SEC Company Response from IGC Pharma, Inc. (IGC) (CIK 0001326205) (IGC) — Apr 28, 2014
IGC Pharma, Inc. (IGC) (CIK 0001326205)
Date: April 28, 2014 · CIK: 0001326205 · Accession: 0001185185-14-001073
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-32830
Referenced dates: January 28, 2014
Letter
VIA EDGAR Securities and Exchange Commission Office of Beverages, Apparel and Mining Form 8-K Filed January 31, 2014 Form 8-K Filed February 6, 2014 Response Dated March 10, 2014 File No. 001-32830
Dear Ms. Jenkins:
This is our response to the SEC Staff’s comments in your letter of April 2, 2014 to India Globalization Capital, Inc. (“IGC”) regarding the above-referenced filings.
For your convenience, we have included each of the Staff’s comments in italics before each of IGC’s responses. References in this letter to “we,” “our” or “us” mean IGC or our advisors, as the context may dictate.
Company Website
1. Please explain the differences between the disclosure in your Form 10-K for the fiscal year ended 2013 and the disclosure on your company website. In this regard we note the references on your company website to reserves and statements regarding beneficiation plant and mine ownership.
IGC answer: We have undertaken a systematic review of all public disclosures including the web site so that they are consistent with our revised disclosures as per the Staff’s comments. As of now, the website displays an “under revision” message to let our investors know we are revising the site.
Form 10-K for the Fiscal Year Ended March 31, 2013
General
2. We note your response to comment 1 of our letter dated January 28, 2014 and we partially reissue the comment. Please tell us the basis for the reserve dollar value on page F-25 of your proposed revised disclosure.
IGC answer: We left this reference to “estimated reserves [are] worth over $200 million at current prices” since this information was given by and was referring to Aohan Banner Company and not to IGC or any of IGC’s subsidiaries. Aohan is an independent mine that provided this information to us in the context of a potential acquisition. However, We agree to delete this reserve dollar value on page F-25 in its entirety.
3. We note your response to comments 4 through 7 of our letter dated January 28, 2014 stating that you have not disclosed any material properties. Supplementally please provide the asset valuation, net profits, and total revenues for these mineral operations to verify your statement of materiality. For the purposes of this materiality determination, your mining and processing operations are defined to include extraction and all later-stage processing and refining facilities in your vertically-integrated operations up to the point of significant commercial sales.
IGC answer: In the MD&A for FYE 2013 we make the following statements:
“The revenue reported for 2013 and 2012 is from trading of ore in India and China. The Government of India has indicated that it will reopen the mines in fiscal 2013. Our plants in China were intermittently open in fiscal 2013. We opened them on a test basis, while we await permission from the Government to reopen them under the new ownership of IGC and a new mining license.”
As stated we derived no revenue and no profit from any mining activity, including beneficiation in Fiscal 2013. We had no extraction and no later-stage processing, or refining. All of our revenue, as stated in the MD&A, was from trading activity in India and China. Trading activity is based on buying refined iron ore from suppliers and selling it to steel mills or brokers.
4. Additionally, supplementally please tell us about all properties in which you have an interest and discuss the activities at each of these properties.
IGC answer: We have an interest in five acres of property in India. This land currently belongs to Sricon in which we have a minority interest. An ownership interest in part of this land is under discussion. There is no activity on this property. We have no properties on which there is any activity.
Item 1A. Risk Factors, page 8
5. We note your responses to comment 31 of our letter dated January 28, 2014. Based on your response, it appears you may not have accounting personnel with sufficient experience in maintaining your books and records and preparing financial statements in accordance with U.S. GAAP. Please provide us a draft risk factor to be included in future filings that describes the factors that impact your ability to prepare financial statements and maintain your books and records in U.S. GAAP. These factors would include, but are not limited to, the facts that your employees who have primary responsibilities of preparing and supervising the preparation of the financial statements under U.S. GAAP are located outside the U.S and do not have sufficient knowledge of and professional experience with U.S. GAAP and SEC rules and regulations. In addition, please tell us how you evaluated these factors at March 31, 2013 in concluding that both disclosure controls and procedures under Item 307 of Regulation S-K and internal control over financial reporting under Item 308 of Regulation S-K were effective. To the extent additional disclosure is required on this matter in the upcoming Form 10-K, please provide us with draft disclosures in your response.
