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Notes to Accounts of Wintac Ltd.

Mar 31, 2016

1. Terms of Repayment

The drawing power under the dropline overdraft limit from State Bank of India is reduced monthly over a period of 92 months after 4 months moratorium - Rs.10 Lakhs per month for 72 months and Rs.14 Lakhs for 20 months.

2. There are no defaults /continuing defaults in repayment of principal amount of the loan or interest as on the balance sheet.

3. Amounts due to be credited to the Investor Education and Protection Fund as on 31-03-2016 Rs. Nil (Nil)

4. Towards reimbursement of cost of materials ,equipment and services procured through these parties against production of bills of original vendor/service provider.

5. Others include employee dues and accrued liabilities.

6. Disclosures pursuant to AS-15 are given in Note 25.1

7. Towards cenvat credit reversal on inventory proposed to be scrapped.

8. Land:

a) There is a dispute on title of the land at Sarjapur Road, Original Cost, Rs. 671,438. There has been a claimant to the said land who was successful in transferring the Khata to his name and the Company has filed a Writ Petition in the Hon''ble High Court of Karnataka which is pending disposal.

b) In respect of factory land at Boodihal Village, a suit has been filed disputing the sale to the Company of 5 Acres of land original cost Rs. 14,97,057/-, effected in the year 1995-96. The Company does not expect any adverse impact from the above two suits.

c) Portion of vacant factory land at Boodihal Village, Nelamangala Taluk measuring 82,000 Sqft has been given on lease to Bangalore Pharmaceuticals & Research Laboratories Pvt. Ltd., a related party as per Section 2(76) of the Companies Act, 2013.

9. Vehicle gross block includes motor car original cost Rs. 13,28,372 standing in the name of the Managing Director.

10. The assessment of deferred tax asset is provisional and is subject to adjustments on company filing its income tax return, assessment of returned income, outcome of appeals, etc.

11. In light of the Company since retaining the regulatory approval for sales to US markets, regulatory approvals available for export to European markets and the current valuation of the company, the Management is virtually certain that the company will be able to earn taxable income in subsequent years to absorb deferred tax asset comprising carry forward depreciation.

12. Capital Advance includes Rs. Nil (Rs. 1,50,08,399) to a key management personnel as defined u/s 2(51) of the Companies Act, 2013, for purpose of purchase of land.

13. Taxes Refundable includes payments made/ refunds adjusted to pending demands and interest thereon which are under appeal as detailed in Note 19.1.

14. Due towards sale of oncology business in financial year 2014-15.

15. Bank deposits with more than 12 months maturity - Nil (Nil)

16. Statement of Account and confirmation of balance have not been received in respect of two account with book balance of Rs. 51,232/- which is non-operative and subject to reconciliation.

17 a) Overview of Employees Benefits

1) The compensation to employees for services rendered are as follows:

i. Salaries and Wages including compensated absences. Compensated absences such as eligibility towards earned leave are allowed to be accumulated as per company''s rules. Such earned leave can be encashed at the time of separation.

ii Bonus as per the Bonus Act, 1965.

iii. Contributions under defined contribution plans such as Provident Fund as per Employees Provident and Miscellaneous Provisions Act, Employees Insurance Scheme, etc.

iv. Defined Benefit Plans such as Gratuity on cessation of employment. The Company has taken a Master Policy from LIC to fund this defined benefit obligation.

v. Other employee benefits such as leave travel allowance.

The above benefits are subject to eligibility and other criteria as per company''s rules.

b) Recognition and Measurement

i. Employee benefits are recognized on accrual basis. Liability to compensated absence such as leave encashment are determined by multiplying the actual leave accumulated at the end of the year by the applicable component of salary.

ii. Liability to defined benefit plan viz. Gratuity are valued on actuarial basis under Projected Unit Credit Method. by LIC.

iii. Liability under defined contribution schemes such as contribution to Provident Fund, ESI etc. are measured based on the contribution due for the year.

*Purchase of goods/equipments and services from Gavis Pharma, LLC (Holding Company) and Novel Laboratories, INC (a controlled entity in the holding company group) is by way of reimbursement of cost of goods and services procured on behalf of the Company against production of bill of the original vendor/ Service providers.

18. Segment Reporting: The Company recognizes only one business segment, viz formulations. All the operations are in India. Hence separate segment information in terms of Accounting Standard 17 "Segment Reporting" issued by the Institute of Chartered Accountants on India, is not given.

19. The company has no significant operating leasing arrangements requiring additional disclosure as per AS-19 Leases:- The Company has not entered into any financial leasing arrangement.

