Directors Report of VXL Instruments Ltd.

Mar 31, 2015

The Board of Directors has pleasure in presenting the 29th Annual Report and Audited statement of Accounts for the year ended 31st March, 2015 together with the Independent Auditors' Report.

1. FINANCIAL RESULTS:

Rs. in Lakhs

Particulars 2014-15 2013-14

Net Revenue from operations 7323 8650

Other Income 57 34

Profit / (Loss) before Depreciation (47) (851)

Depreciation 30 45

Profit / (Loss) before Taxation (77) (806)

Provision for Taxation (Deferred Tax Adjustments) 508 304

Profit / (Loss) after Taxation (585) (1110)

Exceptional Items 16 1723

Profit / (Loss) for the period (569) 613

Uncertainty in economic conditions around the world has resulted in reduced sales during the year under review. The Company's profitability was affected adversely by a squeeze on the margins, brought about by the sluggish market conditions. However, loss before taxation reduced from Rs. 806 lakhs in the previous year to Rs. 77 Lakhs during the year under review even though loss for the period was Rs. 569 Lakhs against profit of Rs. 613 Lakhs during the previous period.

FUTURE PROSPECTS:

Long term market drivers such as the push to virtualization technology, a transition from PC to thin clients and sustained economic expansion are expected to push the demand for thin clients during the year 2015-16.

2. RESERVES:

In view of the losses, the question of transferring any amount to Reserves does not arise.

3. SHARE CAPITAL:

There were no changes in the Share Capital of the Company during the year.

4. MATERIAL CHANGES & COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY, BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:

There are no material changes and commitments between the end of the Financial Year and the Date of the Report, which affect the financial position of the Company.

5. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS:

There are no material changes after 31st March, 2015 till the signing of this Report. However, based on the recommendation of the Board, approval of the shareholders has been sought by way of Postal Ballot to shift the Registered Office of the Company from the State of Karnataka to the State of Maharashtra to derive more economic and efficient operational advantages. Necessary approval from the Ministry of Corporate Affairs will also be sought.

6. CHANGE IN NATURE OF BUSINESS:

There were no changes in the nature of business during the year under review as prescribed in Rule 8(ii) of the Companies (Accounts) Rules, 2014.

7. DIVIDEND:

Whilst your Directors understand the sentiments of the Investors, the financials in the year that has passed, do not enable the Board to recommend any dividend. However, the Directors will strive hard to bring the Company back to dividend track before long and the improving performance of the Company is hoped to continue to facilitate consideration of dividend in the days to come.

8. BOARD MEETINGS:

The Meetings of the Board are held at regular intervals with a time gap of not more than 120 days between two consecutive Meetings. Additional Meetings of the Board of Directors are held when necessary

The Board of Directors duly met 6 (Six) times from 1st April, 2014 to 31st March, 2015 on 30th May 2014, 29th July 2014, 30th September 2014, 31st October 2014, 31st January 2015 and 31st March 2015.

9. DIRECTORS AND KEY MANANGERIAL PERSONNEL:

Mr. Prakash H Rao and Mrs. Kumkum Bhuwania, who were appointed as Additional Directors, hold office up to the date of ensuing Annual General Meeting; they are proposed to be appointed as Independent Directors of your Company. Notice has been received from a member of the Company under Section 160 of the Companies Act, 2013 along with the requisite deposits. Mr. Prakash H Rao and Mrs. Kumkum Bhuwania, Directors of the Company, are proposed to be appointed as Independent Directors for consecutive 5 years and they fulfill the requirements as per the Companies Act, 2013. Their appointments are proposed under Special Business.

Mr. M. V Shetty, Executive Director, retires by rotation, as per the Companies Act, 2013 and being eligible, offers himself for re-appointment.

10. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS:

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6).

11. COMPOSITION OF AUDIT COMMITTEE, NOMINATION AND REMUNERATION COMMITTEE & STAKEHOLDERS' RELATIONSHIP COMMITTEE:

Following are the composition of various Committees:

i) Composition of Audit Committee:

a) Mr. N. V. Maslekar - Chairman

b) Mr. K. Prakash - Member

c) Mr. Prakash H Rao - Member

d) Mrs. Kumkum Bhuwania - Member

ii) Nomination and Remuneration Committee:

a) Mr. N. V. Maslekar - Chairman

b) Mr. A K Bhuwania - Member

c) Mr. Prakash H Rao - Member

d) Mr. K Prakash - Member

iii) Composition of Stakeholders' Relationship Committee:

a) Mr. K Prakash - Chairman b) Mr. N V Maslekar - Member

c) Mr. Prakash H Rao - Member

12. RISK MANAGEMENT POLICY:

The Company has not yet formulated a Risk Management Policy and has in place a mechanism to inform the Board Members about risk assessment and minimization procedures and undertakes periodical review to ensure that executive management controls risk by means of a properly designed framework.

13. VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has a whistle blower policy for vigil mechanism which is available on the website of the company and there were no cases reported during the applicability of Section 135 of the Companies Act read with the Companies (Accounts) Rules, 2015. However this clause is not applicable to the Company.

15. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY:

The Company has not given any loan or guarantee covered under the provisions of section 186 of the Companies Act, 2013.

