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Directors Report of City Online Services Ltd.

Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting before you the 15th Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS:

31.03.2014 31.03.2013 Particulars Rs Rs.

I) INCOME

a) Income from operations 12,49,70,759 82,977,246

d) Other Income 14,07,767 288,641

TOTAL 12,63,78,526 83,265,887

II) EXPENDITURE

a) Operating Expenses 8,39,52,733 4,79,97,068

b) Payments & Benefits To Employees 1,10,86,013 1,24,86,364

c) Administrative Expenses 1,86,68,248 1,50,37,289

TOTAL 11,37,06,994 7,55,20,721

GROSS PROFIT 1,26,71,532 77,45,166

III) PROFIT BEFORE INTEREST AND

DEPRECIATION

Interest 12,43,256 12,26,017

IV) PROFIT BEFORE DEPRECIATION

Depreciation 34,09,074 30,01,935

V) PROFIT /(LOSS)BEFORE TAX

Prior period Expenses NIL NIL

Prior period Incomes NIL NIL

VI) PROVISION FOR TAXATION

For Current Income Tax Nil Nil

For Deferred Tax/Liability (Asset) (1,30,301) (316,685)

PROFIT / (LOSS)AFTER TAX 81,49,503 3,833,899

Basic and Diluted Earnings Per Share 1.58 0.74

PERFORMANCE:

Your company has started Digital Head end division, your company is importing components and assembling and integrating it in Hyderabad so far your company has successfully executed seven head end in Andhra Pradesh as many more orders are in pipeline, as Government of India has passed a bill in parliament for converting cable TV into digital format in our country by end of 2015, your company has geared up to meet the demand in this segment .Your company is also planning to enter into Revenue sharing with established MSO,s in small towns by using their infrastructure your company wants to give digital TV and internet to end users in one fiber using GPON technology this will ensure the company long term returns

Your company has entered into providing of triple play services in gated communities as of now your company has successfully implemented this service in nine gated communities the revenue from this sector is very encouraging , hence your company is targeting another ten complexes in this finical year i.e 10000 households.

All this factors have helped your company to increase its turnover by more than 50% compared to last year this trend will continue this year also and the Board of Directors is confident that your company will show more than 100% growth in finical year 2014-2015.

PUBLIC DEPOSITS:

The Company has not accepted any Fixed Deposits from the public and the provisions of Section 58A of the Companies Act, 1956 are not applicable to the Company

INSURANCE:

All the fixed assets and movable assets of the Company are fully insured.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

As required by Clause 49 of the Listing Agreements with Stock Exchanges, the Management discussion and Analysis Report is enclosed as a part of this report.

DIRECTORS:

Shri Ch. Harinath will retire by rotation at the ensuing annual general meeting and, being eligible, offer himself for reappointment.

Directors' responsibility statement:

The Directors' responsibility statement setting out the compliance with the accounting and financial reporting requirements specified under Section 217 (2AA) of the Companies Act, 1956, in respect of the financial statements is as follows:

(i) That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) That the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

(iii) That the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The Directors have prepared annual accounts on a Going concern basis

Auditors:

M/s. Seshachalam & Co, Chartered Accountants, Secunderabad the Company's Auditors retire at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to accept re-appointment and have further confirmed their eligibility U/s. 141 of Companies Act, 2013.

The Board of Directors in accordance with the provisions of Section 139 of the Companies Act, 2013 and their rules made thereunder recommends their appointment for a term of Five years from the conclusion of 15th Annual General Meeting to the conclusion of 20th Annual General Meeting subject to ratification every year at the Annual General Meeting for the consideration of the Shareholders.

AUDIT OBSERVATIONS:

Auditor's observations are suitably explained in notes to the Accounts and are self- explanatory.

EMPLOYEES:

The particulars of employees whose details need to be provided under section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 not applicable to the company.

Your directors also place on record their deep sense of appreciation of the services of the staff and workers of the Company, who have contributed for the administration of the Company's affairs.

Code of Conduct:

The Code of Conduct has been circulated to all the members of the Board and Senior Management and the compliance of the same has been affirmed by them. Code of Conduct has also been placed on the website of the Company. A declaration signed by the Managing Director is given in Annexure.

CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION:

Your Company has taken adequate steps to adhere to all the stipulations laid down in Clause 49 of the Listing Agreement. A report on Corporate Governance is included as a part of this Annual Report.

Certificate from the Practicing Company Secretary, M/s. VCSR & Associates, Company Secretaries confirming the compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report.

Additional Information:

Information as per Section 217(l)(e) read with Companies (Disclosure of particulars in the report of Board Of Directors) Rules, 1988 and forming part of report for the year ended March 31, 2014.

Conservation of Energy, Technology absorption and Foreign Exchange earnings and Outgo: -

A a) Conservation of energy measures taken : Not Applicable

b) Additional investments and proposals, if Not Applicable any being implemented for the reduction of consumption of energy

c) Impact of measures at (a) and (b) Not Applicable P above for reduction of energy consumption and consequent impact on the cost of production of goods

B Research & Development and Technology: The Company has not setup separate Absorption R&D department. However our technical people who run the day-to-day operations of the Company are doing R&D work in the fields of Wireless connectivity and Optic Fiber Technology. No extra costs involved for the purpose of R&D.

Personnel:

The company has maintained cordial relations with the employees during the year under review. The Company has been restructuring the human resources according to the business Requirements of the Company.

Acknowledgement:

Your Directors take this opportunity to place on record their appreciation and gratitude for the cooperation, assistance, guidance and support extended by the Company's Bankers, Shareholders, customers and various Central and State Government Agencies and Local Authorities, Personnel at various levels of the organization.

By order of the Board

Sd/-

Place : Hyderabad S. Raghava Rao

Dated : 01.09.2014 Chairman and Managing Director


Mar 31, 2013

Dear Members,

The Directors have pleasure in presenting the Company's FOURTEENTH DIRECTORS' REPORT together with the Audited Accounts of the Company for the Year ended March 31 2013 and the Auditor's Report thereon

FINANCIAL RESULTS:

31.03.2013 31.03.2012 Rs Rs Particular

I) INCOME

a) Income from operations 82,977,246 54,467,583

d) Other Income 288,641 14,33,769

TOTAL 83,265,887 55,901,352

II) EXPENDITURE

a) Operating Expenses 48,001,349 30,549,289

b) Payments & Benefits To Employees 12,486,364 8,476,614,

c) Administrative Expenses 15,238,318 11,260,151

d) Selling Marketing Expenses - -

TOTAL 75,726,031 50,286,054

III) PROFIT BEFORE INTEREST AND DEPRECIATION

Interest 1,02,0706 1,031,227

IV) PROFIT BEFORE DEPRECIATION

Depreciation 3,001,935 2,653,449

V) PROFIT /(LOSS)BEFORE TAX

Prior period Expenses - -

Prior period Incomes - -

VI) PROVISION FOR TAXATION

For Current Income Tax Nil Nil

For Deferred Tax/Liability (Asset) (316,686) 105,869

For Fringe Benefit Tax PROFIT / (LOSS) AFTER TAX 3,833,899 2,036,491

Basic and Diluted Earnings Per Share 0.74 0.39

Review and Prospects:

The year 2012-13 has been a promising year for your Company. Although the Indian market for Internet revived and there is a considerable increase in demand for higher bandwidth as the prices of raw bandwidth has come down by more than 200 percent. This demand is not only in corporate sector but also in education and broadband. In rural areas also the demand for broadband connections is increasing hence your Company has entered rural market by opening around 50 ISP nodes in all the districts of Andhra Pradesh by March 2013 and in Karnataka about 25 nodes. As of now your Company Under the leadership of your MD, your company is sending video stream for providing IPTV services in USA and other countries. The coming finical year promises to be a good years for your Company and the management is confident of showing better result.

Your company has also started Digital Head end division, your company is importing components and assembling and integrating it in Hyderabad so far your company has successfully executed seven head end in Andhra Pradesh as many more orders are in pipeline, as Government of India has passed a bill in parliament for converting cable TV into digital format in our country by end of 2014, your company has geared up to meet the demand in this segment

Your company has entered into providing of triple play services in gated communities as of now your company has successfully implemented this service in nine gated communities the revenue from this sector is very encouraging , hence your company is targeting another ten complexes in this finical year i.e 10000 households.

All this factors have helped your company to increase its turnover by more than 50% compared to last year this trend will continue this year also and the Board of Directors is confident that your company will show more than 100% growth in finical year 2013-2014.

Public Deposits:

The Company has not accepted any Fixed Deposits from the public and the provisions of Section 58A of the Companies Act, 1956 are not applicable to the Company

Directors:

Mr. R. Krishna Mohan and Mr. M. Nageswara Rao retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

Director's responsibility statement:

The Directors' responsibility statement setting out the compliance with the accounting and financial reporting requirements specified under Section 217 (2AA) of the Companies Act, 1956, in respect of the financial statements is as follows:

(i) That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) That the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

(iii) That the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The Directors have prepared annual accounts on a Going concern basis

AUDITORS:

The Statutory Auditors of the Company, M/s. Seshachalam & Co, Chartered Accountants, Secunderabad retire at the conclusion of the ensuing Annual General Meeting offer themselves for re-appointment till the conclusion of the next Annual General Meeting.

The Company has received letter from them to the effect that their appointment if made would be within the prescribed limits under Section 224 (1-B) of the Companies Act, 1956.

Reply to Auditors Observations, if any:

In respect of note 5 (b) in Annexure to Auditors' Report on Statutory Dues of Income Tax have been paid in due course and those of the Service Tax shall be paid subject to the realization of the same from the Customers.

Code of Conduct:

The Code of Conduct has been circulated to all the members of the Board and Senior Management and the compliance of the same has been affirmed by them. Code of Conduct has also been placed on the website of the Company. A declaration signed by the Managing Director is given in Annexure 1.

Corporate Governance:

The Company is taking necessary steps to comply with the provisions of Clause 49 of the Listing Agreement with the Bangalore Stock Exchange Limited

Particulars of Employees:

In pursuance of the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of employees) Rules 1975, there is no employee who receives remuneration in excess of limits mentioned under the Companies Act, 1956.

During the year under review, the Company maintained the cordial relations with the Employees.

Additional Information:

Information as per Section 217(l)(e) read with Companies (Disclosure of particulars in the report of Board Of Directors) Rules, 1988 and forming part of report for the year ended March 31, 2013. Conservation of Energy, Technology absorption and Foreign Exchange earnings and Outgo:

A a) Conservation of energy measures : The Company uses electric energy for taken its equipment such as air conditioners, computer terminals, lighting and utilities in the work premises. All possible measures have been taken to conserve energy by incorporating energy-efficient equipment.

b) Additional investments and proposals, There was no additional investments if any being implemented for the and proposals for reduction of reduction of consumption of energy consumption of energy

c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods B Research & Development and Technology : The Company has not setup separate Absorption R&D department. However our technical people who run the day-to- day operations of the Company are doing R&D work in the fields of Wireless connectivity and Optic Fiber Technology. No extra costs involved for the purpose of R & D.

Foreign Exchange Earnings & outgo

2012-13 2011-12

a) Earnings on account of rendering Rs.70,592 Rs. 5,74,809 services

b) Used - :

i) For Foreign Travel is : Nil Nil

ii) On account of Hardware : Rs.56,78,757 Rs.16,14,722

Purchase/VOIP Services

Acknowledgements:

Your Directors wish to place on record their appreciation for the dedication, competence hard work, co-operation and support extended by our young, dynamic and highly motivated employees of the Company who have enabled the Company to achieve a robust growth during the year.

Your Directors would like to express their sincere thanks to all the Shareholders who have reposed faith in the Company.

Your Directors specially thank the Central Government, State Governments, Department of Telecommunications and Company's Bankers for their continuous support to the Company during the year and look forward to receive their continued support in all future endeavors.

By order of the Board

Sd/-

Place : Hyderabad S.Raghava Rao

Dated : 14.08.2013 Chairman and Managing Director

 
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