20. a) The Company has no subsidiaries. It has investments in only one joint venture company, M/s Medispec Pharmaceuticals Pvt. Ltd. (the JV) whose net worth has completely eroded and the investment in JV and the amount due from the said JV is fully provided for ( refer Note 10 and 12) .The Company is not expecting any economic benefits from the JV.It has ceased to carry on business since over two years and is now defunct and necessary steps will be taken to strike off its name/ liquidate it pursuant to the provisions of the Companies Act.In light of the same separate consolidated financial statement incorporating the transactions of the Joint venture is not prepared as AS-27 "Financial Reporting of Interest in Associates and Joint Ventures" requires that the interest in such a J.V has to be reported in accordance with AS-13 Accounting for Investments which is now being followed in the stand alone financial statement. As the Company has no other subsidiary or associates the present standalone financial statement represent the consolidated financial statement required to be prepared as per Schedule III of the Companies Act, 2013.

b) Provision for future commitments of Joint Venture

As the other partner in the JV has ceased to participate in the operations of said JV''s business since over 15 years the Company was effectively managing the JV and certain obligations of the JV have to be met by the Company till the said JV company''s name is struck off or that company is liquidated. Accordingly , a provision of '' 5,00,000 had been made as on 31.03.2015 to meet these present and future obligations and the Company will meet the expenses of the joint venture out of said provision till the JV''s name is struck of by the Registrar or liquidated.

The Movement in Provision is as under:

21.) The Company has classified assets and liabilities as long term and short term in terms of Schedule III of the Companies Act, 2013 based on an Operating Cycle of One year.

b) In the assessment of the Management the impact on the financial statements from ongoing review/ reconciliations of balances will not be significant

c) Figures in brackets pertain to the previous year.

d) Previous year figures have been regrouped wherever necessary to be in conformity with current year''s figures.


Mar 31, 2015

1. Rights, Preferences and Restrictions:

Equity shares are on par with each other both with regard to payment of dividend and voting rights.

2. Terms of Repayment - Fixed Deposits are repayable on respective due dates

3. There are no defaults /continuing defaults in repayment of principal amount of the loan or interest as on the balance sheet.

4. Aggregate amount of above loans guaranted by the directors Rs Nil (P.Y. NIL)

5. Amounts due to be credited to the Investor Education and Protection Fund as on 31-03-2015 ` Nil ( Nil)

6. Towards reimbursement of cost of materials ,equipment and services procured through these parties against production of bills of original vendor/ service provider.

7. Others include employee dues and accrued liabilities.

8. Disclosures pursuant to AS-15 are given in Note 25.1

9. Towards cenvat credit reversal on inventory proposed to be scrapped

10. Land:

a) There is a dispute on title of the land at Sarjarpur Road, Original Cost, Rs. 6,71,438. There has been a claimant to the said land who was successful in transferring the Khata to his name and the Company has filed a Writ Petition in the Hon'ble High Court of Karnataka which is pending disposal.

b) In respect of factory land at Boodihal Village a suit has been filed disputing the sale to the Company of 5 Acres of land worth Rs. 14,97,057/-, effected in the year 1995-96. The Company does not expect any adverse impact from the above two suits.

c) Portion of vacant factory land at Bhudihal Village, Nelamangala Taluk measuring 82,000 Sqft has been given on lease to Bangalore Pharmaceuticals & Research Laboratories Pvt. Ltd., a related party as per Section 2(76) of the Companies Act, 2013.

11. Vehicle:

Gross Block includes: Motor Car original cost Rs. 13,29,372/- standing in the name of the Managing Director.

12. In accordance with the Companies Act, 2013, the company has revised the useful life of its fixed assets to comply with the useful life mentioned in Schedule II of the Act. The classification of individual assets within each asset class has also been reviewed and reclassifaction effected wherever necessary to accord with the classification required as per Schedule II of the Companies Act, 2013. The residual useful of each asset held as on 31.03.2014 has been determined in terms of the said schedule and depreciation accordingly calculated. Accordingly:

a) Had the company followed the earlier useful life, the depreciation for the year would have been lower by Rs. 65,74,020 with consequential effect on the loss for the period.

b) Depreciation for the year Rs. 4,70,85,819/- includes Rs. 1,07,15,416 being net excess of carrying value over the residual value in respect of those assets held as on 31.03.2014 whose remaining useful life is nil and disclosed under exceptional item.

13. The assessment of deferred tax asset is provisional and is subject to adjustments on company filing its income tax return, assessment of returned income, outcome of appeals, etc.

14. In light of the Company since retaining the regulatory approval for sales to US markets, regulatory approvals available for export to European markets and the current valuation of the company, the Management is virtually certain that the company will be able to earn taxable income in subsequent years to absorb deferred tax asset comprising carry forward depreciation.

15. Contingent Liabilities and Commitments

16. Claims against the company not acknowledged as debt

17. Overview of Employees Benefits

1) The compensation to employees for services rendered are as follows:

i Salaries and Wages including compensated absences. Compensated absences such as eligibility towards earned leave are allowed to be accumulated as per company's rules. Such earned leave can be encashed at the time of separation.

ii Bonus as per the Bonus Act, 1965.

iii Contributions under defined contribution plans such as Provident Fund as per Employees Provident and Miscellaneous Provisions Act, Employees Insurance Scheme, etc.

iv Defined Benefit Plans such as Gratuity on cessation of employment. The Company has taken a Master Policy from LIC to fund this defined benefit obligation.

v Other employee benefits such as leave travel allowance.