16. DIRECTORS' RESPONSIBILITY STATEMENT:

In pursuance of Section 134 (3) (c) of the Companies Act, 2013, the Directors hereby confirm that:

(a) in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

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

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

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively;

17. EXTRACT OF ANNUAL RETURN:

As required pursuant to Section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual return in MGT-9 is attached as a part of this Annual Report. as Annexure-I.

18. AUDITORS:

The Auditors, Messrs Ishwar & Gopal Chartered Accountants, Bengaluru, retire at the ensuing Annual General Meeting. The Company has received a certificate under Section 141 of the Companies Act, 2013 from them that their appointment would be within the limits specified therein.

19. SECRETARIAL AUDIT REPORT:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. S Kedarnath, Bengaluru, a Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor in the form of MR-3 is annexed to this Report as Annexure-II.

EXPLANATION BY BOARD ON ADVERSE COMMENTS BY AUDITORS:

The Auditors have pointed out under "Emphasis of Matters" with regard to non- provision in respect of Company's investments in and receivables from its Subsidiary . In view of the long term prospects and the steps taken to recover these receivables and cash flow of the Subsidiary, the Directors feel that no provision need be made in the accounts.

20. CONSERVATION OF ENERGY:

Your Company gives high priority for conservation of energy through better supervision and training of employees to economize the usage of electricity.

TECHNOLOGY ABSORPTION:

The Company's products are manufactured by using in-house know how and Research facilities and no outside technology is being used for manufacturing activities. Therefore no technology absorption is required. The Company constantly strives for maintenance and improvement in quality of its products and entire Research & Development activities are directed to achieve the aforesaid goal.

FOREIGN EXCHANGE EARNINGS AND OUTGO:

The Company earned Rs. 61,42,38,969/- in foreign exchange and expended Rs. 43,89,02,693/- in foreign exchange during the period under review.

21. DEPOSITS:

Your Company has not invited/accepted/renewed any deposits from public as defined under the provisions of Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 and accordingly, there were no deposits which were due for repayment on or before 31st March, 2015.

22. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:

The Company continued to maintain, high standards of internal control designed to provide adequate assurance on the efficiency of operations and security of its assets. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid-down systems and policies are comprehensively and frequently monitored by your Company's management at all levels of the organization. The Audit Committee, which meets at-least four times a year, actively reviews internal control systems as well as financial disclosures with adequate participation and inputs from the Statutory, Internal and Corporate Secretarial Auditors.

23. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The Company have duly complied with the provision of Section 186 of the Companies Act, 2013 and it has taken:

Secured Loans: Rs. 29,52,036/- Unsecured Loans: Rs. 3,75,00,000/- Current / Non-Current Investments: Rs. 51,80,261/- Guarantees: NIL

Securities Extended: Hypothecation of vehicles for Secured Loans

24. MATERIAL ORDER PASSED BY ANY COURT OR REGULATOR OR TRIBNUAL IMPACTING GOING CONCERN STATUS OF COMPANY:

No order was passed by any court or regulator or tribunal during the period under review which impacts going concern status of the Company.

25. RELATED PARTY TRANSACTIONS (RPTs):

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. Web link for the same is www.vxl.net.in/Investors/vxl-disclosures.aspx Particulars of Contracts or Arrangements with Related parties referred to in Section 188(1) of the Companies Act, 2013 in Form AOC- 2 annexed to this Report as Annexure-III.

26. HUMAN RESOURCES & INDUSTRIAL RELATIONS:

Your Company recognizes the critical significance of competent and experienced employees. The team VXL Instruments continued to stand by the Company during tiring and tough times and your

Board places its appreciation for these relentless efforts, untiring dedication and sense of belongingness exhibited by the employees at all levels. Your Company focuses on long term Human Resource planning aimed at managing change more efficiently, grooming internal talent for future roles and also driving efficiency within the Organisation.

Pursuant to the closure of the unit manufacturing CRT Terminals caused by the phase out of GVX Terminals, the matter is before the Honourable High Court of Karnataka. As per the directions of the Honourable High Court, pending final decision, the Company has been directed to deposit the amount payable to the workmen with the Honourable High Court. This has been complied with. Industrial relations have been cordial and constructive, which have helped your Company to achieve production targets.

27. DETAILS OF HOLDING COMPANY/ SUBSIDIARIES/JV:

The Company's Subsidiary Company is VXL Instruments Limited (UK) located in the United Kingdom. Financial performance of the Subsidiary Company referred to in Section 129 of the Companies Act, 2013 in Form AOC-1 is annexed to this Report as Annexure-IV.

28. ANNUAL BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and Compliance Committees.

29. RATIO OF REMUNERATION TO EACH DIRECTOR:

Pursuant to Section 197(12) of the Companies Act, 2013 and Rule 5 (1) (2) (3) of the Companies (Appointment and Remuneration) Rules, 2014, details/disclosures of Ratio of Remuneration of each Director to the median employee's remuneration is annexed to this report as Annexure V

30. LISTING WITH STOCK EXCHANGE:

The Company confirms that it has paid the Annual Listing Fees for the year 2015-16 to BSE where the Company's Shares are listed.

31. CORPORATE GOVERNANCE AND SHAREHOLDERS' INFORMATION:

In compliance with the Listing Agreement with the Stock Exchange, your Board has adhered to the Corporate Governance Code. All the requisite Committees are functioning in line with the guidelines.