IGC answer:
In reviewing the Staff’s comments we will include three separate Risk Factors as shown below. The first addresses the issue related to staffing, the second addresses the potential impact on our stock, and the third addresses potential delays in reporting. Please see the draft disclosures below, for Risk Factors proposed for the upcoming Form 10-K:
Risk Related to Our Securities
We do not currently have accounting personnel with sufficient experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP and SEC rules and regulations.
Our accounting personnel are located, in Hong Kong, India, China and the U.S, primarily near our businesses, and they all do not have sufficient knowledge of and professional experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP and SEC rules and regulations. This may impact our ability to prepare financial statements and maintain our books and records in accordance with U.S. GAAP, and SEC rules and regulations, which will constitute a material weakness in our internal controls over financial reporting unless rectified.
Material weaknesses in our internal controls and financial reporting, and our lack of accounting personnel with sufficient U.S. GAAP experience may limit our ability to prevent or detect financial misstatements or omissions. As a result, our financial reports may not always comply with U.S. GAAP and the Accounting Standards Codification. Any material weakness, misstatement or omission in our financial statements will negatively affect the market, and price of our stock which could result in significant loss to our investors.
As reported earlier, our CFO is on indefinite leave due to health reasons. Our current interim CFO does not have significant U.S. GAAP or SEC reporting experience. Our strategy to supplement the gap in in reporting knowledge or experience is to use the advisory services of experts, some of whom we have already hired and in the process of supplementing. Although we are actively seeking individuals with sufficient knowledge of U.S. GAAP and Accounting Standards Codification and SEC rules and regulations, qualified individuals with necessary language and geographic experience are proving to be difficult to find. Therefore, we may experience “weakness” and potential issues in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act. This “weakness” also includes a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified a weakness relating to the Company not having sufficient experienced personnel with the requisite technical skills and working knowledge of the application of U.S. GAAP, particularly with our reporting in China. Projections of any evaluation of effectiveness to future periods are also subject to the risk that controls may become inadequate because of new acquisitions, changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This may result in significant deficiencies or material weaknesses in our internal controls, which could affect the reliability of our financial statements and prevent us from complying with SEC rules and regulations. Failure to comply or adequately comply with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in achieving either the effectiveness of a registration statement or the development of an active and liquid trading market for our Common Stock. To the extent that the market place perceives that we do not have a strong financial staff and financial controls, the market for and price of our stock may be impaired.
We incur costs as a result of operating as a public company. Our management is required to devote substantial time to new compliance initiatives. Because we report in U.S. GAAP, we may experience delays in closing our books and records, and delays in the preparation of financial statements and related disclosures.
As part of a public company with substantial operations in foreign countries, we are experiencing an increase in legal, accounting and other expenses. In addition, the new rules implemented by the SEC and the NYSE MKT have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. We have completed the testing of internal controls in all our subsidiaries in India and China. We expect to take actions that include the curtailment of activity whose reporting and compliance costs exceed any present or future shareholder benefit. We also anticipate installing improved systems and processes. However, we cannot be certain as to the timing or completion of the remediation actions, or their full impact on our operations. Furthermore, it is difficult to hire personnel in India and China who have sufficient experience with U.S. GAAP and SEC rules and regulations. To compensate, we have hired several competent consultants to help review our internal reporting and disclosures, and to train our Indian and Chinese staff in SEC reporting and U.S. GAAP. We do not foresee a problem other than the time and increased cost required to hire qualified individuals, complete the training and to implement the improved processes. However, until then we may experience delays in the preparations of financial statements and related disclosures.
