Integrated Global
Networks, LLC. (5)
|
|
10.10
|
|
Amended
and Restated Letter Advisory Agreement between the Registrant, Ferris,
Baker Watts, Inc. and SG Americas Securities, LLC. (5)
|
|
10.11
|
|
Form
of Letter Agreement between Ferris, Baker Watts, Inc. and certain officers
and directors of the Registrant. (4)
|
|
10.12
|
|
Form
of Letter Agreement between Ferris, Baker Watts, Inc. and each of the
Special Advisors of the Registrant. (4)
|
|
10.13
|
|
Form
of Letter Agreement between the Registrant and certain officers and
directors of the Registrant. (4)
|
|
10.14
|
|
Form
of Letter Agreement between the Registrant and each of the Special
Advisors of the Registrant. (4)
|
|
10.15
|
|
Promissory
Note issued by the Registrant to Ranga Krishna. (2)
|
|
10.15.1
|
|
Extension
of Due Date of Promissory Note issued to Ranga Krishna.
(2)
|
|
10.16
|
|
Form
of Promissory Note to be issued by the Registrant to Ranga Krishna.
(2)
|
|
10.17
|
|
Share
Subscription Cum Purchase Agreement dated February 2, 2007 by and
among India Globalization Capital, Inc., MBL Infrastructures Limited and
the persons “named as Promoters therein”. (6)
|
|
10.18
|
|
Debenture
Subscription Agreement dated February 2, 2007 by and among India
Globalization Capital, Inc., MBL Infrastructures Limited and the persons
named as Promoters therein. (6)
|
|
10.19
|
|
Note
and Warrant Purchase Agreement dated February 5, 2007 by and among
India Globalization Capital, Inc. and Oliveira Capital, LLC.
(6)
|
|
10.20
|
|
Promissory
Note dated February 5, 2007 in the initial principal amount for
$3,000,000 issued by India Globalization Capital, Inc. to Oliveira
Capital, LLC. (6)
|
|
10.21
|
|
Warrant
to Purchase Shares of Common Stock of India Globalization Capital, Inc.
issued by India Globalization Capital, Inc. to Oliveira Capital, LLC.
(6)
|
|
10.22
|
|
First
Amendment to Share Subscription Cum Purchase Agreement dated February 2,
2007 by and among India Globalization Capital, Inc., MBL Infrastructures
Limited and the persons named as Promoters therein. (7)
|
|
10.23
|
|
First
Amendment to the Debenture Subscription Agreement dated February 2, 2007
by and among India Globalization Capital, Inc., MBL Infrastructures
Limited and the persons named as Promoters therein. (7)
|
|
10.24
|
|
Contract
Agreement dated April 29, 2007 between IGC, CWEL, AMTL and MAIL.
(7)
|
|
10.25
|
|
First
Amendment dated August 20, 2007 to Agreement dated April 29, 2007 between
IGC, CWEL, AMTL and MAIL. (8)
|
|
10.26
|
|
Share
Subscription Cum Purchase Agreement dated September 16, 2007 by and among
India Globalization Capital, Inc., Techni Bharathi Limited and the persons
named as Promoters therein (9).
|
|
10.27
|
|
Shareholders
Agreement dated September 16, 2007 by and among India Globalization
Capital, Inc., Techni Barathi Limited and the persons named as Promoters
therein. (9)
|
|
10.28
|
|
Share
Purchase Agreement dated September 21, 2007 by and between India
Globalization Capital, Inc. and Odeon Limited. (9)
|
|
10.29
|
|
Share
Subscription Cum Purchase Agreement dated September 15, 2007 by and among
India Globalization Capital, Inc., Sricon Infrastructure
Private Limited and the persons named as Promoters therein.
(9)
|
|
10.30
|
|
Shareholders
Agreement dated September 15, 2007 by and among India Globalization
Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (9)
|
|
10.31
|
|
Form
of Amendment to the Share Subscription Cum Purchase Agreement Dated
September 15, 2007, entered into on December 19, 2007 by and among India
Globalization Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (10)
|
|
10.32
|
|
Form
of Amendment to the Share Subscription Agreement Dated September 16, 2007,
entered into on December 21, 2007 by and among India Globalization
Capital, Inc., Techni Bharathi Limited and the persons named as Promoters
therein. (10)
|
|
10.33
|
|
Note
Purchase Agreement, effective as of December 24, 2007, by and among India
Globalization Capital, Inc. and the persons named as Lenders therein.