As reported earlier, a reputed firm of independent Chartered Accountants has been carrying out the responsibilities of Internal Auditors and periodically they have been reporting their findings of systems, procedures and management practices.

As required under Clause 49 of the Listing Agreement with the Stock Exchange, a report on Corporate Governance and a Certificate from Messrs Ishwar & Gopal Chartered Accountants, confirming compliance with the requirements of Corporate Governance forms integral part of this Report as Annexure VI.

32. CAPITAL EXPENDITURE:

As on 31st March, 2015, the gross tangible and intangible assets stood at Rs. 18,43,33,771/- and the net tangible and intangible assets, at Rs. 17,07,92,765/-. Additions during the year amounted to Rs. 38,63,957/-. The Company has not purchased any assets under lease.

33. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the sexual harassment of women at the work place (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2014-15:

Number of complaints received : NIL

Number of complaints disposed off : NIL

34. MANAGEMENT DISCUSSION AND ANALYSIS:

As requisite and appropriate Management Discussion & Analysis is covered under this Report itself, a separate note on the same is not being furnished.

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration.

35. ACKNOWLEDGEMENTS:

The Directors place on record their appreciation for valuable contribution made by employees at all levels, active support and encouragement received from the Government of India, Government of Karnataka, Company's Bankers, Customers, Principals, Business Associates and other Acquaintances.

Your Directors recognize the continued support extended by all the Shareholders and gratefully acknowledge with a firm belief that the support and trust will continue in future also.

For and on behalf of the Board of Directors

Madireddy V Nagaraj M.V. Shetty

Managing Director Whole Time Director

DIN: 00515419 DIN: 00515711

Place : Bengaluru

Date : 30th July, 2015

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Mar 31, 2014

Dear Members,

The Directors present their report on the business and operations of your Company for the year ended 31st March 2014. As notified by McA Circular No. 1/19/2013-CL-V dated 04.04.2014, the Company has followed the Companies Act, 1956, in respect of the report.

FINANCIAL RESULTS Rs. in Lakhs

Particulars 2013-14 2012-13

Net Sales & Other Income 8,684 8,562

Depreciation/Amortization 45 81

Profit / (Loss) before taxation & Exceptional items (806) 40

Exceptional items 1,722 - Income Tax 303 4

Profit/(Loss) after Taxation &

Exceptional items 613 36

Balance carried forward (1,243) (1,856)

YEAR UNDER REVIEW

During the year under review, your Company achieved a net turnover of Rs. 8,684 lakhs as compared to Rs. 8,562 lakhs in the previous financial year.

Tough economic conditions around the world have impacted on the expected sales growth.

Though the Company registered a marginal growth in overall Sales Value, the Company''s Profitability was affected by a severe squeeze on the margins, brought about by sluggish market conditions in all markets, resulting in operating loss of Rs.806 lakhs. However, during the year under report, your Company disposed off one of the idle properties. Exceptional income of Rs. 1,722 lakhs, mainly from the sale of property, resulted in overall profit of Rs 613 lakhs.

OVERSEAS OPERATIONS

VXL-UK has been able to extend good support in terms of marketing of the Company''s products in Europe and especially in USA during the year under review. VXL has been one of the first Indian companies to venture into the export market and inspite of many obstacles and misconceptions about Indian progress as IT Hardware compared to Indian Software, VXLhas established itself worldwide as a player of the long run.

FUTURE PROSPECTS

According to International Experts, after showing a strong double- digit growth for three years, the Global thin client market may end with flat performance of 1% in its unit shipments in 2014.

Globally, the thin client sales growth has fallen in recent years, hurt by surging demand for tablets and other mobile devices

We can look for some recovery in emerging regions going forward, but it may coincide with slower growth in mature regions, and we do not see the recent gains as a motive to raise the long term outlook

RESEARCH AND DEVELOPMENT

Your Company recognizes R & D as one of its major focus areas in both Hardware and Software. This focus has helped your Company to design fully ROHS compliant products carrying better features and ergonomics. These products have been well received by our customers.

SUBSIDIARY COMPANIES

VXL, UK has managed to earn a profit of GBP 43,973 during the current financial year.

PARTICULARS OF EMPLOYEES

None of the employees drew remuneration in excess of the limits prescribed in Sec. 217 (2A) of the Companies Act, 1956.

DIRECTORS

Mr. N V Maslekar, Director, retires by rotation and being eligible, offer himself for re-appointment. In terms of the requirement of the new Companies Act, 2013, his appointment as Independent Director is proposed under Special Business.

Mr. K Prakash, Director, retires by rotation as per the new Companies Act, 2013 and being eligible, offers himself for re-appointment.

AUDIT COMMITTEE

Audit Committee constituted by the Board of Directors with requisite composition to fall in line with the prevailing laws continued to discharge its functions during the year under report.

AUDITORS

Messrs Ishwar & Gopal, Chartered Accountants, Auditors of the Company, being eligible, offer themselves for re-appointment.

AUDITORS'' REPORT

The Auditors have pointed out in their report with regard to non-provision in respect of Company''s investments in and receivables from a subsidiary and accounting of deferred tax credits. In view of the long term prospects and steps taken to recover these receivables, the Directors feel that no provision need be made in the accounts.

FIXED DEPOSITS

The total amount of fixed deposits accepted from Directors as on 31st March, 2014 was NIL. There were no unclaimed deposits as at that date.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that

(a) The financial statements have been prepared in conformity with the generally accepted accounting standards and principles and in terms of the requirement of the Companies Act, 1956. Reasonable and prudent judgments and estimates have been made wherever necessary.

(b) The accounting policies selected and applied consistently give a true and fair view of the financial statements.

(c) The Company has implemented adequate internal controls to provide reasonable assurance of the reliability of its financial records, proper safe guarding and use of its assets and detection of frauds and irregularities.

(d) The Directors have prepared the annual accounts on a "going concern" basis.

CORPORATE GOVERNANCE

The Board meets at regular intervals and transacts various businesses. The Company consistently forwards the quarterly financial results to the Stock Exchange and publishes the same in the newspapers as per the listing agreement.

INDUSTRIAL RELATIONS

The industrial relations during the year was cordial and harmonious.

The Company has closed the unit manufacturing CRT Terminals as the product GVX terminal has been phased out. On this, workmen raised certain objection which was rejected by the Secretary, Department of Labour. Now the matter is before the High Court of Karnataka as per whose directive the Company has deposited the amount payable to Workmen with the High Court. This idle property was sold last year.

There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report.

Bank Operation

On the back of sale proceeds of one of the company''s idle properties, your company was able to repay the credit facilities

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required to be furnished under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

APPRECIATION

The Directors wish to thank the Customers, Vendors, Business Associates, employees and the Investors for the continued support during the year.

The Directors also thank State Bank of India for the unstinted co-operation extended by them.

For and on behalf of the Board of Directors

Madireddy V Nagaraj M.V. Shetty Managing Director Whole Time Director

Place : Bangalore Date : 29th July, 2014

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Mar 31, 2013

To The Members

The Directors present their report on the business and operations of your Company for the year ended 31st March 2013.

FINANCIAL RESULTS Rs. in Lakhs

Particulars 2012-13 2011-12

Net Sales & Other Income 8,562 8,066

Depreciation/Amortization 81 111

Profit before taxation 40 286

Income Tax 4 13

Profit/(Loss) after Taxation 36 273

Balance carried forward (1,856) (1,892)

YEAR UNDER REVIEW

During the year under review, your Company achieved a net turnover of Rs. 8,562 lakhs as compared to Rs. 8,066 lakhs in the previous financial year. Your Company has earned a profit after taxation of Rs. 36 lakhs in the current financial year as against Rs. 273 lakhs profits in the previous year.

The uncertainty in global markets therefore continued to cause concern.

Though the Company registered a growth in overall sales value, the Company''s profitability was affected by a severe squeeze on the margins, brought by the sluggish market conditions in all hard currency markets, resulting in the drop in profits.

OVERSEAS OPERATIONS

Your Company continues the tie up with Priya Limited for providing support in Logistics and Distribution of its products in Europe and USA. VXL-UK has been able to extend good support in terms of marketing of the Company''s products in Europe and especially in USA during the year under review. VXL has been one of the first Indian Companies to venture into the export market and inspite of many obstacles and misconceptions about Indian progress as IT Hardware compared to Indian Software, VXL has established itself worldwide as a player of the long run.

FUTURE PROSPECTS

It is our belief that "thin client" will continue to grow and become even more prevalent among computer users of all types.

During the first quarter of 2013-14, our company''s turnover is comparatively increased when compared to first quarter of 2012-13 We expect the same improvement in the second half of the current financial year.

VXL continues to have tie up with global leaders in the field of Information Technology, who develop, manufacture and market high quality secure and easy to use technology products and services, worldwide. Through this agreement, VXL expects to increase its global and national reach through their widely spread sales channels.

Current trends like cloud computing and virtualization help us growing and add further values to our cost effective and remotely manageable Thin Clients.

Your company is extending markets to new geographies like China and Eastern Europe and expects these regions to add significant revenues to its portfolio.

RESEARCH AND DEVELOPMENT

Your Company recognizes R & D as one of its major focus areas in both Hardware and Software. This focus has helped your Company to design fully ROHS compliant products carrying better features and ergonomics. These products have been well received by our customers.

Your Company has come out with latest offering based on Eden Dual core CPU. This product is complying with all safety and EMI related certifications. These also comply with the stringent EPEAT environmental requirments of Europe and USA.

Your Company has come out with its own thin client linux operating system, Gio5. This has several variants and it is well accepted by the market.

SUBSIDIARY COMPANIES

VXL, UK has managed to earn a profit of GBP 54,126 during the current financial year.

PARTICULARS OF EMPLOYEES

None of the employees drew remuneration in excess of the limits prescribed in Sec. 217 (2A) of the Companies Act, 1956.

DIRECTORS

Mr. Arun Kumar Bhuwania and Mr Dipak S. Rao retire by rotation, and being eligible, offer themselves for re-appointment.

AUDITORS

Messrs Ishwar & Gopal, Chartered Accountants, Auditors of the Company, being eligible, offer themselves for re-appointment.