Please see the below additional draft disclosures for Internal Controls and Procedures proposed for the amendment to the FYE March 31, 2013 10-K and for the upcoming Form 10-K for Fiscal year ended March 31, 2014, with the corresponding anticipated dates:
Item 9A. Controls and Procedures
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and interim principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2014, management conducted an evaluation (under the supervision and with the participation of the chief executive officer and the principal accounting officer), pursuant to Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2014. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. A material weakness in internal control over financial reporting (as defined in Auditing Standard No. 5 of the Public Company Accounting Oversight Board) is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by the entity’s internal control.
On April 2, 2014, the SEC notified the Company of a potential material weakness in the internal controls due to the lack of accounting personnel with enough experience in US GAAP and SEC rules and regulations. After a review of the circumstances, the Chief Executive Officer and Principal Accounting Officer are now unable to conclude that the Company’s disclosure controls and procedures were effective as of March 31, 2014.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. However, the Company is in the process of taking steps to rectify the material weaknesses raised by the lack of accounting personnel with extensive experience with US GAAP and SEC rules and regulations. The Company’s management has heightened its diligence in addressing the Company’s disclosure controls and, throughout the period subsequent to the identification of such material weakness, management and is in the process of adding additional measures to improve and evaluate the effectiveness of its controls over financial reporting. These measures include the completion of checklists by the Company, its securities counsel and its independent auditors with respect to the accounting and reporting standards, engaging external experts of U.S. GAAP to assist in the preparation and review of financial statements. The Company has and expects to continue to provide U.S. GAAP and reporting training for our India-based accounting staff. Currently, we continue to rely on manual steps for the consolidation of our financial statements and expect to address the systems aspects in the future as part of our continued effort to eliminate errors and significantly remediate deficiencies in our internal controls over financial reporting. The Company is in the process of engaging additional consultants with the requisite experience with SEC accounting requirements to assist in the Company’s disclosure and its filings.
Limitations on the Effectiveness of Disclosure Controls and Procedures
The Company’s management, including the Company’s CEO and PAO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent l
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indiaglobal-corresp042814.htm
India Globalization Capital, Inc.
4336 Montgomery Avenue
Bethesda, Maryland 20814
Phone: 301-983-0998
Fax: 240-465-0273
April 28, 2014
VIA EDGAR
Securities and Exchange Commission
100 F. Street, N.E.
Washington, D.C. 20549
Attn: Ms. Tia Jenkins
Senior Assistant Chief Accountant
Office of Beverages, Apparel and Mining
Re:
India Globalization Capital, Inc.
Form 10-K for the Fiscal Year Ended March 31, 2013
Filed July 16, 2013
Form 8-K Filed January 31, 2014
Form 8-K Filed February 6, 2014
Response Dated March 10, 2014
File No. 001-32830
Dear Ms. Jenkins:
This is our response to the SEC Staff’s comments in your letter of April 2, 2014 to India Globalization Capital, Inc. (“IGC”) regarding the above-referenced filings.
For your convenience, we have included each of the Staff’s comments in italics before each of IGC’s responses. References in this letter to “we,” “our” or “us” mean IGC or our advisors, as the context may dictate.
Company Website
1. Please explain the differences between the disclosure in your Form 10-K for the fiscal year ended 2013 and the disclosure on your company website. In this regard we note the references on your company website to reserves and statements regarding beneficiation plant and mine ownership.
IGC answer: We have undertaken a systematic review of all public disclosures including the web site so that they are consistent with our revised disclosures as per the Staff’s comments. As of now, the website displays an “under revision” message to let our investors know we are revising the site.
Form 10-K for the Fiscal Year Ended March 31, 2013
General
2. We note your response to comment 1 of our letter dated January 28, 2014 and we partially reissue the comment. Please tell us the basis for the reserve dollar value on page F-25 of your proposed revised disclosure.
IGC answer: We left this reference to “estimated reserves [are] worth over $200 million at current prices” since this information was given by and was referring to Aohan Banner Company and not to IGC or any of IGC’s subsidiaries. Aohan is an independent mine that provided this information to us in the context of a potential acquisition. However, We agree to delete this reserve dollar value on page F-25 in its entirety.