(10)
|
|
10.34
|
|
Form
of India Globalization Capital, Inc. Promissory Note. (10)
|
|
10.35
|
|
Form
of Registration Rights Agreement by and among India Globalization Capital,
Inc. and the persons named as Investors therein. (10)
|
10.36
|
|
Form
of Pledge Agreement, effective as of December 24, 2007, by and among India
Globalization Capital, Inc. and the persons named as
Secured Parties therein. (10)
|
10.37
|
|
Form
of Lock up Letter Agreement, dated December 24, 2007 by and between India
Globalization Capital, Inc. and Dr. Ranga Krishna.
(10)
|
10.38
|
|
Form
of Letter Agreement, dated December 24, 2007, with Dr. Ranga Krishna.
(10)
|
10.39
|
|
Form
of Letter Agreement, dated December 24, 2007, with Oliveira Capital, LLC.
(10)
|
10.40
|
|
Form
of Warrant Clarification Agreement, dated January 4, 2008, by and between
the Company and Continental Stock Transfer & Trust Company.
(11)
|
10.41
|
|
Form
of Amendment to Unit Purchase Options, dated January 4, 2008, by and
between the Company and the holders of Unit Purchase Options.
(11)
|
10.42
|
|
Second
Amendment to the Share Subscription Cum Purchase Agreement Dated September
15, 2007, entered into on January 14, 2008 by and among India
Globalization Capital, Inc., Sricon Infrastructure Private Limited and the
persons named as Promoters therein. (12)
|
10.43
|
|
Letter
Agreement dated January 8, 2008 by and among India Globalization Capital,
Inc., Odeon Limited, and Techni Bharathi Limited with respect to the Share
Purchase Agreement dated September 21, 2007 by and among India
Globalization Capital, Inc. and Odeon Limited.
(12)
|
10.44
|
|
Employment
Agreement between India Globalization Capital, Inc., India Globalization
Capital Mauritius and Ram Mukunda dated as of March 8, 2008.
(13)
|
10.45
|
|
2008
Omnibus Incentive Plan. (14)
|
10.46
|
|
Note
and Share Purchase Agreement dated as of September 30, 2008, by and among
India Globalization Capital, Inc. and Steven M. Oliveira 1998
Charitable Remainder Unitrust (15)
|
10.47
|
|
Registration
Rights Agreement dated September 30, 2008 by and among India Globalization
Capital, Inc. and the persons named as Investors therein.
(15) |
23.1
|
|
Consent
of Goldstein Golub Kessler LLP.
|
23.2
|
|
Consent
of Yoganandh & Ram
|
23.3
|
|
Consent
of Seyfarth Shaw LLP (incorporated by reference from
Exhibit 5.1)
|
23.4
|
|
Consent
of Mega Ace Consultancy. (4)
|
24
|
|
Power
of Attorney. (4)
|
99.1
|
|
Code
of Ethics. (5)
|
(1)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on November 2,
2005.
|
(2)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on February 14,
2006.
|
(3)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as originally filed on May 13,
2005.
|
(4)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on July 11,
2005.
|
(5)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-1 (SEC
File No. 333-124942), as amended and filed on March 2,
2006.
|
(6)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on February 12,
2007.
|
(7)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on May 2, 2007.
|
(8)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on August 23, 2007.
|
(9)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on September 27, 2007.
|
(10)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on December 27, 2007.
|
(11)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on January 7, 2008.
|
(12)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on January 16, 2008.
|
(13)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on May 23, 2008.
|
(14)
|
Incorporated
by reference to the Registrant’s Definitive Proxy Statement on Schedule
14A (SEC File No. 333-124942), as originally filed on February 8,
2008.
|
(15)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K (SEC File No.
333-124942), as originally filed on October 6,
2008.
|
* To be
filed by amendment