AUDITORS'' REPORT

The Auditors have pointed out in their report with regard to non-provision in respect of Company''s investments in and receivables from a subsidiary and accounting of deferred tax credits. In view of the long term prospects and steps taken to recover these receivables, the Directors feel that no provision need be made in the accounts.

FIXED DEPOSITS

The total amount of fixed deposits accepted from Directors as on 31st March, 2013 was Rs.4.00 lakhs. There were no unclaimed deposits as at that date.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that:

(a) The financial statements have been prepared in conformity with the generally accepted accounting standards and principles and in terms of the requirement of the Companies Act, 1956. Reasonable and prudent judgements and estimates have been made wherever necessary.

(b) The accounting policies selected and applied consistently give a true and fair view of the financial statements.

(c) The Company has implemented adequate internal controls to provide reasonable assurance of the reliability of its financial records, proper safeguarding and use of its assets and detection of frauds and irregularities.

(d) The Directors have prepared the annual accounts on a "going concern" basis.

CORPORATE GOVERNANCE:

The Board meets at regular intervals and transacts various businesses. The Company consistently forwards the quarterly financial results to the Stock Exchange and publishes the same in the newspapers as per the listing agreement.

INDUSTRIAL RELATIONS

The Company has closed the unit manufacturing CRT Terminals as the product GVX terminal has been phased out. On this, workmen raised certain objection which has been rejected by the Secretary, Department of Labour. Now the matter is before the High Court of Karnataka. Provision has been made for Rs. 19,72,505/- towards settlement amount due to employees of the unit. Additional liability, if any, on this account is not ascertainable and will be provided on settlement of the dispute.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required to be furnished under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

APPRECIATION

The Directors wish to thank the Customers, Vendors, Business Associates, Employees and the Investors for the continued support during the year.

The Directors also thank State Bank of India for the unstinted co-operation extended by them.

For and on behalf of the Board of Directors

Madireddy V. Nagaraj M.V. Shetty Managing Director Whole Time Director

Place : Bangalore

Date : 29th May 2013

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Mar 31, 2012

The Directors present their report on the business and operations of your Company for the year ended 31st March 2012.

FINANCIAL RESULTS Rs. in Lakhs

Particulars 2011-12 2010-11

Net Sales & Other Income 8,066 9,536

Depreciation/Amortization 111 148

Profit before taxation 286 312

Income Tax 13 3

Profit/(Loss) after Taxation 273 309

Balance carried forward -1,892 -2,165

YEAR UNDER REVIEW

During the year under review, your Company achieved a net turnover of Rs. 8,066 lakhs as compared to Rs.9,536 lakhs in the previous financial year. Your Company has earned a profit after taxation of Rs. 273 lakhs in the current financial year as against Rs. 309 lakhs profits in the previous year. Export performance during the year under review was affected due to the slowdown in USA and the crisis in euro currency zone.

The uncertanity in Global Markets therefore continued to cause concern. To offset the downturn in North America / Europe, the Company continued to explore new geographies and is expecting to see results for these efforts in the near future.

Your company is confident that the improved export business would ensure a turn around in the company's operations.

OVERSEAS OPERATIONS

Your Company continues the tie up with Priya Limited for providing support in Logistics and Distribution of its products in Europe and USA.

VXL-UK has been able to extend good support in terms of marketing of the Company's products in Europe and especially in USA during the year under review.

VXL has been one of the first Indian Companies to venture into the export market and in spite of many obstacles and misconceptions about Indian progress as IT Hardware compared to Indian Software, VXL has established itself worldwide as a player of the long run.

FUTURE PROSPECTS

This year Dell announced the acquisition of Wyse, a leading Company in cloud client computing. This has validated the market potential for thin clients and the growing interest in thin client infrastructure.

It is our belief that "thin client" will continue to grow and become even more prevalent among computer users of all types. The IDC supports this theory, forecasting a $3 billion market by 2015. Market growth will be fueled by increased speed of networks, as well as performance and efficiency improvements in hardware and software. These growth areas will drive flexibility, scalability and usability in thin client computing solutions.

During the first quarter of 2012-13, our company's turnover is comparatively less when compared to first quarter of 2011-12 due to the uncertainty in the euro zone and the slowdown in USA. We expect the situation to improve in the second half of the current financial year.

VXL continues to have tie up with Global leaders in the field of Information Technology, who develop, Manufacture and market high quality secure and easy to use tachonology products and services, world wide. Through this Agreement, VXL expects to increase its Global and National reach through their widely spread sales channels.

With the introduction of new products carrying better features and with the strengthening and addition of better and more features in our complementing software products, your company expects a substantial increase in exports during the financial year 2012-13.

RESEARCH AND DEVELOPMENT

Your Company recognizes R & D as one of its major focus areas in both Hardware and Software. This focus has helped your Company to design fully ROHS compliant products carrying better features and ergonomics. These products have been well received by our customers.

SUBSIDIARY COMPANIES

VXL, UK has managed to earn a profit of GBP 41,628 during the current financial year.

PARTICULARS OF EMPLOYEES

None of the employees drew remuneration in excess of the limits prescribed in Sec. 217 (2A) of the Companies Act, 1956.

DIRECTORS

Mr Arun Kumar Bhuwania and Mr. K. Prakash retire by rotation, and being eligible, offer themselves for re-appointment.

The Board inducted Mr. N.V. Maslekar as additional director on 6th July, 2012. He holds office upto the date of ensuing Annul General Meeting and a Notice has been received from a member under section 257 of the Companies Act, 1956 proposing his candidature.

AUDITORS

Messrs Ishwar & Gopal, Chartered Accountants, Auditors of the Company, being eligible, offer themselves for re-appointment.

AUDITORS' REPORT

The Auditors have pointed out in their report with regard to non-provision in respect of Company's investments in and receivables from a subsidiary and accounting of deferred tax credits. In view of the long term prospects and steps taken to recover these receivables, the Directors feel that no provision need be made in the accounts.

FIXED DEPOSITS

The total amount of fixed deposits accepted from Directors as on 31st March, 2012 was Rs.21.35 lakhs. There were no unclaimed deposits as at that date.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that:

(a) The financial statements have been prepared in conformity with the generally accepted accounting standards and principles and in terms of the requirement of the Companies Act, 1956. Reasonable and prudent judgements and estimates have been made wherever necessary.

(b) The accounting policies selected and applied consistently give a true and fair view of the financial statements.

(c) The Company has implemented adequate internal controls to provide reasonable assurance of the reliability of its financial records, proper safeguarding and use of its assets and detection of frauds and irregularities.

(d) The Directors have prepared the annual accounts on a "going concern" basis.

CORPORATE GOVERNANCE:

The Board meets at regular intervals and transacts various businesses. The Company consistently forwards the quarterly financial results to the Stock Exchange and publishes the same in the newspapers as per the listing agreement.

INDUSTRIAL RELATIONS

The Company has closed the unit manufacturing CRT Terminals as the product GVX terminal has been phased out. On this, workmen raised certain objection which has been rejected by the Secretary, Department of Labour. Now the matter is before the High Court of Karnataka. Provision has been made for Rs. 19,72,505/- towards settlement amount due to employees of the unit. Additional liability, if any, on this account is not ascertainable and will be provided on settlement of the dispute.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required to be furnished under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

APPRECIATION

The Directors wish to thank the Customers, Vendors, Business Associates, Employees and the Investors for the continued support during the year.

The Directors also thank State Bank of India for the unstinted co-operation extended by them.

For and on behalf of the Board of Directors

M.V. Nagaraj M.V. Shetty

Managing Director Whole Time Director

Place : Bangalore

Date :6th July 2012

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Mar 31, 2011

The Members

The Directors present their report on the business and operations of your Company for the year ended 31st March 2011.

FINANCIAL RESULTS Rs. in Lakhs

Particulars 2010-11 2009-10

Sales 9,536 7,747

Depreciation/Amortization 148 115

Profit before taxation 311 34

Profit/(Loss) after Taxation 309 31

Balance carried forward (2,165) (2,474)

YEAR UNDER REVIEW

During the year under review, your Company achieved a net turnover of Rs. 9536 lakhs as compared to Rs.7747 lakhs in the previous financial year. Your Company has earned a profit after taxation of Rs. 309 lakhs in the financial year as against Rs. 31 lakhs profits in the previous year. Sales of thin clients have grown from 40,000 units during 2009-10 to 74,000 units during 2010-11, registering a growth of 85 %.

Your company is confident that the improved export business would ensure a turn around in the company's operations.

OVERSEAS OPERATIONS

Your Company continues the tie up with Priya Ltd. for providing support in Logistics and Distribution of its products in Europe and USA.

VXL-UK has been able to extend good support in terms of marketing of the Company's products in Europe and especially in USA during the year under review.

VXL has been one of the first Indian Companies to venture into the export market and in spite of many obstacles and misconceptions about Indian progress as IT Hardware compared to Indian Software, VXL has established itself worldwide as a player of the long run.

FUTURE PROSPECTS

A. GENERAL

As has been informed to the shareholders in earlier years the Company keeping in mind its overall competitiveness in international markets has closed

the unit at No. 86A & B, 4th Cross, Electronics City, Hosur Road, Bangalore – 560 100. This unit used to manufacture CRT Terminals (GVX) for which there is no demand over many years. The workforce had become surplus. Workmen raised certain objections on the closure of this unit which have been rejected by the Secretary, Department of Labour, Government of Karnataka.

B. EXPORT

With the introduction of new products carrying better features and with the strengthening and addition of better and more features in our complementing software products, your company expects a substantial jump in exports in the next financial year

As per Global Industry Analysts Inc's recent global report on Thin Clients market, the world market for Thin Clients is projected to reach 14.36 million units in sales by the year 2015. Growth will be primarily driven by the ability of thin clients to present exceptional environmental and cost benefits to the user. Desktop virtualization and growing need for anytime, anywhere accessibility to corporate & Internet networks are the other trends that augur well for thin clients market.

Growth in the worldwide thin clients market is also fashioned by a range of environmental benefits that thin clients offer, including efficient use of energy and less use of raw materials. Thin clients are also the growing phenomena across the corporate world, as companies increasingly opt for providing their employees, just the basic systems required for processing their assigned tasks. The much awaited revolution in enterprise computing is now close at hand, thanks to the proliferation of cutting edge technologies, such as, virtualization, which is helping push thin clients into the mainstream enterprise business.