The above benefits are subject to eligibility and other criteria as per company's rules.

18. Recognition and Measurement

i. Employee benefits are recognised on accrual basis. Liability to compensated absence such as leave encashment are determined by multiplying the actual leave accumulated at the end of the half year by the applicable component of salary.

ii. Liability to defined benefit plan viz. Gratuity are valued on actuarial basis under Projected Unit Credit Method. by LIC.

iii. Liability under defined contribution schemes such as contribution to Provident Fund, ESI etc are measured based on the contribution due for the year.

19. OTHER DISCLOSURES

20. Related Party Transactions

A) In terms of Accounting Standard 18 "Related Party Disclosures", the following relationships and related parties have been identified.

Relationship Related Party

1 Holding Companies Gavis Pharma LLC - USA

2 Enterprises under Common control None of the Holding Company

3 Associates/Joint Ventures Medispec Pharmaceuticals (P) Ltd

4 Investing Party in respect of None which the Company is an Associate of Joint Venture

5 Individuals who directly or Dr. Veerappan indirectly are in a position Subramanian to control or exercise significant influence over the company

6 Enterprises/Individuals holding None 20% or more of the voting power in the company directly or indirectly (other than controlling interest)

7 Key Management Personnel Mr.S.Jayaprakash Mady (As defined under AS-18) Managing Director

8 Relatives of 5, 6 or 7 Mr.S.Jayaprakash Mady (HUF)

Mrs.Govindammal Subramanian Ms.Anu Balasubramaniam Mr.Ilango Subramanian Mrs.Meenakshi Mady Mrs.Kripa Mady Ms.Devaki Mady Ms.Priyamvada Mady Ms.Shreelakshmi Mady Mrs.Rajani Subba Rao

9 Enterprises over which Novel Laboratories Inc any person described in Novel Clinical Research 5,6,7 or 8 is able to (India) Private Ltd exercise significant GAVIS Pharmaceuticals LLC influence (has c°ntrd or VGS Holdings , Inc 20% or more interest in VGS Foundation, Inc the voting power directly Kali Capital, LP or indirectly) Kali Management, LP

21. Segment Reporting: The Company recognizes only one business segment, viz formulations. All the operations are in India. Hence separate segment information in terms of Accounting Standard 17 "Segment Reporting" issued by the Institute of Chartered Accountants on India, is not given.

22. The company has no significant operating leasing arrangements requiring additional disclosure as per AS- 19:Leases. The Company has not entered into any financial leasing arrangement.

23. The Company has classified assets and liabilities as long term and short term in terms of Schedule III of the Companies Act, 2013 based on an Operating Cycle of One year.

24. In the assessment of the Management the impact on the financial statements from ongoing review/ reconciliations of balances will not be significant.

25. Figures in brackets pertain to the previous year.

26. Previous year figures have been regrouped wherever necessary to be in conformity with current year's figures.

27. As the Company does not have any subsidiary AS- 21 Consolidated Financial Statements is not applicable the Company's interest in the Joint Venture Company Medispec Pharmaceuticals (P) Ltd is reported in this financial statement as per AS - 13 Accounting for Investments as permitted under the Companies (Accounts) Rules, 2014


Mar 31, 2013

1.1 Rights, Preferences and Restrictions:

Equity shares are on par with each other both with regard to payment of dividend and voting rights.

1.2 Redemption of Preference Shares:

2,00,000 15% cumulative preference shares ofRs. 100 each which were due for redemption as on 17.02.2014 or within one month''s notice whichever is earlier, have been redeemed on

17.02.2013 out of proceeds of preference issue of 40,00,000 equity shares and said amount is disclosed under Note 18 as redemption moneys paid to the Preference Share holder. The redemption was made through the promoters who have mortgaged their properties to the Preference Share holder to secure the redemption of the Preference shares and have also taken over the balance of Rs.1,32,85,000 due from the Preference shareholder to the company as on 31-03-2012. As the Preference Share Certificate has not been surrendered, the Board has decided as a matter of abundant precaution to issue a formal notice calling for the surrender of the Share Certificate and close the Preference Share Account only on expiry of the notice period or on receipt of Share Certificate whichever is earlier. Accordingly, liability for cumulative preference dividend in Note 19.4 (c) is taken as Nil.

1.3 Unpaid balance out of preference issue of Rs. 40 crores effected during the year is held in Bank Deposits Rs. 16,60,87,000 and Rs. 5,24,178 in Current Account.

2.1.1 Land:

There is a dispute on title of the land at Sarjarpur Road, Original Cost, Rs. 6,71,438. There has been a claimant to the said land who was successfull in transfering the Khata to his name and the Company has filed a Writ Petition in the Hon''ble High Court of Karntaka which is pending disposal.