3. We note your response to comments 4 through 7 of our letter dated January 28, 2014 stating that you have not disclosed any material properties. Supplementally please provide the asset valuation, net profits, and total revenues for these mineral operations to verify your statement of materiality. For the purposes of this materiality determination, your mining and processing operations are defined to include extraction and all later-stage processing and refining facilities in your vertically-integrated operations up to the point of significant commercial sales.
IGC answer: In the MD&A for FYE 2013 we make the following statements:
“The revenue reported for 2013 and 2012 is from trading of ore in India and China. The Government of India has indicated that it will reopen the mines in fiscal 2013. Our plants in China were intermittently open in fiscal 2013. We opened them on a test basis, while we await permission from the Government to reopen them under the new ownership of IGC and a new mining license.”
As stated we derived no revenue and no profit from any mining activity, including beneficiation in Fiscal 2013. We had no extraction and no later-stage processing, or refining. All of our revenue, as stated in the MD&A, was from trading activity in India and China. Trading activity is based on buying refined iron ore from suppliers and selling it to steel mills or brokers.
4. Additionally, supplementally please tell us about all properties in which you have an interest and discuss the activities at each of these properties.
IGC answer: We have an interest in five acres of property in India. This land currently belongs to Sricon in which we have a minority interest. An ownership interest in part of this land is under discussion. There is no activity on this property. We have no properties on which there is any activity.
Item 1A. Risk Factors, page 8
5. We note your responses to comment 31 of our letter dated January 28, 2014. Based on your response, it appears you may not have accounting personnel with sufficient experience in maintaining your books and records and preparing financial statements in accordance with U.S. GAAP. Please provide us a draft risk factor to be included in future filings that describes the factors that impact your ability to prepare financial statements and maintain your books and records in U.S. GAAP. These factors would include, but are not limited to, the facts that your employees who have primary responsibilities of preparing and supervising the preparation of the financial statements under U.S. GAAP are located outside the U.S and do not have sufficient knowledge of and professional experience with U.S. GAAP and SEC rules and regulations. In addition, please tell us how you evaluated these factors at March 31, 2013 in concluding that both disclosure controls and procedures under Item 307 of Regulation S-K and internal control over financial reporting under Item 308 of Regulation S-K were effective. To the extent additional disclosure is required on this matter in the upcoming Form 10-K, please provide us with draft disclosures in your response.
IGC answer:
In reviewing the Staff’s comments we will include three separate Risk Factors as shown below. The first addresses the issue related to staffing, the second addresses the potential impact on our stock, and the third addresses potential delays in reporting. Please see the draft disclosures below, for Risk Factors proposed for the upcoming Form 10-K:
Risk Related to Our Securities
We do not currently have accounting personnel with sufficient experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP and SEC rules and regulations.
Our accounting personnel are located, in Hong Kong, India, China and the U.S, primarily near our businesses, and they all do not have sufficient knowledge of and professional experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP and SEC rules and regulations. This may impact our ability to prepare financial statements and maintain our books and records in accordance with U.S. GAAP, and SEC rules and regulations, which will constitute a material weakness in our internal controls over financial reporting unless rectified.
Material weaknesses in our internal controls and financial reporting, and our lack of accounting personnel with sufficient U.S. GAAP experience may limit our ability to prevent or detect financial misstatements or omissions. As a result, our financial reports may not always comply with U.S. GAAP and the Accounting Standards Codification. Any material weakness, misstatement or omission in our financial statements will negatively affect the market, and price of our stock which could result in significant loss to our investors.