VXL Instruments UK (subsidiary of VXL Instruments Limited, India) had announced in 2010 an agreement with Lenovo who develop, manufacture and market high quality, secure and easy to use technology products and services world-wide.( Lenovo group had earlier acquired the IBM Personal Computing Division.)

Under the agreement;

- – VXL thin clients will be made available through standard Lenovo Channels.

– VXL will also be selling Lenovo's ThinkPad PCs.

Through this agreement VXL expects to increase its global and national reach through Lenovo's widely spread sales channels.

RESEARCH AND DEVELOPMENT

Your Company recognizes R & D as one of its major focus areas in both Hardware and Software. This focus has helped your Company to design fully ROHS compliant products carrying better features and ergonomics. These products have been well received by our customers.

SUBSIDIARY COMPANIES

VXL, UK has managed to earn a profit of USD 30,376 during the year.

The wholly owned Indian subsidiary, XL Net Software Systems Limited has been wound up with effect from 8th October 2010. It did not engage in any active business operations in the past few years.

PARTICULARS OF EMPLOYEES

None of the employees drew remuneration in excess of the limits prescribed in Sec. 217 (2A) of the Companies Act, 1956.

DIRECTORS

Mr D. S. Rao and Mr. K. Prakash retire by rotation, and being eligible, offer themselves for re-appointment.

Mr. Kumar Shyam ceased to be the Director of the Company with effect from 25.05.2011 pursuant to his resignation to the office of Director and acceptance of the same in the Meeting of the Board of Directors held on 25.05.2011. The Board has placed on record its appreciation for the services rendered by him.

AUDITORS

Messrs Ishwar & Gopal, Chartered Accountants, Auditors of the Company, being eligible, offer themselves for re-appointment.

AUDITORS REPORT

The Auditors have pointed out in their report with regard to non-provision in respect of Company's investments in and receivables from a subsidiary and accounting of deferred tax credits. In view of the long term prospects and steps taken to recover these receivables, the Directors feel that no provision need be made in the accounts.

FIXED DEPOSITS

The total amount of fixed deposits accepted from Directors as on 31st March, 2011 was Rs.21.35 lakhs. There were no unclaimed deposits as at that date.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that:

(a) The financial statements have been prepared in conformity with the generally accepted accounting standards and principles and in terms of the requirement of the Companies Act, 1956. Reasonable and prudent judgements and estimates have been made wherever necessary.

(b) The accounting policies selected and applied consistently give a true and fair view of the financial statements.

(c) The Company has implemented adequate internal controls to provide reasonable assurance of the reliability of its financial records, proper safe guarding and use of its assets and detection of frauds and irregularities.

(d) The Directors have prepared the annual accounts on a “going concern” basis.

CORPORATE GOVERNANCE:

The Board meets at regular intervals and transacts various businesses. The Company consistently forwards the quarterly financial results to the Stock Exchange and publishes the same in the newspapers as per the listing agreement.

INDUSTRIAL RELATIONS

The Company has closed the unit manufacturing CRT Terminals as the product GVX terminal has been phased out. On this, workmen raised certain objection which has been rejected by the Secretary, Department of Labour.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required to be furnished under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

APPRECIATION

The Directors wish to thank the Customers, Vendors, Business Associates, employees and the Investors for the continued support during the year.

The Directors also thank State Bank of India for the unstinted co-operation extended by them.

For and on behalf of the Board of Directors

M.V. Nagaraj M.V. Shetty Managing Director Whole Time Director

Place : Bangalore Date : 25th May 2011

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Mar 31, 2010

The Directors present their report on the business and operations of your Company for the year ended 31st March 2010.

FINANCIAL RESULTS

Rs. in Lakhs

Particulars 2009-10 2008-09

Sales 7,748 8,069

Depreciation/Amortization 115 119

Profit/(Loss) before Taxation 34 32

Profit/(Loss) after Taxation 34 (205)

Less: Excess provision for

taxation withdrawn 03 Nil

Balance carried forward (2,474) (2,511)

YEAR UNDER REVIEW

During the year under review, your Company achieved a net turnover of Rs. 775 million as compared to Rs.807 million in the previous financial year. Your Company has earned a profit after taxation of Rs. 3.4 million in the financial year as against Rs. 20.5 million loss in the previous year.

Your company is confident that the improved export business would ensure a turn around in the company’s operations.

During the year under review, your Company has paid all installments due to State Bank of India on time. All the term loans have been repaid fully. We are proud to say that now your company is a long term debt free company.

OVERSEAS OPERATIONS

Your Company continues the tie up with Priya Ltd. for providing support in Logistics and Distribution of its products in Europe and USA.

VXL-UK has been able to extend good support in terms of marketing of the Company’s products in Europe and especially in USA during the year under review.

VXL has been one of the first Indian Companies to venture into the export market and in spite of many obstacles and misconceptions about Indian progress as IT Hardware compared to Indian Software, VXL has established itself worldwide as a player of the long run.

FUTURE PROSPECTS

A. GENERAL

As has been informed to the shareholders in earlier years the Company keeping in mind its overall competitiveness in international markets is taking steps to close the unit at No. 86A & B, 4th Cross, Electronics City, Hosur Road, Bangalore – 560 100. This unit used to manufacture CRT Terminals (GVX) for which there is no demand over many years. The workforce had become surplus. The closure would involve payment of compensation under the provisions of the Industrial Disputes Act, 1947.

The closure would involve review by the concerned Labour Authorities of the Government of Karnataka, under The Industrial Disputes Act, 1947. The company is confident of defending the closure before the concerned Labour Authorities.

B. EXPORT Market Forecast

The Research firm IDC reports that the thin-client market has grown by 46% in the four years since 2005 and that unit sales for 2009 were an estimated 2.4 million units. Forecast for the coming years vary by analyst but they all report a dramatic increase in growth, particularly in the Asian market. The most conservative estimate is from Forrester which is predicting annual growth rates of 45% in thin client shipments for the next four years. IDC forecasts a dramatic increase for 2010 with unit sales more than doubling to reach 5.3 million units with total sales of $1.25 billion. At the same time virtually all analysts agree that PC shipments will remain flat at best with some predicting negative growth. Two key market drivers are primarily responsible for these growth projections in the thin client sector; virtualisation and environmental concerns.

Virtualisation - In just about every organisation, IT departments are being asked to do more with less. Virtualisation technologies offer a direct and readily quantifiable means of achieving this goal by consolidating computing resources. Employing virtualization yields both an immediate, one-time cost saving and potentially significant ongoing savings in reduced heating, time management etc. Additionally, virtualisation can greatly enhance an organization’s business agility. A virtualised infrastructure is better positioned to respond to the changing demands that an organisation places on its I.T. infrastructure.

Green Computing - The growth of the environmental lobby and the rising cost of energy has helped to create the green computing movement which seeks to reduce the environmental impact of I.T. The client server model works particularly well in this regard as thin client desktops use about a quarter of the power required to run PCs because they have no moving parts. This in turn means greater reliability and longer lifecycles, thus greatly reducing the quantity of obsolete computer hardware.

Focus - VXL has been making terminals and thin clients for many years. Unlike many of our competitors that is all that we do – our total focus as a company is to produce thin clients which the market requires. VXL is a true manufacturer, i.e. we actually make the majority of the products we sell at our own manufacturing facility. This gives VXL a significant advantage over our competitors in that it allows us to be flexible in producing exactly what the customer requires.

Conclusion:

By general agreement of both analysts and industry experts, the thin client market is poised to undergo a period of dramatic growth. It seems evident that those companies who possess the skill, expertise and focus within the thin client arena will be ideally placed to benefit from this projected growth.

RESEARCH AND DEVELOPMENT

Your Company recognizes R & D as one of its major focus areas in both Hardware and Software. This focus has helped your Company to design fully ROHS compliant products carrying better features and ergonomics. These products have been well received by our customers.

SUBSIDIARY COMPANIES

VXL, UK has managed to earn a profit of USD 7,329 for the year.

Xlnet Software Systems Limited did not engage in any active business operations during the year.

PARTICULARS OF EMPLOYEES

None of the employees drew remuneration in excess of the limits prescribed in Sec. 217 (2A) of the Companies Act, 1956.

DIRECTORS

Mr Arun Kumar Bhuwania and Mr. Kumar Shyam retire by rotation, and being eligible, offer themselves for re-appointment.

AUDITORS

Messrs Ishwar & Gopal, Chartered Accountants, Auditors of the Company, being eligible, offer themselves for re-appointment.

AUDITORS REPORT

The Auditors have pointed out in their report with regard to non-provision in respect of Company’s investments in and receivables from a subsidiary and

accounting of deferred tax credits. In view of the long term prospects and steps taken to recover these receivables, the Directors feel that no provision need be made in the accounts.

FIXED DEPOSITS

Your Company has been accepting fixed deposits from the public and shareholders. The total amount of such fixed deposits as on 31st March, 2010 was Rs.28.35 lakhs. There were no unclaimed deposits as at that date.

DIRECTORS RESPONSIBILITY STATEMENT

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that:

(a) The financial statements have been prepared in conformity with the generally accepted accounting standards and principles and in terms of the requirement of the Companies Act, 1956. Reasonable and prudent judgements and estimates have been made wherever necessary.

(b) The accounting policies selected and applied consistently give a true and fair view of the financial statements.

(c) The Company has implemented adequate internal controls to provide reasonable assurance of the reliability of its financial records, proper safe guarding and use of its assets and detection of frauds and irregularities.

(d) The Directors have prepared the annual accounts on a "going concern" basis.

CORPORATE GOVERNANCE:

The Board meets at regular intervals and transacts various businesses. The Company consistently forwards the quarterly financial results to the Stock Exchange and publishes the same in the newspapers as per the listing agreement.

INDUSTRIAL RELATIONS:

As mentioned earlier the company enjoys the support of the majority of employees which has ensured smooth flow of operations despite the strike by the employees at the GVX unit from 26.04.2008 to 03.08.2009

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required to be furnished under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

APPRECIATION

The Directors wish to thank the Customers, Vendors, Business Associates and the Investors for the continued support during the year.

The Directors also thank State Bank of India for the unstinted co-operation extended by them.



For and on behalf of the Board of Directors

M.V. Nagaraj M.V. Shetty Managing Director Whole Time Director

Place : Bangalore

Date : 29th May 2010