2.1.2 Portion of vacant factory land at Bhudihal Village, Nelamangala Taluk measuring 82,000 Sqt has been given on lease to Bangalore Pharmaceuticals & Research Laboratories Pvt. Ltd.

2.2 Trademarks

"Trademarks are under transfer to the company for which necessary applications have been made"

2.3 Vehicle:

Gross Block includes: Motor Car original cost Rs. 13,29,372/- standing in the name of the Managing Director.

2.4 Application Software is amortised over a period of six years.

2.5 During the year, fixed assets were physically verified and compared with book records. Based on such verification, the financial books and fixed asset register have been brought upto date, after making necessary adjustments.

2.6 None of the Fixed Assets are subject matter of any charge. Action is being taken by the company to rectify the records in the Registrar of Companies/ Ministry of Company Affairs which shows/ continues to show a charge on 1.885 acres of land given on lease referred to in Note 9.1.2 above.

3.1 The assessment of deferred tax asset is provisional and is subject to adjustments on company filing its income tax return, assessment of returned income, outcome of appeals, etc.

3.2 In light of steps taken by the company to retain the regulatory approval obtained for sales to US markets, regulatory approvals available for export to European markets and the current valuation of the company, the Management is virtually certain that the company will be able to earn taxable income in subsequent years to absorb deferred tax asset comprising carry forward depreciation and carry forward research and development expenditure.

4.1 Balances with Banks in Deposit Accounts includes

a Rs. 3,06,000/- (Rs. 3,23,773) pledged as margin towards bank guarantees b Rs. 1,04,15,276 (Rs. 21,04,225) pledged as margin towards Letter of Credit facilities.

4.2 Bank deposits with more than 12 months maturity - Nil (Nil)

4.3 Balances in 3 (7) current accounts with banks which has not been operated during the year aggregating to Rs. 60,486/- ( Rs. 44,769/-) for which statement of accounts and confirmation has not been received.

5.1 Input tax credits in respect of Cenvat, Service tax and Vat balances are under reconciliation.

6.1 Other money for which the company is contingently liable

(a) Sales Tax & Entry Tax :

The management is of the opinion that company will have no further liability / exposure arising from pending assessments for Sales Tax and Entry Tax for current and earlier years at erstwhile depots and at Bangalore, including tax payable on the products of Medispec Pharma (P) Ltd sold under co-marketing arrangements.

(b) Fringe Benefit Tax :

The Commissioner of Income Tax, Bangalore III has in an order of revision set aside the Nil assessment made by the Assessing Officer for the Assessment year 2008-09 (year ended 31.03.2008 ). Same is under challenge before the ITAT. The assessment for the assessment year 2007-08 has also been since re-opened by the Assessing Officer.

7.1 Formulation Development Fee Rs.2,21,88,195 (Rs.2,20,30,651) represents Technology Transfer Fee for development of dosage forms. Revenue from these contracts is generally being recognized in accordance with the payments falling due as per the payment milestones under the agreement, which method, in the opinion of the management, approximates to the proportionate completion method specified in Accounting Standard - 9 "Revenue Recognition".

8.1 a) Overview of Employees Benefits

The compensation to employees for services rendered are as follows: i. Salaries and Wages including compensated absences. Compensated absences such as eligibility towards earned leave are allowed to be accumulated as per company''s rules. Such earned leave can be encashed at the time of separation.

ii Bonus as per the Bonus Act, 1965.

iii Contributions under defined contribution plans such as Provident Fund as per Employees Provident and Miscellaneous Provisions Act, Employees Insurance Scheme, etc.

iv Defined Benefit Plans such as Gratuity on cessation of employment. The Company has taken a Master Policy from LIC to fund this defined benefit obligation.

v Other employee benefits such as leave travel allowance.

The above benefits are subject to eligibility and other criteria as per company''s rules. The Company has discontinued the Superannuation Scheme at the close of 31.03.2009 and dues if any to a separating employee is met out of the unpaid contribuiton (referred to in Note 7.2).

b) Recognition and Measurement

i Employee benefits are recognised on accrual basis. Liability to compensated absence such as leave encashment are determined by multiplying the actual leave accumulated at the end of the year by the applicable component of salary.

ii Liability to defined benefit plan viz. Gratuity are valued on actuarial basis under Projected Unit Credit Method by LIC.

iii Liability under defined contribution schemes such as contribution to Provident Fund, ESI etc are measured based on the contribution due for the year.

iv Leave Travel Allowance is recognized based on claim. The unavailed allowance is not recognized as in the opinion of the management, the same will not be material

8.2 The changes in the remuneration of the Managing Director effected pursuant to the Board meeting dated 12th Feb 2013 will be placed before the ensuing AGM for ratification.

9.1 Segment Reporting: The Company recognizes only one business segment, viz formulations. All the operations are in India. Hence separate segment information in terms of Accounting Standard 17 "Segment Reporting" issued by the Institute of Chargted Accountants on India, is not given.