As reported earlier, our CFO is on indefinite leave due to health reasons. Our current interim CFO does not have significant U.S. GAAP or SEC reporting experience. Our strategy to supplement the gap in in reporting knowledge or experience is to use the advisory services of experts, some of whom we have already hired and in the process of supplementing. Although we are actively seeking individuals with sufficient knowledge of U.S. GAAP and Accounting Standards Codification and SEC rules and regulations, qualified individuals with necessary language and geographic experience are proving to be difficult to find. Therefore, we may experience “weakness” and potential issues in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act. This “weakness” also includes a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified a weakness relating to the Company not having sufficient experienced personnel with the requisite technical skills and working knowledge of the application of U.S. GAAP, particularly with our reporting in China. Projections of any evaluation of effectiveness to future periods are also subject to the risk that controls may become inadequate because of new acquisitions, changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This may result in significant deficiencies or material weaknesses in our internal controls, which could affect the reliability of our financial statements and prevent us from complying with SEC rules and regulations. Failure to comply or adequately comply with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in achieving either the effectiveness of a registration statement or the development of an active and liquid trading market for our Common Stock. To the extent that the market place perceives that we do not have a strong financial staff and financial controls, the market for and price of our stock may be impaired.
We incur costs as a result of operating as a public company. Our management is required to devote substantial time to new compliance initiatives. Because we report in U.S. GAAP, we may experience delays in closing our books and records, and delays in the preparation of financial statements and related disclosures.
As part of a public company with substantial operations in foreign countries, we are experiencing an increase in legal, accounting and other expenses. In addition, the new rules implemented by the SEC and the NYSE MKT have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. We have completed the testing of internal controls in all our subsidiaries in India and China. We expect to take actions that include the curtailment of activity whose reporting and compliance costs exceed any present or future shareholder benefit. We also anticipate installing improved systems and processes. However, we cannot be certain as to the timing or completion of the remediation actions, or their full impact on our operations. Furthermore, it is difficult to hire personnel in India and China who have sufficient experience with U.S. GAAP and SEC rules and regulations. To compensate, we have hired several competent consultants to help review our internal reporting and disclosures, and to train our Indian and Chinese staff in SEC reporting and U.S. GAAP. We do not foresee a problem other than the time and increased cost required to hire qualified individuals, complete the training and to implement the improved processes. However, until then we may experience delays in the preparations of financial statements and related disclosures.
Please see the below additional draft disclosures for Internal Controls and Procedures proposed for the amendment to the FYE March 31, 2013 10-K and for the upcoming Form 10-K for Fiscal year ended March 31, 2014, with the corresponding anticipated dates:
Item 9A. Controls and Procedures
Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and interim principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2014, management conducted an evaluation (under the supervision and with the participation of the chief executive officer and the principal accounting officer), pursuant to Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2014. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. A material weakness in internal control over financial reporting (as defined in Auditing Standard No. 5 of the Public Company Accounting Oversight Board) is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by the entity’s internal control.
On April 2, 2014, the SEC notified the Company of a potential material weakness in the internal controls due to the lack of accounting personnel with enough experience in US GAAP and SEC rules and regulations. After a review of the circumstances, the Chief Executive Officer and Principal Accounting Officer are now unable to conclude that the Company’s disclosure controls and procedures were effective as of March 31, 2014.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. However, the Company is in the process of taking steps to rectify the material weaknesses raised by the lack of accounting personnel with extensive experience with US GAAP and SEC rules and regulations. The Company’s management has heightened its diligence in addressing the Company’s disclosure controls and, throughout the period subsequent to the identification of such material weakness, management and is in the process of adding additional measures to improve and evaluate the effectiveness of its controls over financial reporting. These measures include the completion of checklists by the Company, its securities counsel and its independent auditors with respect to the accounting and reporting standards, engaging external experts of U.S. GAAP to assist in the preparation and review of financial statements. The Company has and expects to continue to provide U.S. GAAP and reporting training for our India-based accounting staff. Currently, we continue to rely on manual steps for the consolidation of our financial statements and expect to address the systems aspects in the future as part of our continued effort to eliminate errors and significantly remediate deficiencies in our internal controls over financial reporting. The Company is in the process of engaging additional consultants with the requisite experience with SEC accounting requirements to assist in the Company’s disclosure and its filings.
Limitations on the Effectiveness of Disclosure Controls and Procedures
The Company’s management, including the Company’s CEO and PAO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent l