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Notes to Accounts of Moschip Semiconductor Technology Ltd.

Mar 31, 2016

The Company reports basic and diluted earnings per equity share in accordance with AS-20, “Earnings per Share”.

Basic earnings per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

The Company recognizes design services as its only primary segment since its operations during the year consists of Services in application specific integrated circuits (ASICs), System on Chip (SOC) and Software technology services. Accordingly revenues from services comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognized in the profit and loss account and the funded status and amounts recognized in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the company''s plan are as follows:

Discount Rate - 8.00%

Expected rate of return on assets - 7.50%

The fund is administered by Life Insurance Corporation of India (“LIC”). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2016 is Rs. 2,076,603.

1 Prior Period Item

Prior Period Item consists of Interest on late payment of TDS for the previous financial years and interest charged by Bank on overdue loan of Export Packing Credit from 2013.

2. Provision for Doubtful Debts

Amount realizable from Moschip, USA has to be received only out of sale proceeds of Inventory lying with the Wholly Owned Subsidiary. In view of the fact that Moschip, USA has written down the value of Inventory by Rs.4.00 Crores, the realizable value of the debt also had to be adjusted accordingly. Hence a provision of Rs.4.00 Crores has been made towards doubtful debts.

3. Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

4. Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.

Per and subject to our report of even date


Mar 31, 2015

1.1 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. The operations of the STPI Unit have resulted in a net loss for the year ended 31 March 2015. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard – 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

1.2 Reduction in Share Capital (Scheme of Capital Reduction)

During the year the Company has proposed for Scheme of Capital Reduction. Under this Scheme the Company reduced Face Value of its equity shares from 10/- to Rs.2/- per share. After the reduction, the paid up share capital stands at Rs. 92,071,034/- divided into 46,035,517 equity shares of Rs.2/- each fully paid up. The reduction in share capital amounting to Rs 368,284,136/- and the balance standing in the share premium account of Rs 666,633,920/- has been used to set off accumulated losses to the extent of Rs 1,034,918,056.

The Company has received necessary approval from High Court of Judicature at Hyderabad for the State of Telangana and for the State of Andhra Pradesh on 09 January 2015. The Company filed the form INC-28 with ROC and received necessary approvals.

1.3 Short Term Borrowings During the period the Company has obtained further unsecured loans from Directors an amount of Rs.4.30 crores and the outstanding as on 31.03.2015 is Rs. 14.60 crores at varying interest rates payable. The provision for the same has been made in these accounts in the financial year ending 31st March 2015.

1.4 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes i.c, Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.5 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.6 Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.7 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the company''s plan are as follows:

Discount Rate - 7.90%

Expected rate of return on assets – 7.50%

The fund is administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2015 is Rs. 1,555,451.

1.8 Retained Earnings

Pursuant to the Companies Act, 2013 effective from April 1, 2014, the Company has recomputed the depreciation based on the useful life of the assets as prescribed in Schedule II of the Act. As a result an amount of Rs. 135.63 lakhs has been adjusted against opening balance of retained earnings for the assets which had no residual life as at April 1, 2014.

1.9 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.10 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2014

Overview

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in providing customized application specific integrated circuits (ASICs), System on Chip (SOC) and Software technology services to its clients across the globe. MosChip has its headquarters in Hyderabad, India

1.1.1 Contingent Liabilities:

(Amount in Rupees) As at 31 March Particulars 2014 2013

Estimated amount of unexecuted capital contracts not provided Nil Nil

Outstanding Bank Guarantee given by bankers 9,844,364 9,075,000

Outstanding Bank Guarantee on account of Bond executed by the Company to Government of India towards execution of Govt. contract 90,514,145 90,514,145

Outstanding amount payable to JI Corporate Consulting (P) Ltd. towards professional fee for Scheme of Capital Reduction 7,30,000 Nil

1.1.2 Accounting for taxes on income During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2014. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard - 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

1.1.3 Short Term Borrowings

During the period the Company has obtained further unsecured loans from a Director of an amount Rs.4.91 crores and the outstanding as on 31.03.2014 is Rs. 10.30 crores at varying interest rates payable. The provision for the same has been made in these accounts in the financial year ending 31st March 2014.

1.1.4 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes i.c, Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.1.5 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.1.6 Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/ license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.1.7 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the company''s plan are as follows:

Discount Rate - 9.30%

Expected rate of return on assets - 7.50%

The fund is administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2014 is Rs. 2,309,034.

1.1.8 Investments

During the year, Moschip Semiconductor Technology Ltd., has written off its investment of Rs.2,282,953 in its wholly owned subsidiary MosChip Semiconductor Technology Pte. Ltd., Singapore, owing to the latter closing down its business operations, which has resulted in a net loss of Rs.1,604,750.

1.1.9 Extraordinary Items

The extraordinary item represents the diminution in value of Rs.8,612,901 in the carrying cost of investment in MosChip USA which is 100% subsidiary of MosChip India. This diminution loss was due to changes in underlying business conditions of MosChip USA.

1.1.10 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.1.11 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2013

Company overview

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in providing customized application specific integrated circuits (ASICs), System on Chip (SOC) and Software technology services to its clients across the globe. MosChip has its headquarters in Hyderabad, India

1.1.1 Contingent Liabilities:

(Amount in Rupees) As at 31 March

Particulars 2013 2012

Estimated amount of unexecuted capital contracts not provided Nil Nil

Outstanding Bank Guarantee given by bankers 9,075,000 585,301

Outstanding Bank Guarantee on account of Bond executed by the Company to Government of India towards execution of Govt. contract 90,514,145 5,500,000

1.1.2 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2013. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard – 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

1.1.3 Short Term Borrowings

During the period the Company has obtained unsecured loans from a Director of an amount Rs.6.63 crores and the outstanding as on 31.03.2013 is Rs. 5.87 crores at varying interest rates payable. The provision for the same has been made in these accounts in the financial year ending 31st March 2013.

1.1.4 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period. The Company has established nine schemes i.c, Employee Stock Option Plan,

MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.1.5 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.1.6 Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/ license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.1.7 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

1.1.8 Extraordinary Items

The extraordinary item consists of diminution in value of Rs. 62,361,897 in the carrying cost of investment in MosChip USA which is 100% subsidiary of MosChip India. This diminution loss was due to changes in underlying business conditions of MosChip USA. The charge on account of diminution has been determined on the basis of the MosChip USA''s Net Worth as on 31.03.2013.

1.1.9 Investments

During the year Moschip Semiconductor Technology Limited has further invested in its 100% wholly owned Subsidiary in Singapore named Moschip Semiconductor Technology PTE Limited an amount of Rs.974,584 (SGD 22,500).

1.1.10 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.1.11 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2012

Company overview

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in the business of developing application specific integrated circuits (ASICs) and System on Chip (SOC) technologies. The Company also sale application specific integrated circuits (ASICs). The Company specializes in the areas of computer peripherals, data communications and consumer electronics. The development/design process is carried out at its design centre located in Hyderabad. The Company also provides Software Services to its clients across the globe. MosChip has its headquarters in Hyderabad, India

1.1.1 Contingent Liabilities:

(Amount in Rupees)

As at 31 March Particulars 2012 2011

Estimated amount of unexecuted capital contracts not provided Nil Nil

Outstanding Bank Guarantee given by bankers 585,301 585,301

Outstanding Bank Guarantee on account of Bond executed by the Company to Government of India towards exemption of customs duty 5,500,000 8,025,000

1.1.2 Forfeited Share Warrants

In FY 2009-10 the company allotted 250,000 convertible warrants at a price of Rs.12.50 each and received 25% as upfront payment of Rs. 781,250. Due to non payment of the balance amount within the stipulated time, the aforesaid 250,000 warrants stood lapsed and upfront payment received against these warrants was forfeited and credited to Capital Reserve Account.

1.1.3 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2012. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard - 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

1.1.4 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes i.c, Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.1.5 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.1.6 Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/ license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.1.7 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the company''s plan are as follows:

Discount Rate - 8.65%

Expected rate of return on assets - 7.50%

The fund is administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2012 is Rs.1,377,651.

1.1.8 Extraordinary Items

The extraordinary Item consists of diminution in value of Rs. 303,647,300 in the carrying cost of investment in MosChip USA which is 100% subsidiary of MosChip India This diminution loss was due to changes in underlying business conditions of MosChip USA. The charge on account of diminution has been determined on the basis of the MosChip USA''s Net Worth as on 31st March 2012.

1.1.9 Discontinuing Operations

Revenue on discontinuing operation consist of Rs.45,070,000 towards sale of MosChip India''s I/O division Intellectual Property Rights.

1.1.10 Investments

During the year MosChip Semiconductor Technology Limited has incorporated a 100% wholly owned Subsidiary in Singapore named MosChip Semiconductor Technology PTE Limited with an initial investment of Rs.39 (One Singapore Dollar) and further Invested an amount of Rs. 13,08,330 (SGD 32,500) for which allotment is pending at the end of the financial year 31st March 2012.

Company has eroded the value of investment in wholly owned subsidiary MosChip Semiconductor Technology, USA in view of significant accumulated losses incurred by the Subsidiary & in the absence of certainty of recovery of such Losses in visible time, the Company has written off its investment to the extent of Rs.303,647,300.

1.1.11 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.1.13 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2011

Company overview

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in the business of developing application specific integrated circuits (ASICs) and System on Chip (SOC) technologies. The Company also sale application specific integrated circuits (ASICs). The Company specializes in the areas of computer peripherals, data communications and consumer electronics. The development/design process is carried out at its design centre located in Hyderabad. The Company also provides Software Services to its clients across the globe.

MosChip has its headquarters in Hyderabad, India with a branch office in Santa Clara, CA, USA.

14.2.1 Contingent Liabilities:

(Amount in Rupees)

As at 31 March Particulars 2011 2010

Estimated amount of unexecuted capital contracts not provided Nil Nil

Outstanding Bank Guarantee given by bankers 585,301 907,433

Outstanding Bank Guarantee on account of Bond executed by the Company to Government of India towards exemption of customs duty 8,025,000 8,025,000

14.2.2 Secured Loans

Export Packing Credit facility obtained from UCO Bank is secured by hypothecation by way of first charge on stocks of finished goods, raw materials, work in progress, stores and spares and book debts, and second charge in respect of other movable assets, and guaranteed by Chairman and Managing Director.

14.2.3 Unsecured Loans

The Company has obtained unsecured loan from director of an amount of Rs. 1.60 Crores at the rate of 12% interest payable. The provision for the same has been made in these accounts in the financial year ending 31st March 2011.

Similarly the company has also obtained interest bearing Inter Corporate Deposit of Rs. 1 Crore at the rate of 10% interest. The provision for the same has been made in these accounts in the financial year ending 31st March 2011.

The interest and other terms and conditions are not prejudicial to the interest of the company

14.2.4 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2011. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard – 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

14.2.5 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes i.c, Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

14.2.6 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

14.2.10 Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/ license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

14.2.12 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the company''s plan are as follows:

Discount Rate - 8.30%

Expected rate of return on assets – 7.50%

The fund is administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2011 is Rs. 1,142,895.

14.2.13 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

14.2.14 Quantitative Details

During the year the Company is engaged in computer software development and selling of ASICs (Semiconductor Chips). The production and sale of software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details computer software development sales. The following statement shows the quantitative details of ASIC''s as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.

14.2.15 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2010

1. Company overview

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in the business of developing application specific integrated circuits (ASICs) and System on Chip (SOC) technologies. The Company also sale application specific integrated circuits (ASICs). The Company specializes in the areas of computer peripherals, data communications and consumer electronics. The development/design process is carried out at its design centre located in Hyderabad.

MosChip has its headquarters in Hyderabad, India with a branch office in Santa Clara, CA, USA.

1.2.1 Contingent Liabilities:

(Amount in Rupees)

As at 31 March

Particulars

2010 2009

Estimated amount of

unexecuted capital

contracts not provided Nil Nil

Outstanding Bank

Guarantee given by

Bankers 907,433 889,185

Outstanding Bank

Guarantee

on account of

Bond executed

by the Company to

Government of India

towards exemption of

customs duty 2,525,000 2,525,000

1.2.2 Share Capital

The Company has allotted 2,650,000 equity shares of Rs.10 each at a price of Rs.12.50 per share (including premium of Rs.2.50) to the subscribers on a preferential basis during the financial year, raising an amount of Rs.33,125,000/-.

Convertible warrants

During the year under review, the Company has issued 250,000 convertible warrants at a price of Rs.12.50 each. The said warrants represent a right to acquire, but not exceeding, 250,000 equity shares of Rs.10 each at the price of Rs.12.50 (including premium) per share. The warrants can be exercised within a period of 18 months from the date of issue of such warrants. The warrants were issued for an upfront consideration of Rs.781,250. Non-exercise of warrants within 18 months from the date of issue will result in forfeiture of upfront consideration.

1.2.3 Secured Loans

Export Packing Credit facility obtained from UCO Bank is secured by hypothecation by way of first charge on stocks of finished goods, raw materials, work in progress, stores and spares and book debts, and second charge in respect of other movable assets, and guaranteed by Chairman and Managing Director.

1.2.4 Unsecured Loans

The Company has obtained unsecured loan from director of an amount of Rs. 1 Crore at the rate of 10% interest payable. The provision for the same has been made in these accounts in the financial year ending 31st March 2010. The due date for the loan repayment is on or before 03rd September 2010.

Similarly the company has also obtained interest bearing Inter Corporate Deposit of Rs. 1 Crore at the rate of 10% interest. The provision for the same has been made in these accounts in the financial year ending 31st March 2010. Due date for the repayment of loan is on or before 06th September 2010.

The interest and other terms and conditions are not prejudicial to the interest of the company

1.2.5 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2010. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard – 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

1.2.6 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.2.7 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share".

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.2.8. Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.2.9 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table summarizes the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the respective plans:

The principal assumptions used in determining gratuity and other post employment benefit obligations for the companys plan are as follows:

Discount Rate - 8.30%

Expected rate of return on assets - 7.50%

The fund is administered by Life Insurance Corporation of India ("LIC"). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2010 is Rs. 1,392,309.

1.2.10 Utilization of Preferential Issue Proceeds

The following statement shows the total funds raised through issue of Preferential Issue, the amounts utilized up to 31 March 2010 and the balance available as on that date:

1.2.11 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.2.11 Quantitative Details

During the year the Company is engaged in computer software development and selling of ASICs (Semiconductor Chips). The production and sale of software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details computer software development sales. The following statement shows the quantitative details of ASICs as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.

1.2.12 Regrouping/ Reclassification

The figures for previous year have been regrouped reclassified wherever necessary.


Mar 31, 2009

1. Company overview

MosChip Semiconductor Technology Limited (“MosChip” or “the Company”) is a fabless semiconductor company engaged in the business of developing application specific integrated circuits (ASICs) and System on Chip (SOC) technologies. The Company

specializes in the areas of computer peripherals, data communications and consumer electronics The development/ design process is carried out at its design centre located in Hyderabad.

MosChip has its headquarters in Hyderabad, India with a branch office in Santa Clara, CA, USA.

1.1.1 Contingent Liabilities:

(Amount in Rupees) As at 31 March Particulars 2009 2008

Estimated amount of unexecuted capital Nil Nil ontracts not provided

Outstanding Bank Guarantee given by Bankers 889,185 889,185

Outstanding Bank Guarantee on account of Bond executed by the Company to Government of India 2,525,000 2,525,000 towards exemption of customs duty

1.1.2 Working Capital Borrowing from Bank

The Company has availed a working capital loan from UCO Bank during the financial year. This borrowing is secured by hypothecation by way of first charge on stocks of finished goods, raw materials, work in progress, stores and spares and book debts, and second charge in respect of other movable assets, and guaranteed by Chairman and Managing Director.

1.1.3 Forfeited Share Warrants

In FY 2006-07 the company allotted 15,00,000 convertible warrants at the price of Rs.31 each and received 10% as upfront payment of Rs.46,50,000. Due to non payment of the balance amount within the stipulated time, the aforesaid 15,00,000 warrants stood lapsed and upfront payment received against these warrants was forfeited and credited to Capital Reserve Account.

1.1.4 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2009. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard – 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

Fringe Benefits Tax (FBT) payable under the provisions of section 115WC of the Income-tax Act, 1961 is in accordance with the Guidance Note on Accounting for Fringe Benefits Tax issued by the ICAI regarded as an additional income tax and considered in determination of the profits/(losses) for the year.

1.1.5 Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established nine schemes Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (MI), MosChip Stock Option Plan 2005 (WOS), MosChip Stock Option Plan 2008, MosChip Stock Option Plan 2008(ALR) and MosChip Stock Option Plan 2008(Director) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares, 500,000 equity shares, 3,000,000 equity shares, 1,000,000 equity shares and 1,000,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

1.1.6 Earnings per Share

The Company reports basic and diluted earnings per equity share in accordance with AS-20, “Earnings per Share”.

Basic earning per equity share has been computed by dividing net loss after tax by the weighted average number of equity shares outstanding during the applicable periods. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. The reconciliation between basic and diluted earnings per equity share is as follows:

1.1.7. Segment Reporting

The Company recognizes ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

1.1.8 Gratuity Plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The principal assumptions used in determining gratuity and other post employment benefit obligations for the companys plan are as follows:

Discount Rate - 7.95%

Expected rate of return on assets – 7.50%

The fund is administered by Life Insurance Corporation of India (“LIC”). The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Above figures have been adopted as per actuarial valuation done by Thanawala Consultancy Services.

The defined benefit obligation of compensated absence (leave encashment) in respect of the employees of the company as at 31st March 2009 is Rs. 1, 787, 053.

1.1.9 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act 2006, (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertakings and micro, small & medium enterprises which are outstanding for more than 30 days or 45 days respectively at the Balance Sheet date. This information has been determined to the extent such parties have been identified on the basis of information available with the company.

1.1.10 Quantitative Details

During the year the Company is engaged in computer software development and selling of ASICs (Semiconductor Chips). The production and sale of software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details computer software development sales. The following statement shows the quantitative details of ASICs as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.

1.1.11 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2008

13. 2.1 Contingent Liabilities: (Amount in Rupees)

As at 31 March

Particulars 2008 2007

Estimated amount Nil 44,092 unexecuted on capital contracts not provided

Outstanding Bank 889,185 712,761

Guarantee given by bankers Outstanding Bank Guarantee 2,525,000 2,525,000 on account of Bond executed

by the Company to

Government of India towards exemption of customs duty

13. 2.2 Share Capital

During the year under review, the Company has allotted 2,000 equity shares of Rs. 10/- each at a price of Rs. 26,75/- per share to the employees upon exercise of Stock Options

13. 2.3 Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2008. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard - 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

Fringe Benefits Tax (FBT) payable under the provisions of section 115WC of the Income-tax Act, 1961 is in accordance with the Guidance Note on Accounting for Fringe Benefits Tax issued by the ICAI regarded as an additional income tax and considered in determination of the profits/(losses) for the year.

13. 2.4 Extraordinary Item

During the year, Company has received the final payment of Rs. 50.05 lakhs from Insurance Company against the replacement cost of assets that were destroyed in fire on 5 November 2006. The Company has accordingly recognized the extraordinary income of Rs. 38.51 lakhs that is over and above the written down value of destroyed assets and customs duty liability on account of debonding the destroyed assets. The Company has disclosed the amount as an Extraorindary item" in the profit and loss account.

13. 2.5 Exceptional Item

During the year, Company has undertaken physical verification of all fixed assets in line with the requirements of AS-28 on Impairment of Assets. Based on verification fixed assets having Gross Block value of Rs. 9,451,272/- and Accumulated Depreciation of Rs. 6,986,158/- were retired from active use as no further benefit was expected. Therefore, these fixed assets were discarded on 31 December 2007. On discarding, Rs. 2,465,114/- was debited to "Fixed Assets Discarded" account. The amount being material in nature has been disclosed under Exceptional Item for the year under review.

13. 2.6 Dues to Micro and Small Enterprises (SME):

In terms of Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 (SME Act) the outstanding payable to Micro and Small enterprises, as defined under the SME Act, are required to be disclosed in the prescribed format. However, such Enterprises are required to be registered under the SME Act.

There are no dues to any small scale industrial undertaking and micro, small & medium enterprises which are outstanding for more than 30 days of 45 days respectively at the Balance Sheet date. This information has been determined to the extend such parties have been identified on the basis of information available with the company.

13. 2.7 Quantitative Details

The Company is engaged in the development of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required under Paragraphs 3 and 4C of Part 11 of Schedule VI of the Companies Act, 1956.

13. 2.8 Regrouping/ Reclassification

The figures for previous year have been regrouped / reclassified wherever necessary.


Mar 31, 2007

1. Description of Business

MosChip Semiconductor Technology Limited ("MosChip" or "the Company") is a fabless semiconductor company engaged in the business of developing application specific integrated circuits (ASICs) specializing in the areas of computer peripherals, data communications and consumer electronics The development/design process is carried out at its design centre located in Hyderabad.

MosChip has its headquarters in Hyderabad, India with a Branch Office in Santa Clara, CA, USA.

2. Contingent Liabilities:

i. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for: Rs. 44,092/-(as at 31 March 2006 Rs. 11,250/-).

ii. On account of Bank Guarantee given by bankers: Rs. 712,760/- (as at 31 March 2006 Rs. 618.040/-)

iii. On account of Bond executed by the Company to Government of India towards exemption of customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment: Rs. 2,525,000/- (as at 31 March 2006 Rs. 2,525,000/-)

3. Convertible Warrants

During the year under review, the Company has allotted 1,500,000 convertible warrants at a price of Rs.31 each. The said warrants represent a right to acquire 1,500,000 equity shares of Rs.10 each at a price of Rs.31 per share. The warrants can be exercised at any time on or before 28 June 2008. The warrants were issued for an upfront consideration of Rs. 4,650,000. Non-exercise of warrants on or before 28 June 2008 will result in forfeiture of upfront consideration,

4. Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the STPI Unit and overseas branch have resulted in a net loss for the year ended 31 March 2007. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard - 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

Fringe Benefits Tax (FBT) payable under the provisions of section 115WC of the Income-tax Act, 1961 is in accordance with the Guidance Note on Accounting for Fringe Benefits Tax issued by the ICAI regarded as an additional income tax and considered in determination of the profits/(losses) for the year.

5. Extraordinary and Prior Period Item

a. Due to a fire which occurred in part of the premises of the Company on 5 November 2006, certain fixed assets were destroyed. The Company has received an interim payment of Rs.80 lakhs (Insurance Policy on Replacement Cost basis) from Insurance Company against the replacement cost of assets that were destroyed. The Company has accordingly recognized the extraordinary income of Rs. 18.21 lakhs that is over and above the written down value of destroyed assets and customs duty liability on account of debonding the destroyed assets. The Company has disclosed the amount as an "Extraordinary item in the profit and loss account.

b. Extraordinary and Prior Period item includes Rs. 22.33 lakhs on account of write back of excess depreciation provision on Computer Software pertaining to financial year 2005-2006.

6. Fixed Assets discarded

Computer Software having Gross Block of Rs. 12,755,325/- and Accumulated Depreciation of Rs. 12,577,986/- as on 3t.03.2007, were retired from active use as no further benefit was expected. Therefore, these were discarded at the end of the year. On discarding, Rs. 177,339/- was debited to "Loss on Fixed Assets Sold/Discarded" account.

7. Quantitative Details

The Company is engaged in the development of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.


Mar 31, 2006

1. Contingent Liabilities:

(i) Estimated amount of Contracts remaining to be executed on Capital Account and not provided for : Rs. 11,250/- (as at 31 March 2005 Rs. 156,338/-).

(ii) On account of Bank Guarantee given by bankers : Rs.618,040/- (as at 31 March 2005 Rs.601,250/-)

(iii) On account of Bond executed by the Company to Government of India towards exemption of customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment: Rs. 2,525,000/- (as at 31 March 2005 Rs. 2,525,000/-)

2. Share Capital

Increase in Share. Capital for the Year is on account of the following allotments:

Particulars No. of Shares Price Per Share

On exercise of Employee Stock Options 38,326 26.75

On exercise of Employee Stock Options 3,000 30.50

On exercise of Employee Stock Options 76,125 31.00

On exercise of Employee Stock Options 100,050 33.00

In lieu of shares underlying GDRs 9,107,454 34.95

On exercise of Employee Stock Options 1,000 40.50

On exercise of Employee Stock Options 1,000 42.85

Total 9,326,955

3. Accounting for taxes on income

During the period under review, the Company carried its operations in India through its 100% Export Oriented Unit, registered with the Software Technology Parks of India (STPI), Hyderabad. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the STPI Unit and overseas branch have resulted in a net toss for the year ended 31 March 2006. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard-22 on Accounting For Taxes on Income, issued by the Institute of Chartered Accountants of India.

4. Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortized on a straight-line basis over the vesting period.

The Company has established six schemes Employee Stock Option Plan, MosChip Stock Option Plan 2001, MosChip Stock Option Plan 2002, MosChip Stock Option Plan 2004, MosChip Stock Option Plan 2005 (Ml) and MosChip Stock Option Plan 2005 (WOS) with 600,000 equity shares, 300,000 equity shares, 700,000 equity shares, 1,000,000 equity shares, 500,000 equity shares and 500,000 equity shares respectively. Of these the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

Stock Options Outstanding under the Employee Stock Option Plan

Particulars Year ended Year ended 31 March 2006 31 March 2005

Options outstanding at the beginning of the year 310,840 246,620

Granted during the year 4,000 208,000

Forfeited during the year 77,500 77,970

Exercised during the year 74,840 65,810

Outstanding at the end of the year 162,500 310,840

Stock Options Outstanding under the MosChip Stock Option Plan 2001

Particulars Year ended Year ended 31 March 2006 31 March 2005

Options outstanding at the beginning of the year 287,000 273,000

Granted during the year 40,000 66,000

Forfeited during the year 53,000 41,000

Exercised during the year 108,375 11,000

Outstanding at the end of the year 165,625 287,000

Stock Options Outstanding under the MosChip Stock Option Plan 2002

Particulars Year ended Year ended 31 March 2006 31 March 2005

Options outstanding at the beginning of the year 556,029 688,300

Granted during the year 14,000 148,000

Forfeited during the year 62,074 239,587

Exercised during the year 108,376 40,684

Outstanding at the end of the year 399,579 556,029

Stock Options Outstanding under the MosChip Stock Option Plan 2004

Particulars Year ended Year ended 31 March 2006 31 March 2005

Options outstanding at the beginning of the year 75,000 Nil

Granted during the year 723,000 75,000

Forfeited during the year 72,000 Nil

Exercised during the year 1,000 Nil

Outstanding at the end of the year 725,000 75,000

As on the balance sheet date no options have been granted to any of the employees of the Company or its Wholly owned subsidiary under MosChip Stock Option Plan 2005 (Ml) and MosChip Stock Option Plan 2005 (WOS).

5. Earnings Per Share

The basic earnings per share has been computed using the weighted average number of equity shares outstanding during the applicable periods.

Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. Potential equity shares include equity shares that can be issued against the share application money received during the year.

(Amounts in Rupees) Particulars Year ended Year ended 31 March 2006 31 March 2005

BASIC EARNINGS/(LOSS) PER SHARE Net ProfiV(Loss) for the period (65,615,961) (97,024,496)

Weighted average number of equity shares 42,569,215 32,916,612

Basic Eamings/(Loss) per equity share (1.54) (2.95)

DILUTED EARNINGS/(LOSS) PER SHARE

Net Profit/(Loss) for the year (65,615,961) (97,024,496)

Adjustments Nil Nil

Diluted Net ProfiV(Loss) for the period (65,615,961) (97,024,496)

Weighted average number of equity shares 42,569,215 32,916,612

Potential weighted average number of equity shares applicable to share application money 490 136 Weighted average number of diluted equity shares 42,569,705 32,916,748

Diluted eamings/(loss) per share (1.54) (2.95)

6. Directors Remuneration;

(Amounts in Rupees) Particulars Year ended Year ended 31 March 2006 31 March 2005

1. Salary and allowances 5,332,064 3,858,000

2. No Provision for Commission, to Whole Time Directors has been made in the books, as there is no profit in accordance with Section 198 of the Companies Act, 1956.

7. Related Party Transactions

The. Company entered into related party transactions during the period with its wholly owned subsidiary, MosChip Semiconductor Technology, USA. The transactions with subsidiary include investment in equity shares, purchase of capital equipments, consumables, reimbursement of expenses, loans given to meet the working capital requirements and interest receivable on such loans. The key management personnel are:

Name of Personnel Designation

Whole-time Directors

K. Ramachandra Reddy Chairman & CEO

C. Dayakar Reddy Managing Director

Key Management Personnel

Vivek Bhargava Chief Financial Officer

The transactions with the related parties, are summarized below:

(Amounts in Rupees) Nature of Transactions Transactions Balance as on during the year 31 March 2006

Transactions with Subsidiary Purchases of Fixed Assets/Payable 2,401,655 72,800

Reimbursement of expenses/Payable 986,615 506,416 Revenue/Receivable 2,6520,751 4,896,063

Advance License Fee Refunded 9,091,440 Nil

Equity Investment in MosChip USA (WOS) 66,359,989 375,579,087

Loan Refunded/Balance loan Receivable 16,085,550 17,848,000

Transactions with whole time directors Remuneration to Chairman & CEO 2,666,032 Nil

Remuneration to Managing Director 2,666,032 Nil

Transactions with Key management personnel

Remuneration to Key Management Personnel 1,744,373 Nil

Stock Options Granted/Outstanding to key management personnel Nil 37,500

8. Additional information as required under Part, II of Schedule VI of the Companies Act, 1956:

(Amounts in Rupees) For the year ended For the year ended 31 March 2006 31 March 2005 Rs. Rs.

A. C I F Value of Imports : Capital Goods 4,522,422 1,449,546

Computer Software 19,654,654 Nil

B. Expenditure in Foreign currency

Software Charges 3,506,702 Nil

Traveling Expenses 2,810,438 1,825,715

Salaries 1,506,409 7,812,599

Professional Charges 4,439,250 13,560,249

Consumables 1,556,722 1,444,728

GDR Issue Expenses 10,473,960 3,376,408

Other Expenses 3,388,365 1,753,289

C. Earnings in Foreign Exchange

Sales Revenue 49,898,022 23,289,723

9. Segment Reporting

The Company recognizes ASIC design as its only-primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/

10. Amounts paid/payable to Auditors:

Particulars Year ended Year ended 31 March 2006 31 March 2005 Rs. Rs.

As Auditors 77,140 66,120

For Tax Audit 27,550 27,880

For Certification 102,510 68,000

Total 207,200 162,000

12. Regrouping/Reclassification

The figures for previous year have been regrouped/reclassified wherever necessary.

13. Quantitative Details

The Company is engaged in the development of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.


Mar 31, 2004

1. Contingent Liabilities:

(i) Estimated amount of Contracts remaining to be executed on Capital Account and not provided for Rs. 108,745/- (Previous Year Rs. 82,662/-).

(ii) On account of Bank Guarantee given by bankers Rs. 580,000/- (Previous Year Rs. 580.000/-)

(iii) On account of Bond executed by the Company to Government of India towards exemption of Customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment Rs. 2,100,000/- (Previous Year Rs. 2,100,000/-)

(iv) On account of disputed demand for income tax Rs.5,56,162. The Company tiled an appeal against such demand.

2. Amalgamation of Verasity Technologies, Inc

(a) Pursuant to Scheme of Amalgamation of Verasity Technologies, Inc, a Company incorporated under the California Corporation Code, with the Company as approved by the shareholders in the Court convened meeting held on 28th April, 2003 and subsequently sanctioned by the Honourable High Court of Andhra Pradesh as per order dated 13th August 2003, the assets and liabilities of Verasity Technologies, Inc were transferred to and vested in the Company with effect from 1st January, 2003. Accordingly the said scheme has been given effect to in these Accounts.

(b) The nature of business of Verasity Technologies, Inc., is designing internet security ASICs.

(c) The amalgamation has been accounted for under the "Pooling of Interest" method as prescribed by Accounting Standard (AS-14).

Accounting for Amalgamations, issued by the Institute of Chartered Accountants of India. Accordingly, the assets and liabilities as at 1st January 2003 have been taken over at their book values, subject to adjustments made for the differences in the Accounting Policies between the two companies.

(d) The expenditure in revenue nature, incurred by erstwhile Verasity Technologies, Inc., during the period from 1st January 2003 to 21st November 2003, the effective date of amalgamation, amounting to Rs. 31,215,760/- has been debited to the Profit and Loss Account of the Company. It had no revenues during the said period.

(e) The percentage of equity shares held by the shareholders of erstwhile Verasity Technologies, Inc., in the Company is 20.16%.

(f) The resultant goodwill, amounting to Rs. 129,966,773/-, on account of difference between the consideration for the amalgamation and the net identifiable assets acquired, has been adjusted against the reserves of the Company.

(g) In view of the aforesaid amalgamation with effect from 1st January, 2003, the figures for the current year are not comparable to those of the previous year.

3. Share Capital

During the period under review, 300,000 equity shares of Rs. 10 each at a price of Rs.33 per share and 950,000 equity shares of Rs.10 each at a price of Rs.30 per share have been allotted to the holders of the convertible warrants upon their exercise of the option for conversion of the warrants into equity shares.

Pursuant to the Scheme of Amalgamation of Verasity Technologies Inc., with the Company 6,177,778 equity shares of Rs. 10 each at a price of Rs.31 per share have been allotted to the shareholders of erstwhile Verasity Technologies Inc., for consideration other than cash.

4. Balance in Profit and Loss Account

The balance in Profit & Loss Account as on 31st March, 2004 is arrived at as follows:

Particulars Amount in Rs.

Opening Balance as on 1st April 2003 113,385,579

Add; Balance in profit and loss account of erstwhile Verasity Technologies, Inc as on 1st January, 2003 35,047,429

Sub-total 148,433,008

Add: Loss for the period 119,912,301

Balance as on 31st March 2004 268,345,309

5. Accounting for taxes on income

During the period under review, the Company carried its operations in India through two 100% Export Oriented Units, one registered with the Software Technology Parks of India (STPI), Hyderabad and the other with NOIDA Special Economic Zone (NSEZ). The STPI unit is entitled to a tax holiday for a period of ten years from the date of commencement of operations. The NSEZ unit is entitled to a tax exemption to the extent of 100% for a period of five years from the date of commencement of operations and to the extent of 50% during the subsequent two years. Pursuant to the scheme of Amalgamation, the Company continues to carry on the business of erstwhile Verasity Technologies and treats it as an overseas branch office. The operations of the overseas branch for the period ended 31st March 2004 have resulted in a net loss. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard - 22 on Accounting For Taxes on Income, issued by the Institute of Chartered Accountants of India.

6. Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortised on a straight-line basis over the vesting period.

The Company has established three schemes Employee Stock Options Plan, MosChip Stock Option Plan 2001 and MosChip Stock Option Plan 2002 with 600,000 equity shares, 300,000 equity shares and 700,000 equity shares respectively. Of these three the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

Stock Options Outstanding under the Employee Stock Options Plan

Particulars Year ended Year ended 31-03-2004 31-03-2003

Options outstanding at the beginning of the year 398,900 354,600

Granted during the year 24,300 149,500

Forfeited during the year 126,900 86,600

Exercised during the year 49,680 18,600

Outstanding at the end of the year 246,620 398,900

Stock Options Outstanding under the MosChip Stock Option Plan 2001

Particulars Year ended Year ended 31-03-2004 31-03-2003

Options outstanding at the beginning of the year 260,500 Nil

Granted during the year 79,500 262,500

Forfeited during the year 67,000 2,000

Exercised during the year Nil Nil

Outstanding at the end of the year 273,000 260,500

Stock Options Outstanding under the MosChip Stock Option Plan 2002

Particulars Year ended Year ended 31-03-2004 31-03-2003

Options outstanding at the beginning of the year 255,800 Nil

Granted during the year 490,500 255,800

Forfeited during the year 58,000 Nil

Exercised during the year Nil Nil

Outstanding at the end of the year 688,300 255,800

7. Earnings Per Share

Basic earnings per share is computed using the weighted average number of equity shares outstanding during the applicable periods.

Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. Potential equity shares include equity shares issuable against the share application money received during the year.

8. Related Party Transactions

The Company entered into related party transactions during the period with its wholly owned subsidiary, MosChip Semiconductor Technology, USA. The transactions with subsidiary include purchase of capital equipments, consumables, reimbursement of expenses, loans given to meet the working capital requirements and interest receivable on such loans. The key management personnel are:

Name of Personnel Designation

Whole-time Directors

K. Ramachandra Reddy Chairman & CEO

C. Dayakar Reddy Managing Director

Key Management Personnel

Vinay D. Kumar Executive Vice President - Operations

Vivek Bhargava Chief Financial Officer

P.S.Narayanan Vice President - Engineering

9. Segment Reporting

The Company recognises ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale/license of related intellectual property developed by it. Accordingly revenues from sale/license of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers

10. Amounts paid/payable to Auditors:

Year Ended Year Ended 31-03-2004 31-03-2003 Rs. Rs.

As Auditors 48,600 37,800

For Tax Audit 16,200 10,500

For Certification 58,000 48,400

Total 122,800 96,700

11. Utilisation of Preferential Issue Proceeds

The following statement shows the total funds raised through preferential issues, the amounts utilized up to 31st March 2004 and the balance available as on that date:

Particulars Amounts in Rs. Amounts in Rs.

Iggyg proceeds

Share Capital 43,960,000

Share Premium 91,628,000

Conversion of Warrants

Share Capital 12,500,000

Share Premium 25,900,000

Total Issue Proceeds 173,988,000

Utilisation

Loan to Subsidiary to meet product development expenditure for the products developed by the parent Company 31,486,250

Payments for purchase of fixed assets 21,726,686

Working Capital 120,775,064

Total Funds Utilised 173,988,000

Funds Available Out of Issue Proceeds Nil

12. Regrouping/Reclasssification

The figures for previous year have been regrouped/reclassified wherever necessary. In view of the amalgamation of erstwhile Verasity Technologies, Inc., with the Company with effect from 1st January, 2003, the figures for the current year are not comparable to those of the previous year.

13. Quantitative Details

The Company is engaged in the development of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.


Mar 31, 2003

1. Contingent Liabilities:

(i) Estimated amount of Contracts remaining to be executed on Capital Account and not provided for Rs. 82.662/- (Previous Year Rs. 1,276,076/-).

(ii) On account of Bank Guarantee given by bankers Rs. 580,000/- (Previous Year Rs. 475.000/-)

(iii) On account of Bond executed by the Company to Government of India towards exemption of customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment Rs. 2,100,000/- (Previous Year Rs. 5,500,000/-)

2. Share Capital

Pursuant to the resolutions of the members of the Company passed in the Extraordinary General Meetings held on 27th March, 2002 and 22nd May, 2002, the Company issued 3,160,000 equity shares of Rs.10 each at a premium of Rs.20 per share and 1,266,000 equity shares of Rs.10 each at a premium of Rs.23 per share respectively. During the year under review, out of such issued capital, the Company has allotted 3,160,000 equity shares of Rs.10 each at a premium of Rs.20 per share and 1,236,000 equity shares of Rs.10 each at a premium of Rs.23 per share.

3. Convertible Warrants

(a) During the year under review, the Company has allotted 950,000 convertible warrants at a price of Rs.30 each. The said warrants represent a right to acquire 950,000 equity shares of Rs.10 each at a price of Rs.30 per share. The warrants can be exercised at any time on or before 25th December, 2003. The warrants were issued for an upfront consideration of Rs.2,850,000.

(b) The Company has also allotted 300,000 convertible warrants at a price of Rs.33 each. The said warrants represent a right to acquire 300,000 equity shares of Rs.10 each at a price of Rs.33 per share respectively. The warrants can be exercised at any time on or before 9th January, 2004. The warrants were issued for an upfront consideration of Rs.990,000.

4. Amalgamation of Verasity Technologies, Inc

The Scheme of Amalgamation of Verasity Technologies, Inc, a Company incorporated under the California Corporation Code, with the Company as approved by the shareholders in the Court convened meeting held on 28th April, 2003, along with a petition seeking the sanction for the same has been filed with the High Court of Andhra Pradesh, the Order in respect of which is awaited. The assets and liabilities of Verasity Technologies, Inc will be transferred to and vested in the Company with retrospective effect from 1st January, 2003, subject to the approval of High Court of Andhra Pradesh in this regard. No effect of the amalgamation/operations has been given in preparing the Accounts of the Company.

5. Accounting for taxes on income

The Company carries on its operations through two 100% Export Oriented Units, one registered with the Software Technology Parks of India (STPI), Hyderabad and the other with NOIDA Special Economic Zone (NSEZ). The STPI unit is entitled to a tax holiday for a period of ten years from the date of commencement of operations. The NSEZ unit is entitled to a tax exemption to the extent of 100% for a period of five years from the date of commencement of operations and to the extent of 50% during the subsequent two years. Hence, no provision has been made in the books of account for the tax liability for the year as well as for the deferred taxes as per the Accounting Standard 22 on Accounting For Taxes on Income, issued by the Institute of Chartered Accountants of India.

6. Employee Stock Option Plans

As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortised on a straight-line basis over the vesting period.

The Company has established three schemes Employee Stock Options Plan, MosChip Stock Option Plan 2001 and MosChip Stock Option Plan 2002 with 600,000 equity shares, 300,000 equity shares and 700,000 equity shares respectively. Of these three the Employee Stock Options Plan was established when the Company was unlisted and consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the options granted under this Plan.

Stock Options Outstanding under the Employee Stock Options Plan

Particulars Year ended Year ended 31-03-2003 31-03-2002

Options outstanding at the beginning of the year 354,600 239,600

Granted during the year 149,500 218,000

Forfeited during the year 86,600 82,400

Exercised during the year 18,600 20,600

Outstanding at the end of the year 398,900 354,600

Stock Options Outstanding under the MosChip Stock Option Plan 2001

Particulars Year ended Year ended 31-03-2003 31-03-2002

Options outstanding at the beginning of the year Nil Nil

Granted during the year 262,500 Nil

Forfeited during the year 2,000 Nil

Exercised during the year Nil Nil

Outstanding at the end of the year 260,500 Nil

Stock Options Outstanding under the MosChip Stock Option Plan 2002

Particulars Year ended Year ended 31-03-2003 31-03-2002

Options outstanding at the beginning of the year Nil Nil

Granted during the year 255,800 Nil

Forfeited during the year Nil Nil

Exercised during the year Nil Nil

Outstanding at the end of the year 255,800 Nil

7. Earnings Per Share

Basic earnings per share is computed using the weighted average number of equity shares outstanding during the applicable periods.

Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. Potential equity shares include equity shares issuable against the share application money received during the year.

(Amounts in Rupees) Year Ended Year Ended 31-03-2003 31-03-2002

BASIC EARNINGS/(LOSS) PER SHARE

Net Profit/(Loss) for the year (72,753,346) (43,864,289)

Weighted average number of equity shares 22,149,923 16,658,789

Basic Eamings/(Loss) per equity share -3.28 -2.63

DILUTED EARNINGS/(LOSS) PER SHARE Net Profit/(Loss) for the year (72,753,346) (43,864,289)

Adjustments Nil Nil

Diluted Net Proflt/(Loss) for the year (72,753,346) (43,864,289)

Weighted average number of equity shares 22,149,923 16,658,789

Potential Equity Shares applicable to share application money 924,110 55,757

Weighted average number of diluted equity shares 23,074,033 16,714,546

Diluted eamings/(loss) per share -3.15 -2.62

8. Directors Remuneration:

Year Ended Year Ended 31-03-2003 31-03-2002 Rs. Rs.

1 Salary and allowances 3,000,000 3,000,000

2 No Provision for Commission to Whole Time Directors has been made in the books, as there is no profit in accordance with Section 198 of the Companies Act, 1956.

9. Related Party Transactions Transactions with Subsidiary

Person/Entity Relationship Nature of Transaction Amount (Rs.) MosChip Wholly owned Purchase of Channel Analyzer 465,868 Semiconductor subsidiary Technology, USA

-do- -do- Purchase of Hardware items 1,202,227

-do- -do- Purchase of PCS Boards 14,263

-do- -do- Purchase of Hard Ware Items 236,660

-do- -do- Consultancy Fee 482,460

-do- -do- Transfer of Audio Codec NRE charges 2,164,343

-do- -do- Loan 17,264,500

-do- -do- Interest on loan 291,487

Amount due from MosChip Semiconductor Technology, USA as at 31st March 2003 is Rs. 18,810,549.

Transactions with Whole time Directors and Key Management Personnel:

The key management personnel are:

Name of Personnel Designation Whole-time Directors

K. Ramachandra Reddy Chairman & CEO

C. Dayakar Reddy Managing Director

Key Management Personnel

Vinay D. Kumar Executive Vice President - Operations

Vivek Bhargava Chief Financial Officer

Vivek Kumar Gupta Vice President - Engineering

Transactions with whole time directors and key management personnel are summarized below:

(Amounts in Rupees)

Nature of Transaction Transactions Balance as at during the year March 31, 2003

Remuneration to Chairman & CEO 1,500,000 Nil

Remuneration to Managing Director 1,500,000 Nil

Remuneration to Key Management Personnel 4,591,541 Nil

Stock Options Granted/Outstanding to key management personnel 40,000 105,000

10. Additional information as required under Part II of Schedule VI of the Companies Act, 1956:

Year Ended Year Ended 31-03-2003 31-03-2002 Rs. Rs. A. GIF Value of Imports

Capital Goods 6,436,309 1,818,519

Computer Software 209,113 19,940,316

B. Expenditure in Foreign currency

Software Charges 4,659,999 97,274

Traveling Expenses 1,172,013 699,346

Advertising Expenses 2,528,510 1,767,463

Professional Charges 567,600 Nil

Consumables 509,309 Nil

Other Expenses 514,578 620,724

C. Earnings in Foreign Exchange - Sales Revenue Nil 3,396,400

11. Segment Reporting

The Company recognises ASIC design as its only primary segment since its operations during the year consists of ASIC design and sale of related intellectual property developed by it. Accordingly revenues from sale of software (designs/intellectual property) comprise the primary basis of segmental information set out in these Financial Statements. Secondary segmental reporting is performed on the basis of the geographical location of customers Business Segment Performance of business segment is as follows:

Year Ended Year Ended 31-03-2003 31-03-2002 Rs. Rs. Revenue

Sales to external customers Nil 3,396,400

Segment result Profitless) -77,821,942 -45,605,603

Interest expense 176 29,354

Other Income 5,068,772 1,792,719

Income Taxes - -

Net profit(loss) -72,753,346 -43,842,238

Other Segment Information Depreciation 13,932,680 11,379,257

Non-cash expenses other than depreciation 1,376,072 1,376,072

Particulars of Segment Assets and Liabilities Segment Assets 90,875,506 77,943,229

Investments 337,219,098 314,771,139

Cash and Bank Deposits 13,268,950 2,774,469

Other Assets 559,133 98,184

Total Assets 441,922,687 395,587,021

Segment Liabilities 3,368,635 8,122,085

Total Liabilities 3,368,635 8,122,085

Geographic Segment Revenue attributable to location of customers is as follows: Geographic Location North America Nil 3,396,400

Segment assets based on their location are as follows Carrying amount of segment assets India 90,071,462 78,075,713

Additions to fixed assets India 11,995,749 39,024,224

12. Amounts paid/payable to Auditors:

Year Ended Year Ended 31-03-2003 31-03-2002 Rs. Rs.

As Auditors 37,800 37,800

For Tax Audit 10,500 10,500

For Certification 48,400 39,000

Total 96,700 87,300

13. Utilisation of Preferential Issue Proceeds

The following statement shows the total funds raised through preferential issues, the amounts utilized upto 31st March, 2003 and the balance available as on that date:

Particulars Amounts in Rs. Amounts in Rs.

Issue Proceeds Share Capital 43,960,000

Share Premium 91,628,000

Convertible Warrants 3,840,000

Total Issue Proceeds 139,428,000

Utilisation

Loan to Subsidiary to meet product development expenditure for the products developed by the parent Company 17,264,500

Payments for purchase of fixed assets 15,903,710

Working Capital 68,777,630

Total Funds Utilised 101,945,840

Funds Available Deposits with Mutual Funds 28,000,000

Deposits with Banks in current accounts 3,336,891

in fixed deposit accounts 6,145,269

Total Funds Available 37,482,160

14. Regrouping/Reclasssification

The figures for previous year have been regrouped/reclassified wherever necessary, to conform to the current year figures.


Mar 31, 2002

1. Contingent Liabilities:

i. On account of Bank Guarantee given by bankers Rs. 475,000/- (Previous Year Rs. 556,034/-)

ii. On account of Bond executed by the Company to Government of India towards exemption of customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment Rs. 5,500,000/- (Previous Year Rs. 5,500,000/-)

2. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for Rs. 1,276,076/- (Previous Year Rs. 14,249,788/-).

3. Previous year figures have been regrouped wherever necessary and paise have been rounded to the nearest rupee.

4. During the year the Company has issued 31,60,000 equity shares of Rs. 10/- each and 9,50,000 warrants convertible into one equity share of Rs. 10/- each to (a) ESS Technology Inc, USA, (b) Flextronics Semiconductor Inc, USA, (c) Silutions Technologies Inc USA, (d) UTI A/c. India Technology Venture Unit Scheme and (e) Dr. S. Sivakumar and the same are yet to be subscribed by them as at the date of the Balance Sheet.

5. As per the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by the Securities and Exchange Board of India, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortised on a straight-line basis over the vesting period.

The options granted by the company during the year are under the Employee Stock Options Plan, which was established when the Company was unlisted. Consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the Company in relation to the options granted under the aforesaid Plan.

During the year under review no options have been granted by the Company under the Employee Stock Option Scheme framed in accordance with the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 issued by SEBI.

6. Earnings Per Share

Basic earnings per share is computed using the weighted average number of equity shares outstanding during the applicable periods.

Diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the applicable periods. Potential equity shares include equity shares issuable against the share application money received during the year.

7. Unallocated Expenditure incurred upto 30.06.2001 for setting up of the new unit at NOIDA Export Processing Zone amounting to Rs. 62,98,737/- has been allocated to Plant and Machinery, Electrical Installations and Computers in the ratio of their direct costs.


Mar 31, 2001

1. Contingent Liabilities:

i. On account of Bank Guarantee given by bankers Rs.556034/-(Previous Year Rs.25000/-)

ii. On account of Bond executed by the Company to Government of India towards exemption of customs Duty on Imported Equipment and Excise Duty on Indigenous Equipment Rs.55,00,000/- (Previous Year Rs.500000/-)

2. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for Rs. 1,42,49,788/- (Previous Year Rs.Nil).

3. Previous year figures have been regrouped wherever necessary and paise have been rounded to the nearest rupee. This being the first Profit and Loss Account no previous year figures have been given.

4. The Securities and Exchange Board of India recently issued the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 that is effective for all stock option schemes of listed companies established after 19th June 2000. In accordance with these guidelines, the excess of the market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the options is to be recognized and amortised on a straight-line basis over the vesting period.

The Employee Stock Options Plan of the Company was established when the Company was unlisted. Consequently, the Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999 are not applicable to the Company.

5. Unallocated Expenditure incurred upto 30.06.2000 amounting to Rs.36,49,546/- has been allocated to Plant and Machinery, Electrical Installations, Computers and Software in the ratio of their direct costs.

6. Provision for Taxation has been made under section 115-JB of the Income Tax Act, 1961.

7. Deposits Recoverable includes an amount of Nil (Previous Year Rs.1,08,000/-) representing rental deposit with a director of the Company. Maximum amount outstanding during the period Nil (Previous Year Rs.1,08,000/-).

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