9.2 The company has no significant operating leasing arrangements requiring addiional disclosure as per AS-19:Leases. The Company has not entered into any financial leasing arrangement.

9.3 a) The Company has classified assets and liabilities as long term and short term in terms of revised Schedule VI largely based on objective criteria. However in a few cases the classification is based on Management perception which will be reviewed while compiling the financial statements for the ensuing financial year.

b) In the assessment of the Management the impact on the financial statements from ongoing review/ reconciliations of balances accounts referred to in note 7.2(ii), 16.3 & 18.1 and under the heads Trade Receivables, Trade Payables and Advances will not be significant.

c) Figures in brackets pertain to the previous year.

d) Previous year figures have been regrouped wherever necessary to be in conformity with current year''s figures.


Mar 31, 2012

1.1 Rights, Preferences and Restrictions:

15% Redeemable Cumulative Preference Shares have been issued with a preferential right to a payment of 15% fixed dividend and repayment of capital. The shares were redeemable at the expiry of 36 months from the date of allotment i.e. 17.02.2007 which was further extended by another 24 months, i.e total of 60 months from the date of allotment. During the year, the Company has redeemed 1,00,000 15% Redeemable Cumulative Preference Shares on 11.07.2011 out of the issue of Rights Shares The balance shares are due for redemption.

Equity shares are on par with each other both with regard to payment of dividend and voting rights.

2.1 Terms of Repayment

a. Term loans from Banks and others are repayable in monthly instalments/ EMI over the period of the loan

b. Intercorporate Deposits and Fixed Deposits are repayable on due dates

2.2 There are no defaults/ continuing defaults in repayment of principal amount of loan or interest as on the balance sheet date.

2.3 Aggregate amount of above loans guaranteed by Directors Rs. 7,24,09,546 (Rs. 6,55,82,458)

3.1 Aggregrate amount of loans guaranteed by Director - X 6,63,10,451 (5,73,63,802)

3.2 There is no default / continuing default in repayment of principal or interest as on the balance sheet date.

4.1 Amounts due to be credited to the Investor Education and Protection Fund as on 31-03-2012 Rs. Nil (Nil)

4.2 Others include employee dues and accrued liabilities. These include balance of Company's contribution to Super Annuation Scheme Rs. 19,49,567 (Rs. 23,71,371) out of balance outstanding on 31.03.2009 when the Company discontinued the Scheme.

5.1 Disclosures pursuant to AS-15 are given in Note 25.1

6.1.1 Land:

As per information received by the Company, the Bangalore Development Authority has dropped the proceedings for acquisition of land at Sarjarpur Road, Original Cost, Rs. 6,71,438/-. However in the meantime there has been a claimant to the said land who sought to transfer the Khata to his name and the Company has succeeded in obtaining stay on the transfer from the Competent authority and proceedings are pending in this regard.

6.1.2 Portion of vacant factory land at Bhudihal Village, Nelamangala Taluk measuring 82,000 Sqt has been given on lease to Bangalore Pharmaceuticals & Research Laboratories Pvt. Ltd.

6.2 Trademarks:

Trademarks are under transfer to the company for which necessary applications have been made.

6.3 Vehicle:

Gross Block includes: Motor Car original cost Rs. 13,29,372/- standing in the name of the Managing Director.

6.4 Application Software is amortised over a period of six years.

6.5 Management is undertaking exercise of bringing the fixed asset register upto date.In respect of old assset sold during the year, the withdrawal of the original cost and depreciation to date could not be done in the absence of the necessary information. Entry for the same (Which in the opinion of the Management will not be material) will be passed on completion of exercise of updating the Fixed Asset Register.

7.1 The company Medispec Pharmaceuticals Private Limited, is specialising in oncological and anti fungal products. Though the net worth of the company is negative as per the latest audited balance sheet available at Rs. 890.39 lakh as on 31st March 2011, considering the intrinsic value and the long term strategic interest, the Directors are of the opinion that there is no permanent decline in value, requiring provision in the accounts. Accordingly no exposure is expected in respect of Corporate Guarantee of Rs. 20,00,000 (Rs. 30,00,000) issued in favour of its bankers.

8.1 The assessment of deferred tax asset is provisional and figures will get crystalised after Company submits its income tax return.

8.2 Though the result for the year were affected because of deferment of sales to overseas buyer on account of delay in obtaining regulatory approval, the managemant is confident that taking into consideration the current order book position and that necessary approval will be received, the Company will be able to earn taxable income in the subsequent years to absorb the deferred tax asset comprising carry forward depreciation and carry forward research and development expenditure.

9.1 Loans and advances to related parties Rs. 7,95,92,226 (Rs. 8,27,45,359) represents amount due from Medispec Pharmaceuticals Pvt Ltd, the joint venture company (including Rs. 1,06,46,752 towards interest) being advance for developing and marketing speciality injectables and share of co-marketing expenses recoverable. The same is expected to be recovered in due course from the future operations of the said joint venture company.

9.2. Other advances recoverable in cash or in kind or for value to be received and considered good includes :

a) Rs. 17,78,845 out of total amount of Rs. 3,00,78,845 (Rs. 3,00,78,845) due from erstwhile subsidiary Recon Agrotech Ltd. Balance of Rs. 2,83,00,000 is considered doubtful and provided for.

b) Advances to Preference Share holder Rs. 1,32,85,000 (Rs. 8,785,000)

10.1 Taxes Refundable includes payments made/ refunds adjusted to pending demands and interest thereon which are under appeal as detailed in Note 19.1.

11.1 Balances with Banks in Deposit Accounts includes

a. Rs. 69,89,954 (Rs. 64,08,192) pledged to Overdraft Account

b. Rs. 3,23,773 (Rs. 3,06,000) pledged as margin towards bank guarantees

c. Rs. 21,04,225 (Rs. 48,69,000) pledged as margin towards Letter of Credit facilities.

11.2 Balances in 7 (8) current accounts with banks which have not been operated during the year aggregating to Rs. 44,769 (Rs. 67,917) statement of accounts have not been received. Of these, confirmation of balances have been received in respect 2 (5) accounts aggregating to Rs. 9,160 (Rs. 56,886)

12.1 Balances under Input tax Credits are under reconciliation.

12.2 Other money for which the company is contingently liable

Sales Tax & Entry Tax :

The management is of the opinion that company will have no further liability / exposure arising from pending assessments for Sales Tax and Entry Tax for current and earlier years at erstwhile depots and at Bangalore, including tax payable on the products of Medispec Pharma (P) Ltd sold under co-marketing arrangements.

* Excise Duty which is collected separetaly and does not form part of revenue is added back to revenue for the purpose of arriving at Gross Sales above.

13.1 Formulation Development Fee Rs. 2,20,30,651 (Rs. 5,26,15,977) represents Technology transfer Fee for development of dosage forms. Revenue from these contracts is generally being recognized in accordance with the payments falling due as per the payment milestones under the agreement, which method, in the opinion of the management, approximates to the proportionate completion method specified in Accounting Standard -9 "Revenue Recognition".

13.1 a. Overview of Employees Benefits

The compensation to employees for services rendered are as follows: i. Salaries and Wages including compensated absences. Compensated absences such as eligibility towards earned leave are allowed to be accumulated as per company's rules. Such earned leave can be encashed at the time of separation.

ii Bonus as per the Bonus Act, 1965.

iii Contributions under defined contribution plans such as Provident Fund as per Employees Provident and Miscellaneous Provisions Act, Employees Insurance Scheme, etc.

iv Defined Benefit Plans such as Gratuity on cessation of employment. The Company has taken a Master Policy from LIC to fund this defined benefit obligation.

v. Other employee benefits such as leave travel allowance.

The above benefits are subject to eligibility and other criteria as per company's rules. The Company has discontinued the Superannuation Scheme at the close of 31.03.2009 and dues if any to a separating employee is met out of the unpaid contribuiton (referred to in Note 7.2).

b. Recognition and Measurement

Employee benefits are recognised on accrual basis. Liability to compensated absence such as leave encashment are determined by multiplying the actual leave accumulated at the end of the year by the applicable component of salary.

Liability to defined benefit plan viz. Gratuity are valued on actuarial basis under Projected Unit Credit Method by LIC.

Liability under defined contribution schemes such as contribution to Provident Fund, ESI etc are measured based on the contribution due for the year.

Leave Travel Allowance is recognized based on claim. The unavailed allowance is not recognized as in the opinion of the management, the same will not be material.

The above figures are as furnished by LIC for purpose of disclosure under AS- 15. The estimates of salary increases furnished by the company to LIC for the purposes of the actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors.

13.2 Segment Reporting: The Company recognizes only one business segment, viz formulations. All the operations are in India. Hence separate segment information in terms of Accounting Standard 17 "Segment Reporting" issued by the Institute of Chargted Accountants on India, is not given.

13.3 The company has no significant operating leasing arrangements requiring addiional disclosure as per AS-19:Leases. The Company has not entered into any financial leasing arrangement.

13.4 a) The Company has classified assets and liabilities as long term and short term in terms of revised Schedule VI largely based on objective criteria. However in a few cases the classification is based on Management perception which will be reviewed while compiling the financial statements for the ensuing financial year.

b) In the assessment of the Management the impact on the finacial statements from ongoing review/ reconciliations of balances under the heads Trade Receivables, Trade Payables and Advances will not be significant.

c) Figures in brackets pertain to the previous year.

d) Previous year figures have been regrouped wherever necessary to be in conformity with current year's figures.


Mar 31, 2010

1. Preference Shares:

15% Redeemable Cummulative Preference Shares were redeemable at the expiry of 36 months from the date of allotment i.e. 17.02.2007 . The tenure of the above 15% Redeemable Cumulative Preference Shares has been extended by another 24 months, i.e 60 months from the date of allotment by Special Resolution passed at the Extra Ordinary General Meeting of the members held on 22.04.2010. The company may redeem the same at an earlier date after giving a months notice.

2. Secured Loans:

a) Working capital loans and Term Loans from UCO Bank Ltd., are secured by the first charge by way of hypothecation of stock in trade both present and future (stock of raw materials, stock in process, cash and other current assets including money receivable, claims and bills receivable) and all other movable plant and machinery, furniture and fixtures, etc. of the company both present and future and first charge by way of equitable mortgage on the fixed assets of the company situated at 54/1, Boodihal Village, Nelamangala Bangalore District and further secured by way of personal guarantee of Sri S.T.R. Mady, Chairman and Shri S. Jayaprakash Mady, Managing Director and pledge of certain shares owned by the Promoters.

b) Car Loans from ICICI Bank and Vehicle Loans from Reliance Capital Ltd are secured by way of hypothecation of the respective vehicles.

c) Overdraft from Bank of Baroda is secured by pledge of fixed deposits.

3. Unsecured loans:

b) Deferred Sales Tax:

Deferred Sales Tax represents 100% deferral of sales tax claimed by the company on sale of finished goods from the Nelamangala Unit , as per the notification No.FD/1/CSL/95(II) dated 06.07.1995 of the Finance Department, Government of Karnataka. Assessment is completed up to financial year 1999-2000. Repayment of Deferred Sales Tax has commenced from the year 2005-06. Amount payable within one year Rs. 9,56,391 (P.Y. – Rs. 38,28,755)

4. Fixed Assets (Including Capital Work in Progress)

a) Land Land at Sarjarpur Road, Rs. 6,71,438 has been notified for acquisitionby the Bangalore Development Authority. Pending fixation of compensation and final notification, no adjustment has been made in the accounts.

b) Trademarks Trademarks are under transfer to the company for which necessary application is being made.

c) Vehicle:

Gross Block includes:

(i) Minibus valued at Rs.8, 90,000 acquired in earlier year, which is to be transferred to the Companys name.

(ii) Motor Car Rs.13,29,372 standing in the name of the Managing Director.

d) Accreditation:

Represents Rs.1,35,66,596 (P.Y. Rs.1,35,23,171) expenditure related to the project for obtaining approval of the parental manufacturing facilities by USFDA capitalised as an Intangible Asset on obtaining approval. The management has estimated the useful life as ten years.

e) Application Software is amortised over a period of six years.

f ) Management is undertaking exercise of bringing the fixed asset register upto date. In respect of old assets sold during the year, the withdrawal of the original cost and depreciation to date has been made to the extent of information available with the management. Entry for the difference ( which in the opinion of the Management will not be material ) will be passed on completion of exercise of updating the Fixed Asset Register.

5. Investments Rs.90,00,000 (Rs.90,00,000)

This represents equity shares of face value aggregating to Rs.90, 00,000 (Rs.90, 00,000) in Medispec Pharmaceuticals Private Limited, a joint venture company specialising in oncological and anti fungal products. Though the net worth of the company is negative as per the latest audited balance sheet available (at Rs.826.17 lakhs, as on 30th June 2008) considering the intrinsic value and the long term strategic interest, the Directors are of the opinion that there is no permanent decline in value, requiring provision in the accounts.

6. Loans and Advance (considered good) include:

a) Rs.8,06,32,059 (Rs.7,36,14,312) due from Medispec Pharmaceuticals Pvt Ltd, the joint venture company (including Rs.106,46,752 towards interest) being advance for developing and marketing speciality injectables and share of co-marketing expenses recoverable. The same is expected to be recovered in due course from the future operations of the said joint venture company.

b) Rs.3,00,78,845 (Rs.3,00,78,845) due from the erstwhile subsidiary Recon Agrotech Limited representing payments made against assurances given on its behalf prior to the divestment. Necessary action is being taken to recover the balance. As a matter of prudence, a provision of Rs.283 lakh (Rs.283 lakh) is held in the accounts for the year under review, considering the value of the assets available for recovery.

7. Current Liabilities:

a) There is no information reportable under the Micro, Small, & Medium Enterprises Development (MSMED) Act, 2006.

b) Amounts due to be credited to the Investor Education and Protection Fund as on 31.03.2010 - Rs.Nil (Nil).

c) Provision for Gratuity to the Managing Director has not been done as the Board is yet to formulate the rules in this regard.

8. Contingent Liability:

a) i) On account of Unexpired Guarantees: Rs.30,00,000 (Rs.45,00,000). These include corporate guarantee of Rs.30 lakhs (Previous Year Rs.45 Lakhs) in favour of the bankers of the joint venture company Medispec Pharmaceuticals Pvt Ltd.

ii) On account of Unexpired Letter of Credit: Rs. Nil (P.Y.NIL)

b) Sales Tax & Entry Tax:

i) The management is of the opinion that the provision for Sales Tax and Entry Tax now held in respect of pending assessments of current and earlier years at erstwhile depots and at Bangalore, including tax payable on the products of Medispec Pharma (P) Ltd sold under co-marketing arrangements, is adequate and no further provision is required.

ii) In the opinion of the management, provision is not required for :

· demand of Rs.66,83,048 towards KST and Rs.34,91,716 towards CST pursuant to order dated 09.03.2009 for the year 2001-02 in view of rectification petition pending before the Authorities.

· CST : The Assessment for the years 2005-06 and 2006-07 have been completed and the Sales Tax Authorities have raised a demand for Rs.4,60,108 and Rs. 5,79,856 respectively for non-submission of F Forms. The Company has gone on appeal seeking time for submission of F Forms and is confident of submitting the forms and vacating the demand.

c) Customs Duty:

On account of import of material under Advance License Scheme Rs. Nil (Previous year: Nil)

d) Service Tax:

The Management does not anticipate any liability from appeal of Revenue Authorities to the Central Excise and Service Tax Appellate Tribunal against the order of the Commissioner (Appeals) setting aside the order for the levy of Service Tax on transfer of Technical know how, C.F charges, etc., effected in the year 2000. In terms of the sale agreement, the liability for transfer of Technical know how will be borne by the purchaser.

e) Income Tax:

(i) The Department is in appeal before the High court of Karnataka against the order of ITAT in favour of the Company relating to the Assessment Year 2001-02.

(ii) The company is in appeal before the High Court of Karnataka against the order of the ITAT restoring the rectification order passed by the Assessing Officer relating to the A.Y. 2001-02. The Company anticipates a favourable order and hence the amount estimated at Rs.70 Lakhs (inclusive of interest) is not provided in the Accounts.

f) Estimated amount of contracts remaining to be executed on capital account not provided for : Rs. 6,04,586/- (P.Y. Rs. NIL)

g) Arrears of Cumulative Preference Dividend - Rs.1,40,30,137 (P.Y. 95,30,137)

9 a) Confirmation of balances in respect of major Sundry Debtors, Creditors and Advances have been called for and received in a few cases.

10. Income Tax / Fringe Benefit Tax

a) The net deferred tax asset as on 31.03.2010 is not recognized as there is no virtual certainty of realization of those assets.

b) Fringe Benefit Tax is not applicable from the A.Y.2010-2011- NIL( P.Y.Rs1,50,000).

However, necessary entries will be passed after completion of the assessment for provision made in respect of Fringe Benefit Tax in respect of earlier years.

11. Formulation Development Fee Rs.4,95,31,628 (P.Y.95,99,337) represents Technology transfer Fee for development of dosage forms. Revenue is recognized in accordance with the payament falling due as per the payment milestones under the agreement, which method, in the opinion of the management approximates to the proportionate completion method specified in the Acconting Standard - 9 Revenue Recognition.

12. Employee Benefits

a) Overview of Employees Benefits

The compensation to employees for services rendered are as follows:

i. Salaries and Wages including compensated absences. Compensated absences such as eligibility towards earned leave are allowed to be accumulated as per companys rules. Such earned leave can be encashed.

ii. Bonus as per the Bonus Act, 1965 and ex-gratia in lieu of bonus to those employees who are not covered under the Bonus Act.

iii. Contributions under defined contribution plans such as Provident Fund as per Employees Provident and Miscellaneous Provisions Act, Employees Insurance Scheme, etc.

iv. Defined Benefit Plans such as Gratuity on cessation of employment. The Company has taken a Master Policy from LIC to fund this defined benefit obligation.

v. Other employee benefits such as leave travel allowance.

The above benefits are subject to eligibility and other criteria as per companys rules. The Company has discontinued the Superannuation Scheme at the close of 31.03.2009.

b) Recognition and Measurement

i. Employee benefits are recognised on accrual basis. Liability to compensated absence such as leave encashment are determined by multiplying the actual leave accumulated at the end of the year by the applicable component of salary.

ii. Liability to defined benefit plan viz. Gratuity are valued on actuarial basis under Projected Unit Credit Method by LIC.

iii. Liability under defined contribution schemes such as contribution to Provident Fund, ESI, etc are measured based on the contribution due for the year.

iv. Leave Travel Allowance is recognized based on claim. The unavailed allowance is not recognized as in the opinion of the management, the same will not be material.

13. Segment Reporting: The Company recognizes only one business segment, viz formulations. All the operations are in India. Hence separate segment information in terms of Accounting Standard 17 "Segment Reporting" issued by the Institute of Chartered Accountants of India, is not given.

14. The company has no significant operating leasing arrangements requiring additional disclosure as per AS – 19: Leases. The company has not entered into any financial leasing arrangement.

15. a) Previous year figures have been regrouped wherever necessary to be in conformity with current years figures.

b) Figures in brackets pertain to the previous year.

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